"Uncertainty continues to shackle the psyche of the PE industry," said Shawn Hessing, national lead partner for KPMG's U.S. Private Equity Group. "With valuation down and the cost of financing up, buyers and sellers are finding it difficult to get to common ground although we are seeing some signs of progress."
Asked for the biggest issues facing the private-equity industry, the respondents cited:
- The lack of lending (30 percent)
- The lack of exits (26 percent)
- The debt coming due on deals in 2011 and 2012 (24 percent)
- The pullback by limited partners (13 percent)
- Regulation (7 percent)
"Financing, debt covenants, exit strategies to sell or issue equity, and investor backing remain the industry's most critical issues," said Hessing, who noted that the survey indicated continuing limited demand for initial public offerings.
According to the survey, 58 percent of respondents noted IPO demand won't return until 2011 at the earliest, and 24 percent said they expect companies will avoid the IPO route as alternative sources of funding, such as growth capital, become more popular. Thirty-seven percent of respondents said they expect there will be a demand for public company offerings in 2010, and 6 percent said it was too hard to predict in this economy.
Asked which sectors would provide the best returns from distressed transactions, 44 percent said real estate, 34 percent pointed to financial services, 14 percent said such returns would come from consumer goods, 6 percent said retail and 2 percent said media.
