Speaking at an IFR LBO conference in London last week Charles Sherwood, partner of leading private equity firm
Despite this, he said financing for mega buyouts was “effectively dead” at the moment and he did not forecast a revival in larger deals until the second quarter of 2008.
Sherwood added that this was provided there was no downturn in the wider economy, saying: “The key confidence factor will be high street shopping this Christmas.”
He said financing for mid-market transactions would lead such a recovery in the buyout market but warned that “the new credit world will be different, with bigger spreads and tighter covenants”.
Despite hoping that the changed credit circumstances would lead to lower pricing on deals, he was not optimistic given that the equity markets remained high.
Sherwood was speaking at the “Financing Leveraged Buyouts” conference organised by Thomson Merger News’ sister publication IFR.
He said that private equity was “an industry faced with challenges”. However, he added that it was wrong to portray his firm, alongside fellow financial buyers KKR and
He pointed out that the largest buyout in Europe this year,
“We are more like Bolton, Sunderland and Derby, just nudging the premiership in terms of deal size,” said Sherwood.
Backing up his theory, he said KKR’s US$31bn buyout of RJR Nabisco in 1989 represented 1.8% of the S&P 500 Index at the time but this year’s record US$44bn buyout of TXU was just a fifth of the size using the same comparative measure.
By Chris Spink