Tough at the top

The prevailing opinion in the private equity market today is that it's not a good time to be a large buyout fund manager. With a 'sweet spot' a long way up the value chain, finding suitable targets is a tough job and convincing banks to back a transaction is even tougher. Conditions may be challenging at present and holding back might make sense, but a large buyout house is governed by the same dynamics as any private equity investor; namely, the need to keep up a reasonable investment pace so that 'LPs don't think we are just ripping out fees,' as one GP recently put it to me. A large buyout house could always take a leaf out of the Charterhouse book and slide way down in size in order to get a deal on the books, as the firm recently did when acquiring insurance broker Giles. Whether this is the best way to keep LPs happy is a moot point in the case of Charterhouse. Its track-record gives it the leeway to do a deal of this size and few would bet against the firm delivering returns on Giles in line with historical performance. The other option is to find a global media mogul looking to generate liquidity in a well-performing asset with great growth potential - this is the route Permira has chosen to go down