Amid heightened competition and regulatory uncertainty, the private equity industry is exhibiting growing confidence and appetite for investment. A study jointly released by Shearman & Sterling and global valuation and corporation finance advisor Duff & Phelps underscores these conclusions and related key findings in an inaugural Global Private Equity Outlook report published in association with Mergermarket.

Respondents overall are bullish about an increase in private equity activity over the next 12 months, with 87% of respondents expressing confidence in a near-term increase in buyout activity and 72% expecting fundraising prospects to improve in the next year. Specific areas of anticipated strength include cross-border investments (industry-wide), consumer and the integrated telecommunications, media and technology (TMT) sectors. Specific highlights from the study include the following:

• The value of year-to-date exits at US$227bn is fast approaching 2013’s total of US$282bn.
• Survey respondents expect the consumer and integrated TMT sectors to have the best opportunities for private equity. Interest in the integrated sector is driven by technology investments, which comprise 75% of year-to-date TMT buyouts. There were 149 TMT buyouts worth approximately US$28bn so far this year.
• On average, cross-border transactions will make up 30% of respondents’ acquisitions over the next 12 months. The notable proportion of cross-border investments by PE firms can be attributed to attractive investment opportunities across the globe. Survey respondents report that 66% of North American, 40% of European and 33% of Asia-Pacific will access foreign markets for financing.

More than a quarter of respondents (28%) think that regulatory and compliance risks are the top challenges faced by private equity firms. "Across geographies and industry sectors, private equity professionals express optimism,” noted Bob Bartell, Global Head of Corporate Finance at Duff & Phelps. “Competition is growing, but the industry is confident that strong investment pipelines, financing accessibility, and exit options will all contribute to a vibrant industry in the year ahead and beyond.”

Despite the general optimism, respondents cite challenges related to regulatory hurdles, compliance risk and increasing competition for assets.

The report also reviews the diverse strategies that private equity firms employ to retain competitive advantages and maximize the desired yield from their investments, including a renewed focus on operational improvements. It also considers the impact of the industry’s current regulatory environment on the industry, which, while traditionally lightly regulated, faces increased oversight. Finally, the survey results address the various drivers of buyouts and exits in the current market and explore regional and industry-specific trends.

Click here to view the full report.