CONTENTS

 

EXECUTIVE SUMMARY

  • Which way next for private equity?
  • Credit constraint
  • When will leverage loan liquidity return?
  • Secondary and primary loan markets
  • Ratings transparency
  • Deal structuring
  • Accessing Gulf dollars
  • Capital markets tools
  • Mezzanine to the rescue
  • ABL – a new hope
  • Post-crunch investment strategies
  • Buy-and-build
  • Portfolio management
  • Take-privates
  • Quoted private equity
  • Infrastructure
  • Private equity real estate
  • The mid-market
  • Distress and retail
  • Portfolio acquisitions
  • Emerging markets
  • China
  • MENA
  • CEE
  • Russia
  • Longer term outlook
  • Fundraising
  • Human capital

Introduction

By Ross Butler

Section 01

THE NEW REALITY

Chapter 01 Private equity and banking

By Guy Hands, Terra Firma Capital Partners

  • A partnership relationship under stress
  • Core principles

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Chapter 02: When will leveraged loan liquidity return?

By William Allen, Houlihan Lokey

  • Market backdrop
  • Current market environment – H1 2008
  • Looking to the future

Chapter 03: Secondary and primary loan markets

By Ian Hazelton, Babson Capital

  • LBOs and the institutional debt market
  • Reconciling primary and secondary asset returns
  • Current developments
  • Prospects

Chapter 04: Ratings Transparency

By Paul Watters and Cameron Andrews, Standard & Poors

  • Adapting ratings for the European market
  • Ratings agencies and LBOs
  • A changing mindset
  • A new approach
  • Ratings innovation

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SECTION 02

DEAL STRUCTURING IN 2009

Chapter 05: Deal conditionality – key issues post-credit crunch

By Peter Hockless and Kevin A. Rinker, Debevoise & Plimpton LLP

  • The US Experience
  • Financing-outs
  • Reverse termination fees
  • MAC / MAE clauses
  • The UK experience
  • Public-to-private transactions
  • Private acquisitions

Chapter 06: Change of Control

By Kaye Scholer

(Details to be confirmed)

Chapter 07: Accessing Gulf dollars

By Atif Hanif , Allen & Overy

  • Private equity and Islamic financing
  • Key Shariah finance and investment principles
  • Prohibition on usury and interest (riba)
  • Prohibition on realising a gain from speculation (mayseer)
  • No uncertainty (gharar) in commercial transactions
  • All activity must be for permitted purposes (i.e., halal)
  • Shariah boards/committees
  • Can private equity work with Islamic investors?
  • Shariah-compliant financing structures
  • Murabaha / Tawarruq
  • Musharaka
  • Ijara
  • Post-acquisition issues

Chapter 08: The evolution of private equity and M&A insurance

By Tim Allen, Daniel Max, Pierre Alexandre Bentin, Marsh

  • Relevance of insurance capital in an economic slowdown
  • Investing further afield
  • Competitive scenarios
  • Optimising portfolio performance
  • Preparing for exit
  • Conclusion

Chapter 09: Mezzanine finance

By Steve Clarke, Intermediate Capital Group

  • Mezzanine makes hay
  • Innovative funding solutions

Chapter 10: Asset-based lending in Europe

By Ross Butler

  • ABL’s best chance yet
  • Advantages of ABL financing

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SECTION 03

POST-CRUNCH STRATEGIES

Chapter 11: Buy-and-build

By Neil McDougal, Silverfleet Capital

  • Buy-and-build as a value creation strategy

Chapter 12: Operations – the new leverage

By Roberto Quarta, Clayton Dubilier & Rice

  • The ‘industrial approach’ – a focus on operational improvements
  • Investment decisions
  • Operating partners – the Kinko’s example
  • Investment decision-making and the operational model
  • A word to the wise
  • Conclusion

Chapter 13: Public to private – an oasis in a deal desert?

By Michael Francies, Ian Hamilton, and Geoff Bailhache, Weil, Gotshal & Manges

  • Take-private deal terms
  • Conditions
  • Reverse break fees
  • Break fees
  • Financing-outs
  • Stub equity – an alternative to cash?
  • Withdrawal
  • Conclusion

Chapter 14: PIPEs come to Europe

By Bruce Carnegie-Brown, 3i Quoted Private Equity

  • Bridging the divide between private and public equity markets
  • Investment flexibility

Chapter 15: Infrastructure – what next for private equity?

By Matthew Carter, Ernst & Young

  • Infrastructure funds vs. private equity
  • Scope of investment opportunity
  • Challenges and opportunities for private equity
  • Summary

Chapter 16: Private equity real estate

By Julian Gabriel, Doughty Hanson

  • PERE in Europe – putting it into context
  • Market environment
  • Investment rationale – Europe, real estate and the opportunities
  • What does the future hold for PERE?

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Chapter 17: Mid-market strategies

By Chris Masek, IK Investment Partners

  • Mid-market opportunities
  • The importance of relationship banking
  • Sourcing deals in a difficult climate
  • Taking a proactive approach

Chapter 18: Distressed debt and equity

By Alan Hudson and Bob Ward, Ernst & Young

  • Distressed investment opportunities
  • Players and techniques
  • Distressed investment risks

Chapter 19: Retail turnarounds

By Henry Jackson, Merchant Equity Partners

  • A gloomy outlook for retailers
  • Will private equity stay the course?

Chapter 20: Portfolio acquisitions: the strategic alternative

By Julian Mash, Chief Executive, Vision Capital

  • Market evolution
  • Deal-making
  • Creating value
  • Looking forward

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SECTION 04

REGIONAL OPPORTUNITIES

Chapter 21: China

By Chris DeAngelis, Vermilion Partners

  • Access and the role of private equity
  • Recent history
  • New rules and regulations
  • A level playing field?
  • Play to your strengths

Chapter 22: The Middle East

By Neven Hendricks, Deloitte

  • Regional challenges
  • Opportunities

Chapter 23: Central & Eastern Europe

By Craig Butcher, Senior Partner, Mid Europa Partners

  • Background
  • Impact of the credit crunch
  • Market outlook and opportunities

Chapter 24: Russia

By Clare Nuttall

  • Shocks to investor confidence
  • Sector opportunities
  • Expansion capital
  • Fund growth

SECTION 05

LONG-TERM OUTLOOK

Chapter 25: Fundraising

By Tim Friedman, Preqin

  • Fundraising defies expectations
  • Demand for new vehicles
  • Supply of new vehicles
  • Conclusions

Chapter 26: Human capital

By Guy Townsend, Walker Hamill Executive Search & Selection

  • Job changes may cause discontent
  • Promotion and succession, appraisal and remuneration
  • Private equity still demands the best

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LIST OF TABLES AND FIGURES

  • Table 15.1:    Estimated average annual infrastructure expenditure for selected sectors (additions and renewal) in OECD countries plus BRIC, 2000–30
  • Table 15.2:    Infrastructure categories (including ‘quasi-infrastructure’)
  • Table 25.1:    Change in capital raised by fund type, H1 2007 and H1 2008 (%)
  • Figure 1:    Funds raised globally, 2001–08
  • Figure 2:    Funds raised EU, 2001–08
  • Figure 3:    Funds raised US, 2001–08
  • Figure 4:    Top 10 US target financial sponsor entries
  • Figure 5:    Top 10 Europe target financial sponsor entries
  • Figure 2.1:    European LBO loan volumes, 2006–H1 2008 (€bn)
  • Figure 2.2:    Secondary market flow names, bid vs. ask, July 05–July 08
  • Figure 2.3:    CLO make-up and margin analysis
  • Figure 2.4:    Comparison of high quality LBO credit structures H1 2007 and H1 2008
  • Figure 4.1:    Syndicated loans for financial sponsor LBOs, Europe
  • Figure 4.2:    Syndicated loans for financial sponsor LBOs, US
  • Figure 9.1:    Primary instrument type 2007–08, % market share, number and value
  • Figure 11.1:    European buy-and-build, volume and value
  • Figure 13.1:    European going private, number and value, 2003-08
  • Figure 16.1:    Growth of private equity property vehicles in Europe, 1995–Q307
  • Figure 16.2:    European office yields, 2001–08
  • Figure 16.3:    European GDP growth vs. office rental growth and vacancy rates, 1996–Q108
  • Figure 16.4:    Cross-border property investment in Europe, 2000–07 (€bn)
  • Figure 16.5:    Office vacancy rates in Europe, 2000–Q108 (%)
  • Figure 16.6:    European office yields vs. Euro swap rate, 2000–Q108 (%)
  • Figure 16.7:    European transaction volumes, 2000–08 (e)
  • Figure 16.8:    Forecast GDP growth in Europe by country, 2007-17 (average % pa)
  • Figure 18.1:    Funds raised, distressed debt, 2003–08
  • Figure 19.1:    Retail transactions, private equity, volume and value, 2001–08
  • Figure 21.1:    Fundraising, Asia, 2003–08
  • Figure 25.1:    Private equity funds under management, 2003–07 (US$bn)
  • Figure 25.2:    Half-yearly private equity fundraising, 2005–08 (US$bn)
  • Figure 25.3:    Investor attitudes towards long-term private equity allocation, 2007–08
  • Figure 25.4:    Investor current private equity investment status
  • Figure 25.5:    Investor attitudes to first-time funds
  • Figure 25.6:    Growth in number of fundraising vehicles, 2006–H207
  • Figure 25.7:    Average time taken to raise funds, 2004–08