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EquityFC Blog
More on PE's turnaround | 2 October 2009
Earlier this week, we highlighted anecdotal and incidental evidence that PE might be turning a corner in terms of exits. We end the week with hard data, although it suggests a proper upturn is still some way into 2010.
The US National Venture Capital Association's exits survey shows that Q3 2009 was... well, OK at best. Certainly the down trend is over, and there's plenty of optimistic talk. But the NVCA's chief Mark Heesen had this to say: "The fact that the many in the media are classifying three IPO's as resurgence is evidence of how low our expectations have become. [That includes this blog, of course. Although we didn't put a rogue apostrophe in "IPOs", so nyah.] ... While the psychology of the market is trending positive, our original forecast of a true recovery not beginning until 2010 still unfortunately holds true."
Meanwhile, Dow Jones had slightly higher numbers for Q3 exits (71 M&A exits for $2.25 billion), but was equally cautious. Green shoots, then, but no mighty oaks.
On one other measure, we can only hope PE has bottomed out: fundraising. According to data from Prequin, Q3 2009 was the lowest quarter for harvesting new funds since 2003, with only (only!) $38bn raised worldwide.
Actually, I think that's still a lot of dough, and the fact that deal activity has remained limited means many funds must still be sitting on some of that $400bn global cash overhang that was much talked-about in the summer. So I'd be cautiously optimitic about next year (except for the big LBO players, who remain terminally borked by the debt markets and the collapse of sentiment in their model).
Caveat: A big factor looks likely to be the stock market in the run up to year end. If the froth - and it is very bubbly - blows off, that might dampen the enthusiasm for IPOs. Equally, higher unemployment could stall an economic recovery, making even operational improvement plays tough for PE firms. In the UK, then, we'd better hope this silly politicians' game of "who can promise the deepest cuts in the public sector payroll" goes away...