What are PE Firms Searching For?

Nothing reveals one’s curiosity like their search history. To find out exactly what private equity firms are looking for as they troll the internet in search of deals, we pulled the top 50 most-searched terms that these investors used on Axial in the last 30 days. While most of the results serve as signals about the industries and regions that are top of mind amongst financial sponsors, we weren’t necessarily surprised to see that the most frequented search term was, in fact, “Private Equity Firms”. As we see a robust M&A environment continue, dry powder pile up, new entrants emerge, and more and more private companies come up for sale, the thing private equity firms are most concerned with is keeping an eye on their competition.

When it comes to searching for counterparties, private equity firms continue to rely on intermediaries for dealflow. Not surprisingly, finding “Investment Banks” to gain access to the best deals is a priority amongst sponsors. Investors also frequently search for “Business Brokers”, recognizing that some of the best deals remain in the hands of smaller, boutique operations or one-man shops. We’ve seen this trend play out on the network as investors continue to seek out growing, profitable middle market and lower middle market companies that the big banks may not have access to.

We’ve written about two particularly hot sectors and what’s stoking their fires and our data confirms that “Manufacturing” and “Healthcare” are still in vogue. Next on the list are the “Industrials”, “Aerospace & Defense” and “Consumer” sectors. More specifically, however, investors are looking at opportunities in “Health Care IT” and “Semiconductor” spaces. Even “Soft Drinks” is bubbling it’s way to the top.

Regionally, California and Texas are the two big states to look at. Interestingly, however, investors tend to search more specifically for California cities, with “San Diego” topping the list, whereas the first Southwest regional term is simply “Texas”. Within Texas, “Houston” wins out, which points to targeted interest in opportunities within oil & gas even while prices are stifled.

The term “Family Office” is also in the top 25 and rightfully so. When it comes to competition, family offices have started to take some share away from the PE industry, shying away from their traditional role as LPs and investing directly in private companies themselves.

When it comes to deal sourcing, being able to find and be found by the right counterparties and companies is paramount to private equity firms’ success. And as the data tells us, more and more, that search is starting online.