Challenging Times

This year has been challenging for private equity players and the fund administrators that support them. In 2009, private equity investments hit a 12 year low in the first half of the year dropping to US$24bn, 80% down on the same period in 2008. Private equity backed deals generated only 3.5% of global M&A volume in the first half of 2009, the lowest level since 2001 and down from the record high of 21% in 2006.

Fundraising was below US$100bn between January and June, equivalent to a two-thirds drop on the same period in 2008. The number of abandoned fund-raisings totalled 30 in the first half of 2009, matching the amount abandoned in the whole of 2008 and double the 14 in 2007. Despite these dismal figures – there have been a few bright spots in the private equity industry this year. Though the first half of 2009 may have been difficult it seems that signs of change are coming. “We track activity in the business very carefully,” says Kevin Brennen, CEO of Ipes in our feature on p14. “And we’re seeing the first signs of a lift in the investment cycle. Between early July and mid-August there was certainly movement, with funds looking at investments and signs that things are beginning to pick up. Deal analysis is more active, particularly in the technology sector.”

It isn’t just the technology sector where things are beginning to turnaround. The secondary market has seen a record US$15.6bn raised in the first half of 2009, already setting a new annual record with six months left in the year. Fund administrators are finding themselves dealing with more niche players on environmental and infrastructure projects. Many of these niche funds have been launched by seasoned private equity professionals changing tack as the prospect of carried interest from their existing activities evaporates in the current market.

Matthew Wood of Mourant says in the feature on page 7: “Spin-outs need our help too. They won’t necessarily be taking finance professional with them. Start-ups and spin-outs are great opportunities for us, and who knows, maybe one of the future big players will develop as a result of these times.” This year has been challenging for private equity players and the fund administrators that support them. In 2009, private equity investments hit a 12 year low in the first half of the year dropping to US$24bn, 80% down on the same period in 2008. Private equity backed deals generated only 3.5% of global M&A volume in the first half of 2009, the lowest level since 2001 and down from the record high of 21% in 2006.