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EquityFC Blog
PE out of the doldrums? | 29 September 2009
Finance execs looking for private equity-backed posts, take heart. There are lots of signs that the exits market is picking up. A decent bit of churn in PE portfolios open up options for fast-thinking FCs and FDs. So what are the portents that things have improved?
Well, I'll start with fantastic news from NVM Private Equity, which has just exited from medical diagnostics firm DxS for a record-breaking return of 13 times money (providing earn-outs all click, of course). Disclaimer: I do help NVM with writing tasks, but the numbers are impressive. And they show one thing very clearly: smaller and mid-market PE houses are fun to work with. DxS had its hiccups on the way - including a big change of strategy when the market it was targeting didn't play out. But NVM backed the business through thick and thin over eight years. They also tweaked the management team when the strategy demanded it - creating opportunities for new finance execs, of course...
But the exit joy is not confined to these shores. FT Alphaville reports that things are looking up in AsiaPac, with big IPOs and trade sales. As confidence creeps back into the markets - particularly important as the secondary buy-out market hasn't quite yet taken off - we can expect more of these deals. Just look (ahem...) at the New Look IPO, slated to value the PE-backed business at £1.7bn.
It's not all buoyant. Richard Fletcher in the Telegraph reports a doomish conversation with a PE GP, alleging that the party's over for the PE model. Well, he's wrong. Massive leverage and debt-enhanced equity multiples might well be a thing of the past - as Fletcher points out, public money investors will be wary of debt-laden companies like Jessop's coming onto the markets.
But PE is so much more than that – as hands-on, operationally driven firms like NVM make clear. Slaving away over the working capital and thrashing the cost base aren't any financial controller's idea of a good time. But spotting, evaluating and executing on market opportunities with a motivated operational colleagues and an interested, experienced and enthusiastic backer? That's more like it.