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Private equity outlook 2009 – Ross Marshall, Dunedin Capital Partners: “Expect the unexpected”

Ross Marshall, chief executive of Dunedin Capital Partners, says the industry winners next year will be private equity houses that did not overpay

Ross Marshall, chief executive of Dunedin Capital Partners, says the industry winners next year will be private equity houses that did not overpay in 2006 and 2007, that avoided consumer businesses, and that have small portfolios.

PE Wire: What is the outlook for the private equity industry in 2009?

RM: As with any recession, we should expect the unexpected. Later in the year there will be some good deals from distressed sellers. Availability of bank finance will be critical to getting these deals done.

Business rescues will be dressed up as growth opportunities, pricing will come down and there will be fewer cash-out deals. The final quarter will prove to be interesting with more use of vendor loans, private equity houses working with trade buyers who can’t raise debt to make acquisitions, and more take-privates.

PE Wire: What will the fundraising environment be like?

RM: For those in fundraising mode it’s going to be difficult, unless you are a distressed debt fund. There will be great value to be found in secondaries and listed private equity.

PE Wire: What will the exit environment be like?

RM: It will be good for strategic assets, but for the rest of the market rifle shot rather than a shotgun approach will be more appropriate. Processes are already falling over because private equity houses are unable to raise debt. Stapled debt figures are meaningless as bank credit committees are reining in new lending, therefore proof of funding will become highly important.

PE Wire: Who will be the winners and losers?

RM: The winners will be those houses that did not overpay in 2006 and 2007, that avoided consumer businesses and that have small portfolios. The losers will be the houses that did overpay in 2006 and 2007, that did not avoid consumer businesses and have large portfolios.

PE Wire: How is your firm placed?

RM: Dunedin has plenty of firepower with 75 per cent of a GBP250m fund to invest. Also, not many houses are able to say that they have recently made a new investment and have money in the bank from a successful exit. Bank debt is still available for sponsors with good track records.

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