Hard knock life

01 November 2008

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Figures often corroborate what experts already accept as truth, so it was no surprise to learn that the UK economy is officially in decline and on the verge of recession (though many broadsheets treated it as such with dramatic headlines). In a similar vein, the latest unquote" Private Equity Barometer, produced in association with Candover, reveals that Europe has suffered a staggering 35% drop in deal activity in the third quarter. While the figures are scary, they paint a far rosier picture than exists in the UK, which saw deals halve in terms of both volume and value in Q3 compared to the previous three months (37 deals worth EUR4.5bn - with Lion's EUR1.4bn takeover of FoodVest propping that figure up)

The silver lining is that some continue to be optimistic. In fact, many firms in the mid-market continue to hire new staff - surely a harbinger for better times ahead. A few are even moving into larger offices - though whether that is a sign of rational exuberance or cheap rents, only time will tell. It will be some time, as well, since a recent straw poll revealed that very few foresee closing any deals this side of Christmas.

Possible exceptions lie in two distinct areas: secondaries and buy-and-build opportunities. Secondaries have become a buzzword in the marketplace, with erstwhile rare directs now becoming more commonplace. Synthetic secondaries not only offer an opportunity for GPs to re-align their positions, but also for some clever advisers to pick up handsome chunks of new work (and fees). While few have been seen so far, a handful are in the works. The other arena, buy-and-build, is nothing new, though its popularity is, with far more now claiming to be specialists than truly are. The ability to originate off-market deals and develop relationships with management - two of the fundamental cornerstones of the buy-and-build philosophy - take years to develop. Novices may struggle to execute successfully, while veterans will announce deals in the next two months.

Success - both of seasoned experts continuing to perfect their game, as well as newcomers exploring new turf in which to hunt - continues to exist, albeit less overtly than yesteryear, making it all the more laudable. unquote" will recognise those who have innovated to succeed on 27 November at the fourth annual British Private Equity Awards. I look forward to seeing you there. www.britishprivateequityawards.com

Yours sincerely,

Kimberly Romaine

Editor-in-chief, unquote"

Tel: +44 20 7004 7449

kimberly.romaine@incisivemedia.com.