DACH Congress: GPs upbeat despite economic challenges

Diana Petrowicz
11 October 2011

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In the current economic climate private equity funds in Germany can still look forward to good dealflow despite concerns over banking and regulation. Diana Petrowicz reports from unquoteтs DACH Congress in Munich.

Concerns over the return of the financial crisis dominated the day. Guy Fraser-Sampson, from the Cass Business School, pointed out that while the government is trying to find solutions to stop banks from failing, common findings have shown that the financial crisis will keep reoccurring under this policy. He believes that instead of injecting more money into the banks it would be easier to "let them fail safely". Fraser-Sampson said there has been too much debt injected into the market and he believes investing even more money is not the right way to deal with this problem.

Fraser-Sampson also questioned whether it is reasonable to regulate the private bank sector, as he thinks that irresponsible money policy conducted by the central bank is one of the main reasons for the current problems.

Nicolas Himmelmann from Auctus said investors should try and make the best of the current situation. He believes GPs are too focused on making the perfect deal in order to impress LPs, adding that there are many good investment out there which do not seem "sexy" at first but show plenty of opportunities for expansion once the investor has entered the company.

He insisted that investors "need to be creative and convincing" when finding deals in order to overcome stereotypes of private equity funds not being interested in long-term relationships and only being profit-focused. On the investment side he noted that the risk of failure can be lowered with comprehensive due diligence and by "digging deeper into the sectors".

Himmelmann highlighted the importance of dispeling negative stereotypes about private equity by showing positive examples of company developments. He stressed that GPs should work together with enterprise owners and demonstrate that private equity can be a positive way to develop a company. Only by doing this can GPs ensure they continue to see high-quality deal flow in the German market.