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Calling time

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Once criticised for doom-mongering, the mainstream media now seems to be queuing up to call time on the economic downturn. Two weeks ago there were reports that both France and Germany had emerged from recession, having turned around their negative trajectory and recorded (modest) growth in the second quarter. Japan soon followed in the footsteps of these continental trail blazers, and some analysts are now even intimating that the US, leader on the way down, may not be too far behind

The good news is not just confined to abstracted GDP growth figures. House prices are reportedly bouncing back (though whether this is a good thing is a matter for debate), while global stock markets are experiencing a prolonged rally.

Even private equity is witnessing an increase in activity levels. In the UK there have been several sizable buyout transactions recorded of late, including LDC's £115m acquisition of financial services business 1st - The Exchange (see page 24).

However, investment trends, though a useful barometer of market confidence, are always just a part of the whole story. Industry meetings continue to be dominated by talk of incumbent portfolio company troubles and news of restructurings continue to make headlines in the financial press on a daily basis.

And well they might. Top line figures may lift the mood of many, but for many firms survival is likely to be more related to their dealing with the old than completing the new.

Furthermore, the issue goes beyond simple self-preservation. Private equity is currently attempting to fight its corner in the face of looming regulation; a swathe of businesses collapsing under the weight of aggressive debt structures does somewhat detract from the argument that the industry is largely benign. Moreover, it does little to encourage owners of the value of partnering with private equity.

Daylight may be beginning to shine through the recessionary gloom, but the industry is likely to be suffering hangover effects for some time to come.

Yours sincerely,

Kimberly Romaine

Editor-in-chief, unquote"

Tel: +44 20 7004 7526

kimberly.romaine@incisivemedia.com.