The year that was 2010: Cold weather fails to put freeze on recovery

John Bakie
23 December 2010

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As the end of 2010 approaches, it will likely be remembered as a year of considerable uncertainty. Fear of a double-dip recession, major debt crises, a fragile economic recovery and the return of mega-buyouts are among the major developments affecting the private equity industry over the past 12 months.

All this week, unquote" takes a look back at the key events in the year that was 2010.

October

The summer's mega-deal trend continued into October, with yet another major deal in the Benelux region. Clayton Dubilier and Rice bought a major stake in chemicals distributor Univar, in a deal which valued the company at $4.2bn. Despite a general lack of activity in the Benelux region throughout the year, it was still able to attract buyers for its largest and most successful companies.

Significantly, October saw a major breakthrough in the Alternative Investment Fund Managers' Directive. The Directive, which had been in the works for 18 months with no firm agreement on its final text, finally received approval from European Parliament negotiators. Despite initial fears that a number of amendments proposed by the Belgian EU presidency would be rejected by the French and Germans, an agreement on third country passporting was finally reached, allowing the proposal to move to the formal approval stage.

November

As the cold winter set in, private equity activity continued strongly across Europe. Doughty Hanson succeeded in buying Vue Entertainment, in a £450m deal. The cinema chain, previously owned by Bank of Scotland Corporate, had been noted by business commentators for performing well despite the recession, and Doughty Hanson is expected to bolster the company with add-on acquisitions of major competitors, such as Odeon.

Barclays also confirmed details of the spin out of its private equity division. Rather than have the management team pay cash to buy Barclays Private Equity, the bank has agreed to take a share in the firm's profits in the future.

November also saw Ireland seek financial assistance from the EU and IMF. Since the Greek debt crisis, there had been concerns about a number of EU countries and their ability to support their high levels of national debt, and Ireland eventually succumbed to market jitters, forcing it to seek aid.

Lastly, the AIFM Directive received the official seal of approval, being passed by the European Parliament in early November. EU governments will now have to implement the new rules by 2013.

December

As the year end approaches, there has been increasing talk of fundraising. Expectations are high for 2011, and just before Christmas Apax announced it plans to raise an €11bn fund. While many expect fundraising in 2011 to be more successful than in recent yeas, there are concerns that LPs will put funds under far greater scrutiny before committing their capital.

So, the industry is approaching the year with cautious optimism. While there remain a number of economic challenges ahead, it seems the worst is now behind us.