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Difficult private equity market conditions: Private equity’s swiping right, but it’s not a match

Corporate and M&A, Private Equity
Business meeting behind jalousie
Senior associate Ari Bendet provides commentary on the current state of play in the private equity market, appearing in yesterday’s editions of both the AFR and The Australian.

In an AFR article quoting “leading dealmakers” on the valuation mismatch between company founders and would-be buyers in the current market, Ari explains that while M&A appetite remains strong, deal tactics will have to change in both the listed and private markets.

In the listed space, PE funds had been relying heavily on having the support of the target company, when boards were often underwhelmed by the initial approach. “What we’re thinking now is that they’ll either have to go completely hostile, or lean heavily on having the support of a major shareholder, or acquire a big pre-bid stake that could stymie rival bidders,” he said. In the private space, Ari says that our experience has been that potential buyers will need to bring more than just money to the table.

Ari uses the analogy of the dating game to describe the situation in a comment article for The Australian.

“The trouble for our desperate PE, trying to land a date with a target company, is that the current environment has widened the valuation gap to levels not seen since the post-GFC era. The tension is playing out in private and listed markets in different ways, offering important lessons for PE and target companies alike.”

In listed markets, he writes, PE funds are learning to deal with rejection by adopting more aggressive tactics to get the deal done. For private markets, it’s a different story and PE can only bridge the valuation gap by understanding what value actually means for the seller. “Public or private, closing the ever-widening valuation gap requires PE firms to understand the dating game and stay alert well beyond the nuptials.”

To read the article in the AFR, click here.

To read Ari’s comment piece in The Australian, click here.

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