Wealth Management

Voted #6 on Top 100 Family Business influencer on Wealth, Legacy, Finance and Investments: Jacoline Loewen LinkedIn Profile
Showing posts with label Prequin Carlysle private equity fundraising loewen partners. Show all posts
Showing posts with label Prequin Carlysle private equity fundraising loewen partners. Show all posts

October 5, 2009

Is Private Equity going elsewhere?

Business owners thinking of transferring their company ownership within the next five years, need to know this fact: In five years, you will not be able to get the valuation you could get right now.

Is this alarmist?

Not if you look at the fact that the last market crash has changed the world view of Brand America. With this mental shift, smart money realizes America is a market in decline and if you want to invest your money and see it grow, you look for growth markets. That affects Canada.

I am hearing that you realize that private equity could buy your company. Hell, they’re calling me all the time, begging to partner in my company. Well, enjoy it while it lasts because the allure of North America is fading. While there are p.e. funds with money and an interest in Canada right now, already money is rushing out of the North American market to India and China. The big boys of private equity, like Carlysle, are investing. Already funds are back to 2003 levels of cash available for business owners, and that was when PE only did about 12% of the deals.

Here's a great article on fund raising activities of Private equity in the States by FinAlternatives. Private equity fundraising hit a nearly six-year low in the third quarter, as industry players offered fewer new funds—with dramatically lower fundraising targets—or abandoned fundraising altogether.

Funds holding their final closing in the third quarter raised just $38 billion, a 55% drop from the second quarter and a 68% drop from the third quarter of last year, according to a new report from Prequin. It was the smallest amount raised by the industry since the fourth quarter of 2003.

“Historical data shows that the summer months of Q3 often represent a relatively slow quarter for fundraising in any given year,” Prequin’s Tim Friedman said. “However, for the rate of fundraising to drop by nearly 70% over the course of a year is a dramatic fall, and demonstrates just how challenging it has become to raise new funds in the current climate. Many of the funds that are closing are doing so short of target, and we have seen a number of fund managers putting their fundraising efforts on hold until 2010, or abandoning them altogether for the foreseeable future.”

Just 1,574 funds are actively fundraising this month, down from almost 100 funds from earlier this year. What’s more, those funds that are seeking capital are looking for less, with an aggregate target of $754 billion, down from nearly $900 billion during the first half. And some 90 funds have given up fundraising altogether this year, three times as many as last year and six times as many as in 2007.

Given the weak fundraising environment, it’s also taking long for private equity funds to close. Fundraising now takes an average of more than 18 months, up from 15 months last year and 12 months in 2007. Just five years ago, the average amount of time spent fundraising was just 9.5 months. And it’s no wonder: Just three in five institutional investors polled by Prequin made a commitment to a p.e. fund in the first half, although 54% of them say they intend to make new investments this year, with another quarter planning to invest next year.

Another bright spot was the closing of Hellman & Friedman’s new fund, which Prequin called the largest p.e. fund that began fundraising in earnest after the collapse of Lehman Brothers.