What lies over the horizon?

For all those people who predicted a year ago that the private equity universe would have (at least partially) recovered by the end of 2011, I'm wondering who is now pointing at the end of 2012... or 2013... or whenever the debt refinancing tsunami is going to hit…

Aside from over-analysing the continuing malaise within private equity, it is interesting to look behind the curtains and see what drives events. For example, a number of exits being trumpeted as signs of a recovery are really nothing more than some houses trying to convince reluctant LPs to invest in new funds by demonstrating that investments in the old funds are not completely illiquid. It's the "here is a small cheque, now please give me a big cheque" strategy. Some have commented that the bulk of secondary sales are nothing more than churn, again to give the appearance of activity.

On the positive side, however, the emphasis on stronger management teams (particularly those with turnaround skills), coupled with the invaluable experience being gained by investment directors tasked with working ever more closely with (or within) their portfolio businesses, should position the industry with a solid foundation once a new market equilibrium is reached. One day, hopefully very soon, today's investment directors (who bemoan their lack of positive carry and feel that they unjustly 'missed out') will see this period as the principal reason why their future carry will truly have value.

PILOTpartners is again grateful to the contributors to this edition of
Pilot's Log:

Dave Hall, Managing Director of YFM Equity Partners, shares with us the experience of rebranding Yorkshire Fund Managers, how they interact with management teams and how having portfolio of 200 companies gives them a unique insight into the UK marketplace.

Chris Smith, Partner with Grant Thornton who heads up their Financial Reporting Advisory Group, provides us with a timely update on IFRS and the ramifications of UK GAAP being phased out - key changes that private equity firms should be looking at, both from an investor's and investee's perspectives.

Andy Etherington, a well known and very successful interim CEO, explains how he stumbled into becoming an interim executive, how he sees being multi-sector experienced as a huge positive, and how he tackles turnaround.

In this issue of PILOTcases, we summarise three great private equity backed exits through varied turnaround processes and what made them successful – other than the fact that they were all driven by interims known to PILOTpartners of course…

Michael Gebauer Partner – private equity practice E. m.gebauer@pilotpartners.eu T. +44 (0)783 423 5458