Charterhouse says consumer-related deals to drop

Executives at Charterhouse Group, which is gearing up to raise a fifth buyout fund, anticipate deal flow will be off by about 20% for the final six months of 2008.

The New York-based mid-market buyout shop has looked at about 400 deals so far this year, about the same amount of activity the firm saw during the same period in 2007. But Charterhouse has seen a decline in the number of opportunities presented from investment bankers since June, says Partner David Hoffman.

Hoffman attributes the slow deal activity to troubles hitting the consumer sector.

“If you’re selling a consumer products company and retail spending has dropped off precipitously, you don’t want to be selling your company,” Hoffman said.

Hoffman said that his firm is sourcing most of its deal opportunities, rather than fielding opportunities from investment bankers. He characterized deal opportunities sourced in-house as down slightly this year.

The drop-off is especially noticeable in consumer and business services, two sectors that are under pressure from high commodity costs and escalating gas prices. Charterhouse also acquires companies in telecom services and health care services.

Nonetheless, the firm is keeping active. It currently has a business services company under letter of intent and expects to close the deal by mid-October. It’s also in the process of closing an add-on deal for one of its portfolio companies.

Charterhouse is also gearing up to raise its fifth buyout vehicle. PE Week affiliate Buyouts reported in December 2007 that the firm would seek to raise $750 million. It raised $447 million for its fourth fund, which closed in 2003. —Bernard Vaughan