Caution the watchword

02 June 2008

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The post-CGT slow-down is now most certainly upon us, according to my inbox. Now, this may not be the best way of taking the temperature of the private equity market but in the absence of other reliable indicators it will have to do. The last few weeks have seen a marked drop-off in the volume of deals as private equity firms hold onto their cash and wait to see how deep the credit crunch starts to bite into the real economy

The biggest deal of the past few weeks, the £110m acquisition of Education & Travel Group by DLJ Merchant Banking from Bowmark Capital, is an interesting one. Education is a good bet in an uncertain market, and this particular sub-sector remains fragmented, yet as an organiser of school holidays the company is more of a tour operator than educational provider. As a luxury not a necessity the school holiday market is susceptible to a fall-off in consumer spending, yet as DLJ has no doubt calculated, school trips will be a considerable way down most peoples list of 'luxuries to be culled.' If anything, the social stigma of not sending your child on a school trip for lack of funds should ensure demand stays robust.

A recently published performance measurement survey has once again shown private equity funds are a must-have for any discerning investor. The latest figures show that UK private equity has outperformed total UK pension fund assets as well as the FTSE All-Share over the medium-to-long term. However, the figures for 2006 vintages suggest the down-turn may have already started to hit returns.

Yours sincerely,

Nathan Williams

Editor, unquote"

Tel: +44 20 7004 7449

nathan.williams@incisivemedia.com.