Private Equity Execs 'Challenged' by Prospect of New Regulatory Standards: KPMG Survey

NEW YORK, Sept. 30 /PRNewswire/ -- Most private equity (PE) industry executives believe that complying with impending financial regulatory standards will be a challenge, according to a survey taken by KPMG LLP, the audit, tax and advisory firm.

The survey of more than 110 industry executives, taken at the Dow Jones Private Equity Analyst Conference yesterday, found that 43 percent of respondents believe meeting the demands of new financial regulation will require a time consuming, difficult process, while 47 percent believe it will be "mildly intrusive." Only 10 percent thought that meeting new regulatory requirements affecting PE firms would be a non-issue.

"While we don't know the precise form the pending regulation will take, many in the industry anticipate dedicating significant time and resources to this issue next year," said Shawn Hessing, national lead partner for KPMG's U.S. Private Equity group. "Most of the large PE funds already have significant compliance processes in place, but the expected greater oversight will likely require additional changes at many PE firms."

Biggest Challenges Facing PE Industry

Regulation was also named among the "challenges" facing the industry.  When asked to name the "biggest challenge" facing the PE industry over the next 12 months, almost half (49 percent) of the respondents to the KPMG survey cited limited partner (LP) fundraising, followed by a tough IPO market (19 percent), proposed regulation (18 percent), financing (9 percent), and image of the industry (5 percent).  

"Many of the PE executives in the audience called for an 'all of the above' response to the 'challenges' question, illustrating that the PE industry is at facing a number of critical issues now," said Hessing. "While the industry has been evolving over the last few years as a result of the financial crisis, the biggest changes could lie ahead, and we may see a very different PE landscape in a year or two."

Other KPMG survey findings include:

• Most respondents (83 percent) said they expect the IPO market to generally remain the same over the next year, while 11 percent thought it would improve and six percent see it shutting down.

• Many of those surveyed (45 percent) believe that buyouts will be the best investment strategy over the next year, followed by mezzanine capital (25 percent), venture capital (18 percent) and debt (12 percent).

• Respondents were almost evenly split on whether there would be a $10 billion buyout in the next year, with 52 percent who answered "yes," and 48 percent who said "no."

The survey was conducted at the Dow Jones Private Equity Analyst Conference in New York on September 29, with a range of 110 to 140 responses per question.

About KPMG's Private Equity Group

KPMG's Private Equity group is a cross-functional, cross-geographic, and cross-sector team focused on serving private equity firms and their portfolio companies. KPMG's Private Equity group works with clients throughout the entire private equity lifecycle, from fundraising to realizing value. KPMG's Private Equity group is comprised of more than 400 experienced professionals, including 50 partners solely dedicated to Private Equity. Our team has a deep understanding of the private equity industry, including the distinct challenges and opportunities facing the industry.

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of KPMG International Cooperative ("KPMG International.")  KPMG International's member firms have 140,000 professionals, including more than 7,900 partners, in 146 countries.

SOURCE KPMG LLP

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