Approximately one-third of private equity firm managers believe the credit crisis was resolved in 2009, while an additional ten per cent predict that market weakness will dissipate before the second half of this year.
In total, more than 80 per cent of private equity professionals surveyed suggest that the credit crisis has ended or will conclude before the second half of 2011, according to "Private Equity in 2010," the latest research report published by professional services firm Rothstein Kass.
The report includes the findings of a survey of 199 private equity firms conducted during the first and second quarters of 2010.
Tom Angell, head of the Rothstein Kass private equity practice and principal-in-charge of the Rothstein Kass commercial services group, says: "Even during the worst of the credit crisis, many private equity firms maintained ample capital for deployment, but most found it extremely difficult to complete deals. At the same time, mounting liquidity concerns compelled many business owners to pursue a potential sale. In many instances, discrepancies between the owner’s perceived value and the price that potential acquirers would pay, kept private equity capital on the sidelines. With lending again less restricted, this gap has started to narrow leading to renewed activity."
The report, which was co-authored by Russ Alan Prince and Hannah Shaw Grove, shows that 77 per cent of participants anticipated increased regulation of private equity firms.
Over 66 per cent of survey respondents are actively raising new capital this year and more than 70 per cent of participants predicted it would be more difficult to raise new capital this year than in 2009.
Forty six per cent of private equity managers expected more fund launches than in 2009, while fewer than 39 per cent expected more closures.
"Most private equity managers recognise that greater involvement with portfolio companies will continue to be essential to unlocking long-term enterprise value. Fortunately, many private equity firms are well-positioned for these conditions. In addition to the vast array of financial approaches and tools at their disposal, many private equity firms possess extensive sector knowledge that enables them to make astute decisions even in a rapidly shifting competitive landscape," says Angell. "With exit strategies uncertain, those private equity firms that are able to sell portfolio companies will be more likely to use the proceeds to bolster other portfolio companies than to pursue other transactions in the near-term."
