LONDON A mini-bubble is brewing in the private equity asset buying market, the managing partner of BC Partners BCPRT.UL said, as cash-rich buyout firms starved of deals vie with each other to buy companies.
Private equity companies, focused on fixing struggling portfolio companies and deprived of debt for deals for the last 18 months, have gone back to dealmaking as leverage has returned and asset prices are rising again this year.
"There's a mini-bubble around at the moment, which is based on the sentiment that there is some pressure to make investments from some people because they have done nothing in 18 months," BC Partners' managing partner Charlie Bott told the Reuters Private Equity and Hedge Funds Summit.
"The deal flow right now is more active today than it has been at any time in the last 12 months," he said.
Some firms with money left to deploy may be willing accept lower returns from those deals, Bott said.
"If those two factors are contributing to your thinking and a high quality asset comes on board, where the chances of losing money are very slim, you may be prepared to take a lower return," Bott said.
The private equity industry is sitting on as much as $500 billion of capital raised for deals at the height of the credit and buy-out boom in 2006 and 2007.
BC Partners continued to target annualized returns in the mid-20s percentage points on deals done in 2009.
"We want to remain very disciplined on price and that's the challenge for everybody," Bott said.
The group this month agreed to acquire cleaning products firm Spotless for AXA Private Equity, in a deal one source said was valued at around 600 million euros ($811 million).
Last year it acquired a minority stake in U.S. listed office products firm Office Depot ODP.N, career training company ATI and diagnostic laboratories Synlab and Futurelab.
(Editing by Greg Mahlich)