Private equity firms could be net acquirers in the U.S. this year.
"We think this year is more buy than sell," said Ernst & Young PE leader Bill Stoffel in a recent interview, citing factors such as robust exit activity in the last three years as well as a healthy recent flow of distributions to limited partners and fundraising.
Dry powder reached a record $754 billion globally, according to a PitchBook report released this month.
"We're seeing a lot more uptick in buy-side activity," Stoffel said.
That said, Stoffel noted that PE faces considerable uncertainty over tax reform.
"There are a lot of unknowns right now," Stoffel said. Among the potential reforms that could have an impact on PE include interest deductibility, he noted.
EY noted in a recent study of private equity divestment planning that recent and anticipated tax reform "makes it more complex than ever to understand both tax implications on a fund and the potential buyer upsides."
EY has a lot of clients that are doing sensitivity studies on what the potential changes might mean for their business, Stoffel said.
The study, which surveyed PE firms' approach to exit strategy and planning against the backdrop of market disruptions, also found a strong emphasis on data analysis. The study tapped FT Remark, the research unit of the Financial Times Group, to interview 100 PE executives globally between October and December 2016.
Among the key findings: 56% of respondents said they sometimes have an exit preparation plan, compared with only 30% who said they never use one.
"I think people look at it and say that divestiture is the culmination of all the work they did, not the way they make their money," Stoffel said. Some firms, he said, put a lot more focus on the buy side, adding that "value creation gets a lot more excitement" than exiting the investment.
Two-thirds of respondents said they spend an average of six months on exit planning, which is much shorter than the time-frame EY deems ideal.
"Strategic, critical thinking about exits requires more than a year of planning (ideally, around 18 months) to allow time for any fundamental changes to be implemented and show results," EY said.
But the study also found that speed of execution is prized among the firms and that they're looking to technology for help there.
Almost all respondents—96%—said improved analytical tools would help them make better and faster exit decisions, and improve sales preparation. Eighty-five percent of PE executives said they intend to use predictive analytics more in the next two years, while 59% said the same for descriptive analytics and visualization and 39% for prescriptive analytics.