Private Equity Managers Bullish, Bearish At The Same Time

Jul 27 2010 | 12:38pm ET

The global economy is on the rebound and, with it, is the private equity industry, according to a new report.

More than 80% of p.e. professionals surveyed in a new Rothstein Kass report say that the credit crisis has ended or will end within a year. Indeed, fully one-third say that the crisis has been over since last year, an optimism that has more than two-thirds of respondents raising money this year.

“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,” said Tom Angell, head of Rothstein Kass’ private equity practice. “With lending again less restricted, this gap has started to narrow leading to renewed activity.”

Much of that renewed activity will come in the form of group deals and consortia to executive large transactions, according to almost 39% of respondents. And more p.e. managers expect more launches than in 2009 and fewer closures than last year, as well. But the news isn’t all good.

More than half of managers say there would be fewer opportunities this year. More than seven in 10 say capital-raising will also be harder. And almost eight in 10 expect increased regulation.

A similar number—77%—say that it will take longer to sell portfolio companies. So, more than half are expecting an increase in initial public offerings. And two-thirds say they’ll have to be more involved in their portfolio companies.

“Most private equity managers recognize 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,” Angell said. “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.”

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