Don't look down

01 February 2009

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Reading the finance section in the newspaper these days is like experiencing a day of London weather: chilly, windy morning followed by overcast midday before the rain kicks in during the evening. It is all over the place, as are the banks' shares in recent days

It is no wonder activity has significantly slowed down as we enter into the second month of the year. But while buyouts are a rare breed, opportunities are present. There is not only a general trend towards more expansion deals, there are also corporates putting non-core assets up for sale. Recent examples include medical supplier Sorin Group in Italy, which recently sold two of its business units to private equity firms (see cover). Meanwhile in Spain, Acciona was said to have shortlisted candidates in the bid for its parking business.

We have also started to see more distressed assets on the block. In Spain, Thesan Capital acquired Avanzit and Vertice 360 and placed a bid for auto repair shop Aurgi. In the UK, tea and coffee retailer Whittard of Chelsea was bought by EPIC Private Equity for less than £2m (just three years after it had been bought for £21.5m), while market rumours suggest that US-based KPS Capital Partners is posed to acquire the assets of glass and china producer Waterford Wedgewood, a 200+ year old company which went into administration in January. And this is just the beginning; market fluctuations are only going to increase such opportunities.

Yet many remain wary of the herd mentality that drove us into our current quagmire, as the distant rumble of hooves can still be heard. Most rather err on the side of caution than to rush into anything right now. At the same time, overly cautious investors could shepherd themselves into a prolonged period of stagnation.

Most of us can recall the fascination and fear experienced when watching a tight rope walker, balancing on a wire many metres up in the air. Sure, some use a safety net but the risk remains high. It requires discipline, concentration and preparation, and oddly enough so do value investments. These qualities separate those who make it from those who break it.

Yours sincerely,

Francinia Protti-Alvarez

Editor, Southern Europe unquote"

Tel: +44 20 7004 7476

francinia.protti-alvarez@incisivemedia.com.