Debt crisis weighs on the private equity industry

Since the begin­ning of the credit crunch in 2007, the private equity indus­try has faced much shorter econo­mic and finan­cing cycles. This vola­ti­lity makes it diffi­cult to evaluate and finance new expo­sures and to plan the opti­mal exit timing of some invest­ments. The finan­cing condi­ti­ons in parti­cu­lar are caus­ing problems for finan­cial inves­tors. For many, they were much more diffi­cult than expec­ted in 2011.

Nevert­hel­ess, around 46 percent of private equity compa­nies expect to be able to increase the number of their invest­ments in 2012. The expec­ted increase in new commit­ments is explai­ned by the fact that quite a few funds want to invest the money raised before the permit­ted invest­ment period expi­res. They also try to demons­trate the best possi­ble track record through their sales for the next fundraising.

The report paints a posi­tive picture for Germany: 58 percent of the compa­nies see Germany as an attrac­tive target for invest­ments in the next five years. By compa­ri­son, this figure was 52 percent in 2011 and only 22 percent in 2007. This has made the loca­tion much more attrac­tive. Only 10 percent of the study parti­ci­pants have a nega­tive impres­sion of Germany — five years earlier, that figure was 36 percent. Accor­din­gly, 80 of the 142 inter­na­tio­nal private equity compa­nies surveyed are alre­ady inves­t­ing in Germany, and a further 23 are plan­ning to do so in the next three to five years.

At the same time, compa­nies are on the lookout for new growth markets. The inter­na­tio­nal compa­nies consider Asia an attrac­tive desti­na­tion (39 percent), follo­wed by Latin America and Central and Western Europe (25 percent each). At 55 percent, German inves­tors are even more attrac­ted to Asia.

Inter­na­tio­nal invest­ment compa­nies see parti­cu­lar growth oppor­tu­ni­ties in the health­care sector: 38 percent of respond­ents confirmed this. Tech­no­logy and indus­trial produc­tion came in second, each with 27 percent. The picture is some­what diffe­rent for the German private equity indus­try: 66 percent are looking at targets in indus­trial produc­tion, 48 percent in consu­mer goods and 41 percent in the auto­mo­tive indus­try. This is typi­cal of German finan­cial inves­tors, who tradi­tio­nally see great poten­tial in SMEs.