Times may be hard but the vast majority of private equity houses expect the number of new buyouts to hold up in the coming months, according to Grant Thornton's latest Private Equity Barometer. The chartered accountants say, however, that although there has been little difficulty in funding new deals only a small proportion have been refinanced recently.
"Private equity funds with a good track record have no problems raising fresh equity for investments in the UK. Moreover, debt is readily available for quality private equity deals," said Mark Naughton, corporate finance director at Grant Thornton in the South West.
Only 27% of respondents to the survey expect their ability to do deals in the coming 12 months to be stymied by difficulties in finding debt to support new investments while 73% do not.
Similarly, 77% of private equity respondents foresee no difficulties in raising new (equity) funds for investment deals compared to 24% who do.
However, Mark Naughton is concerned that in terms of refinancing their existing portfolio, many private equity firms could be storing up trouble for the future. "Only a small minority of UK private equity firms have refinanced significant debt in the past 12 months," he said.
Meanwhile the proportion of respondents who expect to see increased competition from trade buyers from outside the UK in the coming 12 months has risen markedly to 56% while more than half expect increased competition from UK trade buyers and 71% from UK private equity firms.
Mr Naughton concluded: "Even though acquisitive private equity firms may not welcome increased competition from trade bidders as it props up current valuations, trade bidders will provide a welcome exit route for most. After all, only two private equity respondents do not plan to divest any of their portfolio companies in the coming year. Moreover, the 20% that are expecting to achieve an exit via IPO in the coming six months may find their plans delayed by market volatility."
