More than half of private equity leaders are confident that the full recovery of the market is no more than 18 months away, according to research commissioned by Celerant Consulting.
More than half of private equity leaders are confident that the full recovery of the market is no more than 18 months away, according to research commissioned by Celerant Consulting.
The survey of more than 220 senior executives across Europe and the US, carried out by the Economist Intelligence Unit, found that 53 per cent of private equity leaders believe that the market will return to its pre-credit crunch levels within 18 months.
The findings showed that US executives are more optimistic about the future than their European counterparts, with 62 per cent of US respondents believing that a turnaround would occur within that time frame.
The global sentiment was a bit more pessimistic, with 36 per cent of UK and 32 per cent of German respondents predicting a full recovery would take longer.
Paul de Janosi, managing director of private equity at Celerant Consulting, says: ‘Despite the optimistic viewpoint of a majority of the survey respondents, we feel that it will be a few years before we see pre-credit crunch levels of activity again. We expect the roots of early recovery to begin in the second half of 2009, leading to broader activity by mid-2010.’
Despite the long-term optimism, many of those questioned still felt that the market has further to fall.
The vast majority believe both the volume and value of deals will reduce over the next year (78 per cent and 81 per cent respectively), while two thirds (66 per cent) said they intend not to invest at the moment and would instead wait for more attractive deals.
The survey also found that private equity leaders from around the globe are united in the belief that the credit crunch and subsequent recession will transform the industry, with 96 per cent agreeing that private equity firms will have to change.
However, there is no consensus on what the sector will look like when the credit crunch has passed, highlighted by the fact that 16 per cent acknowledge that there will be a need to change but they are not sure how.
One fifth thought the industry would need to find a completely different financing model, while 19 per cent globally and 29 per cent US expect the credit crunch to lead to consolidation within the private equity sector itself.
Despite acknowledging the need for change, only 20 per cent are planning to scale back activity in the next 12 months, and just 2 per cent intend to shed jobs.
‘The credit crunch means that easy refinancing is a thing of the past, yet the private equity industry is still optimistic about the future,’ de Janosi adds. ‘In the short term private equity companies have already begun to shift their focus from investment to improvement. They need to concentrate on their existing portfolios to ensure that they are both maximising their operational efficiency for short-term survival, and guaranteeing long-term growth.’
