More than three-quarters (78%) of private equity fund managers expect traditional exit activity to surge over the next two years, according to research by Ocorian, a leading US and global asset services provider.
This anticipated increase is expected across trade sales, IPOs and secondary buyouts, signalling a shift from the constrained deal environment of recent years.
A further 20 per cent of managers anticipate a slight increase in exit volumes, with alternative structures remaining relevant. Overall, 98 per cent of private equity fund managers expect realisations to rise. The remaining respondents anticipate that the level and type of exit activity will remain broadly the same. Ocorian’s study of 300 senior executives at private equity fund managers in the US and across Europe outlines an industry preparing to return capital to investors.
Appetite for exits is returning; execution remains a challenge
Whilst expectations for fund exits are high, the study also reveals a number of factors influencing their timing.
Around two-thirds (66 per cent) of private equity fund managers surveyed cite regulatory delays and complexity as the single biggest obstacle affecting fund exits. The operational readiness of portfolio companies is the second most prominent issue, with 53% of private equity managers stating that
portfolio companies are not yet ready for exit. Meanwhile, 50% point to limited buyer interest, 47% cite uncertain market conditions, and 44% continue to navigate valuation gaps between buyers and sellers. Just 6% of managers state a preference for continuation fund structures.
Richard Hansford, Head of Growth, EMEA at Ocorian, said: “Our findings point to significant pent-up demand for asset realisation, with more than three-quarters of fund managers expecting a significant increase in traditional sales, IPOs and secondaries. Whilst expectations for exit activity are rising, the timing and routes to exit will vary across portfolios, making exit readiness and flexibility very important.”
Rebecca Thorpe, Head of Regulatory Consulting EMEA at Ocorian, added: “Some exits attract more regulatory scrutiny than others when considering IPOs, secondary buyouts and trade sales. Furthermore, the underlying asset can have a major impact on the regulatory complexity involved. It is therefore interesting that regulatory complexity emerges as a significant factor influencing exit timing, compliance and structuring. This tells us that regulation and compliance have become strategic variables in deal execution.
Speed to market is no longer just about finding the right buyer; it also depends on having the right specialist advisers on hand, ready to act swiftly to navigate any regulatory requirements surrounding a transaction.”
