Silverfleet Capital recently completed the EUR212.5m acquisition of Kalle, a manufacturer of artificial sausage casings and sponge cloths, the first investment from its EUR650m new fund
Silverfleet Capital recently completed the EUR212.5m acquisition of Kalle, a manufacturer of artificial sausage casings and sponge cloths, the first investment from its EUR650m new fund. Managing partner Neil MacDougall predicts that next year will see more IPOs – but not nearly as many as are currently planned.
PEW: What are the key themes in 2010?
NMD: The major theme will be the disparity in the speed at which the different parts of the world economy recover. Developed economies that do not have both big structural trade and public deficits will see much improved GDP growth, and the UK and US will watch on enviously. Any boost in the UK from a change of government will be very short-lived unless the Conservatives gain a sizeable majority.
The BRIC countries will continue to set the pace, and investors will reward Western companies that have developed meaningful exposures to these economies.
PEW: What’s in store for the private equity industry in 2010?
NMD: Next year we will see many apparently successful IPOs, though nowhere near as many as are currently being planned. High growth companies with consistent annual profit growth of 10 to 15 per cent% per annum profit growth) with low gearing (2.5-3.0x EBITDA of debt after new money and fees) will be attractive to the market and their sponsors will be able to return cash to their investors.
More highly geared portfolio companies may get a listing if their growth story is strong but it will be 2011 before the equity lock-ups come off. All the rest will have to brave the M&A market or pay big fees to their banks to get their debt maturities extended.
PEW: What will the fundraising environment be like?
NMD: A few more funds will get closed as the LP community starts to get nervous about doing nothing new for another 12 months.
PEW: What is going to happen to deal flow?
NMD: This will pick up eventually but only after two things happen. Firstly the casualties from the stampede for the IPO window in March 2010 need to come to their senses and decide to explore M&A instead. Secondly and towards the end of 2010 some of the banks will be in a position to sell some of their newly and accidentally acquired portfolios of former PE deals and may realize that holding on to them is neither working nor a sensible use of capital.
PEW: How is your firm placed?
NMD: Silverfleet is well placed. Our small historic portfolio is in good shape and any problems that emerged in 2009 have been successfully addressed. We completed a €212.5 million new transaction in September, the first for our new €670 million fund, and therefore have both the resources and confidence to find the investment opportunities that will certainly be there in 2010.
