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Average number of US investments expected to increase by 50 per cent over the next year

US mid-market private equity firms are looking to increase their investment pace substantially over the next 12 months, according to new research carried out by US-based M&A research firm RW Baird.

The average number of investments that mid-market focused firms expect to make in 2003 is more than 50 per cent higher than the average number of investments made in 2002.

Mid-market firms have the capital available to keep such promises, should the opportunities present themselves, the survey found. The average mid-market firm has only invested 38 per cent of its current fund.

But despite such a positive outlook for 2003, the economic uncertainties and global political instability were reflected in the finding that almost 25 per cent of the 190 responses indicated that return expectations had lowered substantially. Mid-market firms have traditionally expected returns of upwards of 30 per cent; they now anticipate returning between 20 per cent and 30 per cent.

In terms of sector focus, 25 per cent of respondents said that they had shifted their industry focus in the last year: RW Baird found an increased focus on service industries with a slackening of interest in manufacturing, telecoms and software.

Surprisingly, fewer than 50 per cent of respondents said that they would consider either a PIPE or a turnaround transaction, despite a mild wave of interest in such ‘alternative' private equity deals.

The funds responding to RW Baird's survey manage more than $84bn in total and have invested in around 2,300 portfolio companies.

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