70% of businesses backed by private equity are confident that their profits will grow over the next 12 months, according to a new survey from Deloitte.
The survey, based on responses from nearly 60 chief financial officers (CFOs) of firms supported by private equity investors, also found that few companies are overly concerned about reducing costs.
When asked to name their priorities for the forthcoming year, only 11% said that cost-cutting was a paramount objective – a far cry from the equivalent survey last year, when budgetary cutbacks emerged as the top priority.
Emma Cox, lead partner for Deloitte, said the results indicate that the “days of cost-cutting and concerns about bank covenant compliance are behind most CFOs, with a renewed focus on revenue growth and preparing the business for sale.”
However, Cox added that “despite the strong resurgence in private equity deals in 2010, few of the CFOs surveyed anticipate a sale of their business over the next one or two years.”
Indeed, only 18% of respondents anticipate their private equity backers selling the business within the next 12 months; less than half expect a sale until 2013.
The survey also showed that trade buyers hold the key for many investors looking to sell - almost 50% of respondents cited a trade sale as their most likely exit route.
Furthermore, it seems that many firms will pass from one private equity firm to another when their existing backers come to sell up – 35% of those who answered the Deloitte survey anticipate a secondary buyout for their company.