BVCA turns 25

Private equity professionals at last week’s BVCA 25th Anniversary conference believe the current market downturn will last two years, but claim the tougher market presents a buying opportunity. Attendees were polled at the event, with large majorities backing both propositions.

Panel discussions however suggest that financial sponsors have not yet been able to take advantage of the downturn. They are hampered by a lack of debt, which remains the major impediment to deal flow, but also by a lack of forced sellers, which means equity valuations have not (yet) fallen to a level where sponsors are active buyers.

That dearth of debt in particular means sponsors continue to explore alternatives to leveraged investing. CVC has acquired a 73.2% interest in Dutch supermarket chain Schuitema from parent Ahold.

Ahold will retain a 20% stake in the €950m business, with CVC paying a cash consideration of just €185m for its stake and the balance of the consideration made up of 58 stores plus real estate. Lion Capital is understood to have completed a buyout of Russian alcohol distributor Russian Alcohol, an emerging markets alternative to the traditional West European LBO.

In the US TPG is reported to be looking at investing in Merrill Lynch Europe is the most high profile example of a sponsors focusing on investing in FIG.

Private equity sponsors are believed to be among those squaring up to bid for RBS‘s insurance arm, which is collectively worth up to £10bn. Bids for the assets could see firms acting in concert with each other or with trade buyers. Cerberus has said it is interested in German FIG acquisitions. JC Flowers is offering to take a 24.9% stake in Hypo Real Estate Holdings, the same sponsor already holds a stake in HSH Nordbank and till recently was bidding for Friends Provident.

While some of these bids could be for majority stakes or full control, in many cases sponsors are looking to make minority equity funded acquisitions in underperforming, undercapitalised banks with a view to making an unleveraged return on eventually rising equities.