Private Equity Firms and Investors Poised to Capitalize on Market Opportunities

2014 was a strong year for private equity firms according to the Global Private Equity Report 2015 of Bain & Company Inc. The number of buyout exits hit a new record last year and strong distributions of capital to LPs prompted new funds. Meanwhile, EY’s latest private equity survey demonstrates that such abundance of capital will continue this year. “Almost three-quarters of the firms we surveyed plan to raise significant capital in the next two years,” shared EY. The global financial capital already saw a 53 per cent increase from 2000-2010, reaching about USD 600 trillion, and this is expected to hit USD 900 trillion by the end of 2020. This growth is triggered by the convergence of several powerful trends, as well as advanced financial engineering, explained Bain & Company, Inc. Growth in capital is also spurred by higher demands from stakeholders when it comes to performance and operations – from front to middle to back offices. According to the study, 64 per cent of the investors are concerned with team stability and clear strategy when it comes to choosing PE firms, followed by proven operational excellence at 49 per cent. Accuracy of reporting is also a key area at 11 per cent. With these trends, CFOs are challenged to apply only the best practices to create competitive advantages for their firms. For example, when it comes to compliance and risk management, CFOs are urged to move beyond traditional operations and utilize cutting-edge tools that will assist them in portfolio monitoring, valuation, securing confidential information and mitigating risks. The same scenario applies to reporting. According to EY, many finance teams are still spreadsheet-driven, but this strategy is not enough to provide investors detailed explanations of inputs, formal approvals and assumptions. In addition, “three-quarters of investors want tax reporting within four months after year-end, an accomplishment that could place a private equity firm head and shoulders above the average,” said EY. Aside from looking at new technology, the global private equity survey shows that investors are now shifting to new processes, including outsourcing, to face all the challenges ahead. 53 per cent of the participating private equity firms are expected to seek help from third-party providers for tax services in the next two years, 47 per cent for technology solutions, 31 per cent for fund accounting, and 24 per cent for human resources. With the rise of powerful tools for private equity firms as well as the recovering economy, firms and investors are now hoping to increase capital in the succeeding years. To prepare for future demands, contact a trusted financial institution that has access to leading technologies, while offering exceptional client service.