What does the future hold for deals as the end of the year approaches? A recently released survey of 200 middle market private equity fund managers shows a shift toward new investments as opposed to add-on acquisitions. That spells greater interest in take-privates, succession planning, and private company sales. Let’s have a look at the results in detail.

BDO’s Fall 2021 Private Capital Pulse indicates that investor sentiment is even more bullish on deal activity than the spring, when for instance 38 percent of respondents saw take-privates driving deal flow as opposed to today’s 49 percent.

Also trending upward are expectations for private equity exits. Even after a ravenous M&A feast that saw 2020 backlogs picked dry, 42 percent of polled dealmakers see exits driving future deal activity up from 35 percent in the spring.

There’s also a new factor driving mergers: 44 percent say a looming capital gains increase creates pressure to deal. This last observation may be a bit backward looking already, however. Given lengthy queues in dealmakers’ pipelines, Solomon Partners CEO Mark Cooper says the window for tax-motivated transactions has already closed.

“We talk to advisors as well—they’re at an all-time high in terms of utilization,” says Bain Capital’s head of private credit Michael Ewald. “If you call a sell side middle-market investment bank, and say, ‘I want to sell this year,’ it’s ‘sorry, you can’t even get our ‘D-team’ because they’re booked.’ If you go to an accounting firm and ask for a quality of earnings report, they’re booking into January.”

Tax-motivated deals might not materialize in time, but the pressure such inquiries create could mean a big start to the new year.

Brandon Zero