NW private equity notable by its absence
Venture capitalists and private equity houses could be help to salvage the economy but transaction levels seem to be stuck in neutral, according to a Pro Manchester event held this morning.
A discussion seminar sponsored by Ford Campbell and featuring a panel of experts from YFM, Lloyds Development Capital and Halliwells, asked why major deals have not emerged from the private equity landscape during the past year.
Despite the lack of competition from cheap credit, deal numbers in the city region are still relatively low and transactions are taking longer to complete.
Several property-related private equity funds were established just prior to or during the recession in the North West such as Infinity and Zeus but have yet to make their first significant investments.
Simon Cleaver, investment director from YFM, said: "Equity funders have cash to invest, and in a downturn acquisition multiples tend to fall, so deal-flow should be strong. In reality though, trading conditions, vendor confidence and the difficulty of raising debt are all making deals hard to do, so funders and advisers will increasingly have to work closely together to complete transactions."
Chris Froggatt, partner at Ford Campbell, said: "Historically investors have obtained their best returns during economic recessions, as there is less competition for deals and asset values tend to be lower. However the private equity sector will only be able to significantly increase transaction volumes when the debt markets improve."
Paul Jefferson, corporate partner from Halliwells, commented on the market: "Equity investment has been a key catalyst to deal activity in the North West but it is unwilling or unable to deliver on its own. There has been talk of equity taking the strain in the short term by structuring and pricing some risk as quasi-debt but the appetite is not there in practice, as the blended returns fall short of what those guys are used to delivering."
Stuart Layzell, investment director at Lloyds Development Capital: "Investing consistently throughout the business cycle is important to LDC as the most active investor in the UK middle market. We have already supported two North West based businesses in 2009 and would expect to invest in several more this year."
