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EquityFC Blog
All that money must mean... bubble! | 25 March 2010
Earlier in the week, we highlighted the $500bn-odd burning a hole in private equity pockets. And based on antedotal evidence (the deal-doers we've been speaking to), that money seems to be chasing only the high quality deals. M&A is back in 2010 - but you've got to be peddling the good stuff.
Well, there's more evidence mounting up of a stampede for quality - and it's starting to look like a bit of a bubble. (Full story here, but requires WSJ.com subscription.) Dealogic says the value of buyout deals in Europe alone so far this year is EUR9bn, compared with just EUR3.7bn for the first three months of last year. Jennifer Dunstan, partner at 3i is quoted as saying: "Prices have stabilized and debt is trickling back, but there is a very limited supply of high-quality assets and some funds are looking to make deals very aggressively."
Bubbles are almost always bad news, of course, and it begs the question: should you get involved in a PE-backed business you think has been overpaid for? There's no easy answer. It depends on the company, the other members of the management team and the PE firm (as well as its general partners). You might argue that PE firms that have "aggressively" bid for assets are going to be a whole lot more... "attentive" and that might make the finance function's job a bit tougher.
But if the team, the time and your talents are right - well, so long as your eyes are open and the incentives good, being a FD or FC in a backed business can be as rewarding as ever.