Seeking Alpha offered a few highlights from the recent Dow Jones Private Equity Analyst Outlook Conference, held in New York City on January 25th.
Among the bright spots is the outlook for entrepreneurs and the private equity professionals who invest in them. Angel investors, venture capital firms and big tech firms are “flush with cash” and ready to pounce on promising start-ups. And the cost of prototyping and getting a new product to market has dropped considerably in past few years, according to Jeff Fagan a partner at Atlas Venture, an early stage VC firm located in Cambridge, MA.
It could be a good year for IPOs as well. Investors are awaiting the imminent LinkedIn IPO, and valuations are heading upwards. This is potentially good news for VC and PE companies looking to monetize their investments after waiting out the financial crisis. Many corporations are sitting on piles of cash, although the Seeking Alpha article notes a lot of this cash has been earned overseas. The 30% repatriation tax could be an obstacle to investment here in the U.S., and force corporations to invest the money globally instead.
There is still a lot of pent-up demand for IPOs that were put off in 2009 and 2010, something that has shifted in favor of sellers for 2011. Recent valuations reflect improved investor confidence.
Another panel discussion at the conference looked at the challenges of fundraising for private equity firms in 2011. Large institutional investors and pension funds may be close to their limits on private equity allocations, due to an increase in the value of their investments. In addition, due to the lower amounts of leverage being applied today, private equity may offer lower returns than seen in the past. One challenge for PE firms will be to get investors to scale down their expectations of returns, moving forward, while still being willing to invest in the asset class.
What’s your take? Do you see things improving for private equity jobs and firms in 2011? Add your comments below.
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