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How the UK general election will shape private equity

With the General Election just around the corner, 2015 promises to be another interesting year for private equity, says Gary Tipper (pictured), managing partner at Palatine Private Equity…

A change in the political order can often cause changes to the way in which businesses operate and how leaders make decisions, as well as having an impact on the view shareholders take on the timing of an exit. This will inevitably shape the private equity industry over the next 12 months.
It is particularly interesting that, for the first time in 40 years, nobody has a clue who will win the election. This creates a high level of uncertainty for businesses and may see plans around growth and investment being put on hold – whether that is planning an acquisition or an exit. We expect that some business owners will sit on the side lines in the run up to the election to see what the outcome might be. This could have an effect on deal completions in the first half of 2015 and if the result is a hung parliament it could have a longer lasting impression.
However, that being said, not all political changes result in negative consequences for the market. Following the Autumn Statement, £500m of new bank lending will be allocated under the Enterprise Finance Guarantee Scheme. This will service the demand from smaller companies looking to access funding and encourage more bank lending to SMEs.
It’s also worth noting that private equity has had a successful spell of fundraising over the last 12 months, and that there is a significant amount of private equity money available for mid-market and larger deals. One advantage of private equity is that it offers far more than just an injection of capital. It provides businesses with experienced support and input along with the ability to bring non-executive directors, industry contacts and relationships to help drive a business forward.
Though some deals are likely to be delayed in the run up to the election, private equity backers continue to look for good quality management teams with scalable business models. At Palatine, we focus more on the specific micro factors that can affect a business rather than the macro picture, as we are in most cases looking to invest in businesses that can grow at a rate significantly higher than general economic growth. As such the General Election will not have a significant impact on our appetite for investing in 2015.
Overall, the outlook for private equity remains positive despite the impending General Election, and there is a great sense of optimism for the year ahead. Palatine completed a number of exciting investments in 2014 with EPI, Gusto and Character World, meaning that Fund II is almost fully invested. With our next fund already on the horizon we feel that 2015 is set to be an excellent year for both Palatine and private equity in general

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