Lack of targets is biggest challenge, says Apax

By Siobhan Kennedy

LONDON (Reuters) - A lack of available targets and a boom in public markets are the biggest challenges facing the private equity industry, a top executive with leading UK buyout firm Apax said on Tuesday.

Apax Chief Investment Officer Adrian Beecroft said the pipeline for deals "was pretty much empty" and public-to-private transactions, where buyout firms acquire listed companies, "are getting much harder."

"The biggest challenge at present seems to be finding deals, even deals to bid for on a competitive basis," Beecroft said at the Reuters Hedge Funds and Private Equity Summit in London.

While corporates have re-entered the mergers and acquisitions fray after years of restructuring, Beecroft said their presence alone did not raise the competition for assets.

Rather it is corporates' ability to pay more for targets -- due to cost savings from combining businesses -- which was pushing prices up and making it tougher to do deals.

"When the stock market has gone up 20 percent but the prospects on which we look at our returns haven't gone up that much ... the pricing is much harder," he said, referring to the returns private equity firms give their investors.

QUARTERLY DOWNTURN

Private equity accounted for 17.1 percent of global M&A in 2005, racking up some $499.3 billion worth of deals, according to financial data provider Dealogic.  Continued...