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EquityFC Blog
PE watch: will summer sizzle or burn out? | 12 July 2010
Finance execs looking for PE-backed opportunities need to keep a weather eye on the private equity world. But after two years of mixed messages, are we any clearer about whether the industry is recovering? And what might that mean for opportunities?
Well, the bad news is that messages from both sides of the Atlantic - and in both the large buy-out houses and the (more interesting) mid-tier firms - continue to confuse. So on the one hand, we have some mega-deals in the secondary buy-out market in the US; on the other, fundraising continues to fall there, especially for the mega-funds. (That might have something to do with the fact that investors around the world are starting to ask tough questions about PE returns...)
What about this side of the pond - and what about those mid-tier players whose deal-flow creates openings for smart finance execs? The news is, again, mixed. At the bottom end - where many of you might reasonably spy exciting start-up and development opportunities working with creative entrepreneurs - VC funding is approaching record lows. A NESTA report says fewer funds are raising less capital for smaller early-stage investments. The one glimmer of hope for FDs and FCs is that VCs are taking a longer view of investments - giving you more time to get it right.
The good news? I'm still hearing lots of PE players talking about a flight to quality. Sure, they're nervous about overpaying for businesses - especially when competitive auctions result in very rapid and sometimes hasty due diligence. But if the business looks good and shows opportunities for strong organic growth (i.e. generating more cash without needing a ton of debt to do aquisitions), they want to buy.
That's doubly good for you because it means PE firms looking to sell - and boy, do some of these funds need to churn investments - need both great financial management in place and the kind of broad finance functions skills that will help them dress a business for sale. Time, perhaps, to brush off those financial reporting and investor relations skills.