The near collapse of the global financial system, which wiped out trillions in corporate value and personal savings, may be giving way to a new “golden age” for private equity investment,
Private equity firms suffered badly when debt markets seized up as a result of the crisis and banks did not want to lend increasingly scarce capital. Only just recently have credit markets started to unfreeze.
“The financial markets may be on the cusp of a new ‘golden age’ for private equity,” Hutchins said.
Hutchins, who also co-founded the firm, cautioned that while there has been a significant stock market rally, the economy is showing stable, though not robust, growth.
“This recent stock market rally is a little troubling because it seems to me not to be supported by underlying economic fundamentals,” Hutchins said.
“But that aside, we have gotten down to levels that are pretty attractive and the banks seem to be recovering enough to provide modest levels of financing, which is all we need. We feel pretty optimistic,” he added.
But he added that investors need to be mindful that valuations in 2007 should not be defined as normal. They were an “overshoot in another way,” he said.
Silver Lake makes only a few acquisitions a year and is more inclined to use financing for working capital rather than purchases, Hutchins said. It is reportedly involved in a $1.9 billion bid to purchase a 65% stake in online telephony unit Skype from Internet auction and services company eBay Inc.
Ebay agreed to sell the stake in Skype for $1.9 billion to a consortium including Netscape founder Marc Andreessen’s
When asked about the Skype sale and lawsuits filed by Skype’s founders, Hutchins said he had no comment. —Daniel Bases, Reuters