It was a very subdued audience that attended this year’s
Although it is a familiar refrain, especially to journalistic ears, it still came as something of a surprise to actually here a senior member of the European private equity community state on stage that the industry will be effectively immune from the problems everyone else in the financial world and beyond is facing. It is one thing to hear a private equity professional or their public relations representative trot out the usual “things are going to be OK/we’re still very busy” speech when asked how their business is faring; it’s quite another to hear it said so blithely in a panel discussion at one of the supposed highlights on the private equity calendar. Whilst the effects of the credit crunch on the larger end of the buyouts market was dismissed fairly casually, the mid-market, it was said, will carry on as usual.
Is this a confidence borne of arrogance or complacency? It is all well and good explaining away the importance of the mega deals, but these make up a sizeable chunk of private equity deal flow, and completely dominate in terms of value. It is not so easy to say that because only the big boys are affected, it doesn’t really matter.
And besides, what makes the mid-market so special? Whilst its lack of dependency on the debt markets counts in its favour, this is no reason to assume it won’t be hit by other factors, such as problems in the wider economy which unsettle portfolio companies.
At the end of June, buyouts data publisher
The fall is attributed to the lack of attractive companies, a direct result of the struggling economy. Retail deals are nowhere to be seen. Vendors are sticking to their guns and refusing to drop prices, meaning private equity firms looking for a bargain are out of luck (one side effect has been an increase in public to private deals where discounts can be found).
Although the UK economy is expected to be hit harder than most European countries, a similar pattern is sure to be repeated elsewhere. In difficult times such as these, complacency is a danger, and if you’re blind to the credit crunch, get ready to be hit. Hard.