Compiled by Laura Kreutzer
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Each year around this time, Private Equity Beat asks members of the industry to share their reflections on the past year and their predictions for the 12 months that lie ahead. As we head into the holiday, we catch up with Scott Edwards, managing director at Sun Capital Partners, a distressed debt and turnaround firm based in Boca Raton, Fla.
What surprised you the most about 2015?
I don’t know that anyone anticipated such a prolonged period of low oil prices. We and other firms have seen some benefit from that as the profitability at some portfolio companies has been enhanced by lower transportation, energy and input costs. In addition, we believe lower gasoline prices have continued potential to stimulate consumer spending as they may create greater disposable income.
What do you think will be the biggest challenge the industry will face in 2016?
The superabundance of capital in the market will continue to be a challenge that impacts firms across the spectrum of size and strategy. As a result, I expect valuations to remain high and firms to face strong competition for not only winning but finding deal opportunities. Firms will have to differentiate to get deals and generate returns.
What do you think will be the biggest drivers of distressed deal flow in 2016?
Liquidity. Distressed and underperforming business with more access to liquidity can “kick the can” and continue operations as they attempt to right their ship. We’ll likely be more focused on acquiring performing companies where there is opportunity for us to have positive impact in helping them transform potential into business results.