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EquityFC Blog
Showing entries posted in January 2009
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Reading round-up | 8 January 2009
FCs and FDs looking for PE placements in 2009 will need to be well-read on their potential backers and their fortunes in these testing times. So enjoy one of our regular round-ups of the PE landscape - this update is mostly material from late 2008, and I'll bring you something fresher later in the week.
First up, some interesting data on PE returns. The slideshow is US focused, but it adds some interesting background to current PE thinking.
Then we have some interesting analysis sparked off by Blackstone's Steve Schwarzman about the opportunities for PE during an economic bloodbath. In short: Blackstone's own performance should have us take his bullishness with a pinch of salt, but there is gold for those who seek it.
Now a more downbeat assessment focusing on the way Guy Hands at Terra Firma seems to be digging in. True, some of TF's own investments have been looking a bit peaky which might accoutn for his pessimism. But taking the froth out of PE - like any business or sector - is no bad thing.
One feature of the current climate is scarcity of debt - and, as this post explains, already highly leveraged PE-backed businesses are feeling the pinch as cash flows decline. Aren't you pleased that you're here looking for mid-market and high-growth opportunities rather than big LBOs?
Finally, an upbeat look at some good deals done in 2008... in India. Emerging markets are getting the PE bug, and since a poor economic performance in many of these markets in growth slowing from double-digit rates, it pays to keep an eye on what they're up to. Your own backers may be looking more globally for deals and synergies with your own business - and the type of company attracting PE backing over there is an interesting pointer to deals here in the UK.
Picking your PE partner | 5 January 2009
Most FCs and FDs I know stress the importance of being able to work with their PE backers - you're going to be point-person for management, especially if the finances are tight during the recession, and that diplomacy is better conducted with people you can work with.
So I was interested to read this article about picking your investors - and how to avoid the bad ones. It's written for start-up entrepreneurs in the US, so there's a fair degree of localisation to be done. But it's a salutory reminder of the value of doing your own investor due diligence.
PE can help the economy in 2009 | 5 January 2009
Welcome back from the seasonal break and happy new year. Happy? Well, the recession looks like being a challenge for all FDs and FCs, and the way it's being discussed at the moment, we're unlikely to see any good news until the decade is out.
I'll come onto some of the more doomish data released at the end of last year in a post later. But whether you're already in a PE-backed business or are looking for an assignment at one, it pays to keep your head up and look for positive possibilities. So check out just such an upbeat analysis from Simon Walker, CEO of the BVCA: "Private equity provides many of the things we need to make our business
sector and our economy more successful and productive. That is more
true than ever when you think about the problems we face today."
He reckons there are four major plusses. First, PE firms have cash that the business world desperately needs. Global funds raised more than $320bn in the first half of 2008 alone. Pretty good. Second, PE is (traditionally, at least) a long-term investor. If your business needs time to get it right, you'll have it - although it'll pay to keep your backers horribly well-informed during these tough times. Third, that PE cash will be deployed across the economy - from start-ups to FTSE buy-outs. That spread of risk appetite is good for the business community as a whole. Finally, poor returns on the public markets and in fixed-income assets mean pension funds will put more money into PE to be used for these long-term, risk managed investments.
Walker makes all the usual caveats about regulation and taxation - but finance execs take note: the rules have changed. "People in private equity will prove their worth - or not - by
delivering hard-won operational improvements and not clever financial
engineering," he says. That subtly shifts the emphasis for portfolio FDs and FCs.