Private Equity Sponsors Recalibrate for Robust 2021 Buyout Market

This article from @Bloomberg focuses on the European market, but the conditions necessary for explosive private equity deal making growth are present here in North America as well, and over the past several months we have seen private equity sponsors engage the buyout market with increased eagerness and commitment.  

This eagerness to deploy dry powder has led sponsors to engage more deeply in processes than they might have only 12 months ago. Many sponsors are willing to "hang around the rim" a little longer, taking a more aggressive and longer view to competitive buyout opportunities. This means finding every angle to win the bid, including dedicating more resources pre-exclusivity and at times pricing over strategic buyers. Co-investment opportunities have been a big part of that price war - giving sponsors an opportunity to share with committed LPs and occasionally bringing the equity check higher. We have also seen creative deal making, including finding alternative financing arrangements to present a more streamlined closing process to sellers, and a willingness to lean heavily on transactional insurance (R&W Insurance, Transactional Tax Insurance, and Contingency Insurance), giving sellers the "palm tree peace of mind" they are looking for, while still protecting the sponsors downside risk.  

As conditions for explosive buyout growth continue to develop, many private equity sponsors are recalibrating their engagement strategies and gearing up for what could be a very robust 2021 deal market.