February 2013
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Private equities may tap M&As to exit in 2013 as IPOs dry up

Private equity and venture capital environment is likely to remain muted till 2014 with most PE players looking at exiting their investments and getting into a consolidation phase.
However, owing to a relatively dry IPO pipeline, the standard exit route for PEs is no longer valid, said tax and advisory firm Grant Thornton in a joint report with Indian Private Equity and Venture Capital Association (IVCA).
“PE’s are looking at other mechanisms of exits such as mergers and acquisitions and secondary buyouts. We have seen some successful exits in 2012 in spite of the lack of IPO market.
“We expect this trend to continue,” said Harish H.V., Partner, Grant Thornton.
Inflows may double
He, however, added that the amount of fund inflows is likely to double in 2013 as compared to 2012. During 2012, the total PE investments stood at $7.35 billion as against $8.8 billion in the previous year.
While sectors such as real estate, IT, telecom and infrastructure which bagged the maximum PE investments in the last eight years, are losing sheen, consumer-focused businesses will remain the top hunting areas for the PEs. eCommerce, which is dependent on the consumer business, has also witnessed an increase in activity in 2012.
The PE firms have invested close to $63 billion over the past 8 years in about 2,000 Indian companies. While, 2007 remained the ‘honeymoon’ period for the PEs in terms of number of deals and investments, it is unlikely for PE firms to witness such a scenario before 2015, Harish added.
Meanwhile, the report titled “the fourth wheel” highlighted that the deal activity in India and China is expected to slow down. India did not even find a place in the PE firms top new “high growth” markets while Indonesia topped the chart followed by Peru and Colombia.
challenge
On the challenges, Raja Lahiri, Partner (Transaction Advisory Services) said given the global macroeconomic weaknesses, fund raising will remain a major challenge for PE funds worldwide.
The report revealed a marked decline in the fund raising expectations of general partners around the world in 2012, with nearly 72 per cent respondents describing the fund-raising outlook as either ‘negative’ or ‘very negative’. In 2011, it was 46 per cent.
Source: Business Line

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