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Retail Summit 2009 - Private equity deal-making could return by the end of the year.
Archived article dated Wednesday February 4th 2009
Although the private equity industry is effectively sitting on its hands at the moment and avoiding the retail sector it could begin to make a return to deal-making by the end of the year.
This was the view of Ged Keogh-Peters, head of UK Strategy at Kurt Salmon Associates, who told delegates at the Retail Bulletin Summit 2009 that “by the end of 2009 some canny investors will make moves as there will be some attractive prices around”.
He suggested that those retailers who were still trading successfully 12 months from now will be “stronger, leaner and offer good exit potential”. They will have proven that their models can survive through particularly tough times. However, the potential issue is that company owners might continue to over-value their businesses. “Asset prices are falling but people always think their business is worth more so this will be a problem. People have to accept that they won't get the high prices that they might have seen before,” explained Keogh-Peters.
Although private equity houses were holding back from investing in the retail sector at present he suggested they will return again, for the same reasons they previously found the industry attractive - cash generation, rapid roll-out potential, low average transaction values and a pool of talented management.
What will help fuel this return is the major fundraisings that many private equity firms undertook a year or so ago. “They are only in year one or year two of these funds so they can sit and wait for two years. But they have the money ready for the future.”
Tagged as: summit 2009 | ksa
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