The majority of private equity firms do not expect the number of new buyouts to decline in the next year but many private equity houses have not refinanced their debt ‘storing up trouble for the future’, research shows.
The majority of private equity firms do not expect the number of new buyouts to decline in the next year but many private equity houses have not refinanced their debt ‘storing up trouble for the future’, research shows.
Some 50 per cent of respondents expect the volume of its new investments to increase in the coming 12 months when compared to the previous 12 months, while 47 per cent believe the volume will remain at the same level, according to Grant Thornton’s quarterly Private Equity Barometer.
Some 76.5 per cent of the 100 UK private equity executives surveyed do not expect any challenges raising new funds for investment to negatively impact their ability to conduct deals in the coming year, while 23.5 per cent do.
The results found that 73 per cent of executives in the private equity sector do not think that their ability to do deals will be stymied by difficulties in finding debt to support new investments.
Mo Merali, head of private equity at Grant Thornton UK, says debt is ‘readily available’ for private equity deals.
‘In total, our respondents are planning to invest at least £3.2 billion in the UK in the coming 12 months, with nearly three quarters expecting to invest between £5 million and £100 million and about one in five investing more than £100 million.’
Merali warns, ‘I am concerned, however, that in terms of refinancing their existing portfolio, many private equity firms could be storing up trouble for the future. Only a small minority of UK private equity firms have refinanced significant debt in the past 12 months.’
According to the survey, 35 per cent of respondents did not refinance any debt in the last six months, while 48 per cent refinanced less than £50 million.
Some 17 per cent of private equity houses refinanced more than £50 million, including 4 per cent who refinanced over £250 million of debt.
The results also reveal that the number of private equity firms that expect to see increased competition from trade buyers outside the UK has soared from 37 per cent in the first quarter of 2011 to 56 per cent.
