From non-control development capital to traditional management-led buyouts of private companies, PE investment has emerged as an increasingly important source of capital and value creation within the global economy. To date, the PE sector has enjoyed a good run – spurred on by growth in fund size, low cost of borrowing and impressive returns on equity.
However, the improved economic outlook and an influx of fresh capital have generated increased competition for good quality investments. The increase in funds has not corresponded with an increase in completed deals. Valuations are also being pushed up. PE funds now need to cast their nets further to explore untapped sources of value.
In addition, the growing size and complexity of many PE operations have created their own risks and demands, not least of which are the responsibilities of owning and monitoring a diverse portfolio. This is over and above the risks in the market – most notable being the effects of political change and economic environment in the region, and any resulting effects on the regulatory development.
Pertinent Challenges Faced by PEs