Private equity can unlock hidden investment opportunities, says Capital Dynamics

"There is ample opportunity for those who are willing to take a closer look at Europe's private equity markets," says Drugan. The changes to the investment markets arising from the debt crisis engulfing the Eurozone "provide opportunity for the well-capitalized and astute private equity investor. Precisely because of the changes taking place, we believe that mid-market private equity provides a compelling investment case."

Two significant groups of business owners are increasingly motivated to consider selling their businesses in the near term, says Katharina Lichtner, managing director and head of research at Capital Dynamics. The first is the impending retirement of the baby-boomer generation of entrepreneurs, who will be looking to either sell their businesses or pass them on to the next generation. An EU report last year estimated about six million business owners will retire in the next 10 years.

Put another way, says Lichtner, "about 600,000 firms per year will face succession issues. While not all of these often family-owned firms are suitable for private equity ownership, many are and the current owners are increasingly seeing the benefits of a sale to private equity firms, especially in situations where the next generation has pursued a different career path."

The other group potentially looking to sell is the large corporates adapting to the increased regulatory load. She says: "these groups are more likely to focus on their core business and spin off non-core units over the coming years. These types of assets are ideal investment candidates for private equity value creation as they have frequently been under-managed or ignored by their previous owners."

This is an extract from an article originally published in unquote"'s sister publication Investment Europe. Read the full story here.

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