2012 Update: $1 Trillion in “Dry Powder” Fuels Competition for Deals

The current low interest rate environment is attracting lots of capital to private equity, with the intent of realizing higher yields.  Earlier this month, Bain & Company put out a report detailing the extent of the Private Equity’s biggest problem….too much capital chasing too few deals.  While it seems counterintuitive to have too much money at one’s disposal…nearly a trillion dollars industrywide, the fact is that investors in private equity expect that their money will be put to work.  Unfortunately for investors in private equity and the private equity firms themselves, much of this “dry powder” has been sitting on the sidelines for a relatively long time, and must be used soon.  If this investment capital can’t be put to work, it must be returned to the investor…a result that is anathema to private equity firms.

One person’s problem is another person’s opportunity…and opportunity is knocking for owners of middle market enterprises.  Of course, opportunity knocks loudest for those who are the most prepared.