A Darwinian time

A recent survey published by the Boston Consulting Group and the IESE Business School found that with reduced company earnings, collapsed entry multiples and limited partners' wavering loyalty, as many as 40% of buyout houses could collapse in the next two to three years, with portfolio businesses sold off and teams dissolved. The process won't happen overnight; like evolution it will be slow and often painful.

Past success means nothing - the very techniques that have generated record returns at the top of the market in recent years could turn out to be its undoing. A case in point is Alliance Boots, Europe's largest ever private equity deal at £11.1bn, which is rumoured to be struggling. Jon Moulton, head of Alchemy Partners, is reported to have said that it has become impossible to attribute any real value to the company's equity due to the large discounts at which the debt (which made up a staggering £9.3bn of the transaction value) is currently trading.

However, those that can adapt to the new world order will survive and the new vogue in the market seems to be special situations. A good example is UK-based specialist tea and coffee retailer Whittard of Chelsea, recently bought out of administration by EPIC Private Equity. Such deals could become the norm across the continent in the coming months and may turn out to be extremely profitable in the long term.

Shortly after the Whittard deal, previous owner Baugur's UK arm was itself put into administration by its biggest lender, Landsbanki. Survival of the fittest indeed.

Yours sincerely,

Francinia Protti-Alvarez

Editor, Benelux unquote"

Tel: +44 20 7004 7475

Francinia.protti-alvarez@incisivemedia.com

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