EUROPE - "We're on our way to next boom"

"First movers will achieve returns that far exceed their expectations. Not just GPs, but also lenders, which are commanding higher premiums and far better security on deals," stressed Andrea Bonomi, chairman and founder of InvestIndustrial. He continued: "These are by far the best conditions we've seen in our professional lifetimes."

Bonomi conceded this strong performance may be difficult to see right now since there is likely to be another 12 months of failure ahead, as buyouts structured in the last few years prove ill-suited to withstand the current market malaise. Around 50% of private equity-backed companies are expected to fail globally, but he argued that it was imperative private equity looks beyond this. "It is key for private equity to change its business model to progress. We are currently somewhere between the bottom of the market and the next boom."

Others echoed this sentiment, even citing concern that too rapid a recovery could prove detrimental to the long-term health of the sector. "I fear a recession that is too short," said Alioscia Berto, managing director of Doughty Hanson.

"If we see an uptick now, we may see just 30% instead of 50% of businesses failing," Bonomi concurred. "This would allow some weak companies to survive, instead of just the fittest," he added, arguing that it was imperative to restructure across the board and not just allow as many companies as possible "to merely survive". Continued pain in the short-term is preferable.

Both argreed that the lessons learnt by private equity in the last 12 months make it well placed to capitalise on the upturn, as and when it occurs. Unsurprisingly, one lesson is that over-leveraging may be a thing of the past. Said Berto: "Debt taken on must be fully paid back within six or seven years, making certain multiples mathematical impossibilities. We now know this, since we've seen things go very wrong - much worse than we'd anticipated. This means not all companies are well suited for private equity ownership."

But that is not to say the private equity model itself is broken. "In fact it is coming out of the recession much better than it went into it, with the model's strengths becoming apparent in this downturn," stated Giancarlo Aliberti, partner at Apax. He added that the "awful mistakes in pricing and structuring" were fixable, and that it meant future deal structuring would be more conservative. "The private equity world is much more resilient than people thought at the onset of the crisis."

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