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US middle-market private equity investments expected to be up 33 per cent in 2005

The middle-market private equity industry is poised for another active year as 56 surveyed US-based firms anticipate an increase of 33 per cent in the number of portfolio company investments and an increase in exit activity over the next 12 months, according to figures released by Robert W. Baird and Co. The median number of investments per firm is expected to increase from three to four while the median dollar amount invested is expected to increase from $50m to $80m.

Steven Bernard, CFA, director of M&A Research at Baird, said that the survey indicates that firms intend to pick up the pace of activity, both in the US and abroad. 'The fact that, on average, just 53 per cent of a firm's current portfolio is invested should also help drive private equity transactions in 2005,' he said. 'The strong equity and debt capital markets, as well as an overall uptick in the economy, make the conditions ripe for private equity firms.'

Firms are increasingly looking for investment opportunities outside the United States, especially in Canada, Europe and China. Almost 25 per cent of respondents made an investment outside of the US in 2004, and 35 per cent indicated that they planned to do so in the next 12 months. The firms' most popular destinations for global investments in 2004 were Canada, Europe and China. Asia's growing impact on global business reflects in the number of private equity firms that have already established a presence in Asia through a portfolio company (84 per cent of those surveyed) and those that are planning to do so in the next 12 months (17 per cent).

Baird received responses from 56 US-based private equity firms, representing $63bn in assets under management, with a median of $600m per firm.

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