Newly appointed CEOs at firms such as Candover, Cinven, 3i, PAI and Terra Firma will have to commit long hours to sorting out ailing portfolios, figuring out the best way to raise a fund in 2010 and face banks who are unwilling to lend.
Venture capital firms are also looking for new leaders but succession plans are not as clear cut as they are at the more institutionalised buyout firms (p56). The personnel changes on p34 highlight the clutch of high ranking departures of the past two months. Poor performance, a difficult cycle and age are key factors in some executives’ flight to freedom (p7).
Looking at the data for the first half of 2009, the market is difficult, but there is optimism. The volume of investment in the first half of 2009 dropped 65% from the previous six month period, according to the latest data from EVCA. Less than half (41%) of LPs made new commitments to private equity in the first half of 2009. But on the upside, only 9% of LPs intend to reduce their private equity allocation in the next 12 months. Investors are still showing an appetite for private equity over the long term, with 30% intending to increase target allocations over the next three to five years.
The final quarter of 2009 will be crucial to many private equity firms. The Institute of Chartered Accountants’ index of business confidence revealled that the UK recession is ending. Germany and France have already announced growth in the second quarter of 2009 and LPs are planning to recommence investment in 2010. Which means that over the next few months cash is available.