“It was the best of times, it was the worst of times”. Charles Dickens’ immortal words neatly capture the current predicament of private equity albeit with some hyperbole.
The good news is that, despite contraction in bank lending, Private Equity firms have access to an increasing array of debt products which offer high levels of gearing on increasingly flexible terms and at comparatively low pricing. The high yield bond market is now open to midmarket companies while smaller companies now have access to unitranche.
These developments have provided private equity with the ability to compete with corporate buyers on level terms but also paved the way for a flourishing exit market either through sales or dividend recaps. The resurrection of the IPO market has also been helpful.
Conversely, Private Equity remains under attack from a number of quarters in the western economies. Private Equity firms are increasingly besieged by regulatory initiatives which are either mandatory, such as the EU’s Alternative Investment Directive, or optional such as ESG initiatives all of which eat into investor returns. Additionally, as the Private Equity markets have matured the perception is that it has become increasingly difficult for Private Equity firms to add value raising questions as to whether the Private Equity model is broken.
These headwinds have led to the increasing bi-furcation within the industry between the top tier firms who have found ways to add value and others who continue to rely on leverage on the basis that a rising tide lifts all boats.
This conference draws together the leading experts who will provide commentary and an insight into the key issues and trends affecting the Private Equity industry. The conference will provide attendees with the opportunity to raise issues with the expert presenters.
I look forward to welcoming you on the day of the conference and close with more positive sentiments from Dickens “It was the spring of hope…We had everything before us”.
Senior Consultant, Grant Thornton UK LLP