Where's the smart money going in Support Services?

1 April 2010

Support Services has long been a prime target market for private equity. The combination of robust recurring revenues providing a defensive quality to companies in the sector, coupled with long-term growth through a relentless trend towards outsourcing, has created a compelling investment proposition for private equity investors.

In recent years this attractiveness has been further underpinned by increasing government spending on outsourced services, yet with state budgets set for cutbacks is the Support Services party bound to be over? The changing political and economic landscape provides unprecedented levels of challenge to the Support Services sector through tough cutbacks at the government paymaster. Yet efficiency drives could provide the opportunity for further outsourcing from the public sector, and the survey confirms private equity’s continuing interest in investing in innovative providers of outsourced services to public sector clients.

In the private sector outsourcing is well established, providing Support Services companies with growth over many years, but as the market has matured where are the developing areas for investment? Private equity has been an imaginative investor in the Support Services sector, frequently creating substantial national service providers through an effective buy-and-build strategy. But how many unconsolidated niches remain for the private equity deal origination teams still to mine?

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