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Confidence in private equity activity in 2019 sharply down, study shows

Confidence is sharply down among private equity professionals looking ahead to activity for the asset class, with nearly three-quarters of respondents in a study saying economic conditions posed a threat to their portfolios in the coming year.

Some 44% of general partners globally expect private equity activity will improve this year, compared to 59% holding the same view for 2018, according to an S&P Global Market Intelligence survey of more than 1,000 private equity professionals.

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Meanwhile, 14% of respondents expect a deterioration in activity, compared with the 1% who believed this would happen in 2018.

Of those who believe private equity activity will deteriorate, 44% of respondents are from Asia Pacific, with 26% from Europe and the Middle East, 17% from North America and 13% from Latin America.

Thirty-eight percent of those who believe private equity activity will improve come from EMEA, 27% are respondents from Latin America, 18% from North America and 17% from APAC.

With regards to those who believe activity will remain the same, 65% of respondents were from EMEA, 14% and from Latin America, 11% from North America and 10% from APAC.

When asked to identify different risks to their portfolios, 71.5% of respondents believe the economic environment poses a threat. Other risks identified included political upheaval (39%) and issues related to sanctions, tariffs and protectionism (28%). Respondents were able to choose more than one risk factor.

With the industry awash with dry powder respondents identifying growth equity, buy and build, and add-on investments as top execution items this year, S&P Global Market Intelligence data shows there was a surge in transaction volume last year with 14,765 deals announced, compared with 13,714 deals reported in 2016 and 13,995 in 2017.

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In terms of attractive sectors, healthcare topped the list with 49% of respondents already holding portfolio companies in the sector and 49% indicating they would be looking for opportunities in the sector this year. IT, industrials and consumer discretionary followed with 41%, 39% and 33% of respondents flagging these sectors as popular.

With regards to exit strategies, respondents identified a preference for IPOs in 2019. There were 3,387 exit transactions recorded by S&P Global Market Intelligence last year, a 22% decrease from 2017. Respondents in the U.K. and Brazil showed the most enthusiasm for IPOs this year.