Fund management consolidation is set to increase as firms attempt to grow their asset base in order to compete for deals, according to a survey of top private equity executives.
Heavy competition for deals is pushing private equity firms to build scale by merging with other firms, which allows companies to reduce costs and expand assets, according to the Global Private Equity Outlook report.
Almost all respondents to the survey by law firm Dechert and Mergermarket said consolidation would increase in the next two years, and more than two thirds think the increase will be substantial.
Dechert partner Markus Bolsinger said: “The goal is to maximise assets under management.
"There are synergies by having that all under one roof. You have a more sophisticated fundraising system, the back office is rationalized and expertise is shared. More assets under management also means you have more dry powder.”
A total of 59 per cent of executives said the need for an increased capital base to compete for deals would be the main driver of consolidation.
Other drivers include a desire to increase scale, the availability of smaller fund managers for sale and the desire for diversification of investments by asset class and geography.
Only two per cent of respondents to the survey, which analysed 100 senior level private equity firm executives, said consolidation will only increase slightly or not at all.