Company advisers take the lead in originating deals, says survey

Mid-market private equity houses fall way behind company advisors in setting up deals for businesses looking to secure private equity financing, according to a survey from BDO LLP, Corporate Finance.

According to the survey, 80 per cent of companies backed by private equity solicited their private equity buyer via a professional advisor to their company. Only 11 per cent had been approached by private equity houses directly and 9 per cent of private equity backed companies were approached by an adviser to the private equity house.

Despite mid-market private equity houses heavily investing in their deal origination capabilities, advisers are shown to be the main drivers of private equity M&A and are a key resource when providing deal advice to businesses, according to the survey.

81 per cent of private equity backed companies took independent financial advice during their private equity backed deal and when a secondary buyout was conducted, this rose to 91 per cent. Additionally, 83 per cent sought independent advice on the management equity deal and a vast majority, 93 per cent, found the management equity deal to at least meet their financial expectations.

Businesses backed by private equity are more satisfied when their company adviser   solicited the private equity house for funding than when solicited by other means, the survey suggests. 82 per cent of private equity backed businesses whose deals were solicited by their advisers were more likely to see their expectations in terms of value
added either met or exceeded, versus a lesser 67 per cent of private equity backed companies that  were approached another way.

Alex White, Corporate Finance partner at BDO LLP, says: “It is not a surprise to see such a direct correlation between the quality of deals and the involvement of an adviser, especially since current economic conditions make it increasingly important for vendors and management to access independent advice to help them make decisions. This is especially so in the case of seasoned management teams that undertake their second or third private equity deal.”

He continues: “The reality of the situation is that investors are finding it easier to raise and resolve the difficult questions when an adviser is involved.”
 
The Private Equity Mid-Market survey explores the views of private equity firms and 100 UK mid market companies backed by private equity.

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Notes to editors:

For more information contact Stephanie Aneto in the BDO press office on 020 7893 3073, Email: stephanie.aneto@bdo.co.uk

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