Unchartered waters

01 June 2009

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If one thing is certain about the current market, it is uncertainty. In the best-case scenarios, investors are successfully pre-empting problems and keeping their investment alive to fight another day. On the other hand, measures can be implemented too late, with investors often seeing their stakes diluted or even wiped out completely.

The years that preceded the current crisis saw stupendous figures not just in terms of deal value but also in volume. According to unquote" data, H2 2006 and H1 2007 saw EUR103bn and EUR125bn invested in buyouts across Europe in 420 and 437 deals respectively. It comes as no surprise, then, that many firms have in their portfolio highly-leveraged assets for which they over-paid and that are inevitably witnessing a downward spiral in valuations.

With some bigger name firms now potentially seeking to reduce the scale of their problems, investors with dry powder to invest have the upper hand. In the wake of the storm that erupted following the burst of the credit bubble, many may now look to take advantage of a wave of restructurings and forced sales.

But this may be wishful thinking. Indeed, that the desire (and initial will) to sell and buy is present does not guarantee that the deals will materialise: there is still the issue of long overdue LP defaults. Certainly, the surge of LP defaults that was anticipated has not materialised despite some LPs struggling to supply the cash they initially committed, but when capital calls begin to go out this autumn, the flood gates could open.

The result is that even cash-rich investors are currently not taking the plunge, unwilling to tap into their deals pipeline for fear that they may find the capital pool dry.

Yours sincerely,

Francinia Protti-Alvarez

Editor, Benelux unquote"

Tel: +44 20 7004 7475

Francinia.protti-alvarez@incisivemedia.com.