Maximising returns in a competitive M&A market

Author: Olly Jackson | Published: 4 May 2018

More sovereign wealth funds and pension funds are deciding to invest directly into companies, driving up auction prices in Europe and forcing private equity firms to adapt. This highly competitive environment has resulted in private equity firms looking to diversify in an effort to find value, but with company valuations and dry powder at an all-time high, maximising returns in the market is currently a very challenging task.

Sovereign wealth funds and pension funds typically have lower return targets than buyout houses, and therefore have driven up prices through their ability to pay more. Clifford Chance’s Neil Barlow said in order to find value, buyout houses are diversifying across asset classes, geographies and sectors and focusing on buy and build strategies to create operational value. Finding value in the mid-market and acquiring smaller companies as bolt-ons is said to be one of the most effective ways of finding value.