Time for a sharp exit?

Of 100 questioned, only 10 per cent do not plan to sell any portfolio companies against 57% planning an exit.

It demonstrates the most positive exit environment in years and reflects the need for private equity firms to achieve returns from successful divestments in order to attract new investors and raise further capital, said Mark Naughton, corporate finance director at Grant Thornton in Bristol.

“We haven’t seen such a surge in planned exits in years – more than half of UK private equity firms expect to sell more than a quarter of their portfolio,” he added. 

“They are encouraged by improving exit conditions, with strategic investors increasingly prepared to outbid private equity players. This was the case with Kiddicare, where we ran a highly competitive sales process and received around 20 initial offers from a mix of private equity and trade players with Morrisons tabling the best offer.

“The surge in planned exits is also driven by the need of many private equity firms to demonstrate their ability to successfully cash in on investments before they hit the fundraising trail. It is remarkable that most funds are planning to attract so many new investors. Almost 60% of respondents expect more than a quarter of limited partners in their next fund to be new to their funds.”

In terms of sector preference, almost half the respondents (47%) see business support services including infrastructure and logistics as a key investment focus over the coming 12 months.

Consumer, retail and food shared the accolade of second most coveted sector with high technology including software and IT. Some 37% of respondents expect to focus on both sector groups this year, compared to only 21% who said they expected to be most active in the consumer sector when asked a year earlier.

“Private equity firms are aggressively pursuing higher returns, which knocked the healthcare sector off its pedestal,” said Mr Naughton.