Although US private equity (PE) mergers and acquisitions (M&A) activity is still quiet, PE firms, armed with cash, continue to look for opportunities to invest, according to Ernst & Young LLP's 2009 U.S. PE report (available at: ey.com/us/privateequity). PE participation in minority stake deals is returning after taking a back seat in 2005 through 2007 a period during when mega-deals were in full swing. In addition, government reform in healthcare and financial services may present investment opportunities.
"PE firms are sitting on a large amount of available cash. However, leverage is still almost nonexistent which is hampering deal flow and cash deployment," said Gregg Slager, America's Private Equity Leader at Ernst & Young LLP.
Announced US PE deal volume fell 42% in 2008 compared to 2007. This downward trend has continued into 2009 with 314 transactions announced through May of this year, the lowest five-month volume since 2002 (see data charts at: http://www.ey.com/US/en/Services/Specialty-Services/Private-Equity/Announced-US-PE-Activity).
"The bid-ask spread -- the price buyers are willing to pay and the price sellers are willing to sell -- hasn't narrowed. Until it does, activity will be slow," Slager added.
According to Ernst & Young LLP's 2009 US PE report, although PE firms have historically experienced the best returns from investments made during a down market, PE will be slow in returning to the M&A arena until the credit and capital markets recover.
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NEW YORK, July 23 /PRNewswire/ --