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Private equity firms eye new sectors

More than half of private equity firms are seeking to expand their sector focus in 2010, with business support services, infrastructure and logistics the most popular industries.

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More than half of private equity firms are seeking to expand their sector focus in 2010, with business support services, infrastructure and logistics the most popular industries.

According to Grant Thornton's Private Equity Barometer, 58 per cent of private equity firms expect to change their investment strategy by focusing on at least one new sector in 2010.

The quarterly survey showed that business support, infrastructure and logistics businesses will continue to be the most popular choices, with 51 per cent of respondents choosing it as one of the most active sectors in 2010.

"Private equity firms are increasingly choosing to invest in sectors that lend themselves to a more obvious exit via trade sale,” commented Mo Merali, head of private equity at Grant Thornton.

“Moreover, acquisitive private equity firms need to get various banks to agree on club deals, which is why they favour sectors that offer steady and predictable cash flows. Healthcare, business support services and infrastructure are fairly safe bets."

The popularity of healthcare is also rising, with 47 per cent of respondents expecting to be most active in the sector.

Meanwhile, the sector group including industrials, manufacturing and engineering was identified by 41 per cent of respondents as being one of their most active sectors in 2010.

The high-tech and consumer products sectors saw sharp falls in popularity, with only 34 per cent and 32 per cent respectively of respondents expecting to be most active in these sectors.