The Private Equity boom

The private equity branch is again on growth course.

Even a wolverine has to nibble at this whopper long: Between gigantic round flat dough-cakes of sesame bread put equally level meatball, garnished with mozzarella cheese, chillies and Pesto sauce. „New York pizza burger“ is called the latest creation from the house Burger King which put on the market the snack chain in September in the USA.

The pizza-size monster burger does not meet, admittedly, completely the taste of the time. Increasingly the customers want ­ lighter and healthier food in the hamburger stores­. Hence, competitor offers McDonald’s long ago also salads. Burger King ­ has fallen back of his greasy dish offer because of with the growth far behind ­ the rival.

Investors feel, admittedly, big appetite for the fast-food chain: For a total of four milliard dollars the holding company wants to swallow 3 g Capital now burger King to bring the group on person in front and to silver later. The transaction should be concluded in the fourth quarter, announced the private equity company recently.

After the heavy setbacks which the branch suffered in the course of the financial crisis private equity (PE) stands before a new blossom. Internationally the volume and the number of the PE deals go upwards (see investor’s info). The last week possibly the private equity houses TPG Capital and KKR provided for sensation which want to take over together the hard disk manufacturer Seagate Technology for more than seven milliard US dollars. But also the German PE houses who concentrate upon the middle class profit. In the impetus starting now investors can participate: The shares of listed PE societies develop clearly better than other values.

The figures speak a clear language: In the first half-year in 2010 ­ the PE investments in Germany amounted to a total of 2.24 milliard euros. This was more than three times a lot like in the year before. Indeed, the investments are still removed far from the precrisis level. We experience currently a healthy, lasting growth. At last provided the Swedish investment IK of partner for sensation which have accessed immediately twice in Germany. At the middle of September the Scandinavians in castle Ahrens near Hamburg took over the resident company GHD which steers for a high growth with services. Besides, few days ago investment IK announced, she wants to buy the Stuttgart family enterprise to Hanse. The company is big in the business with armatures for bath and kitchen.
The PE shops flourish not least, because the banks now again award loans. Indeed, they are not completely as generous any more as in the past when the investments were often pressed with 75 or even 90 percent of debts.  Today by the financing of the transactions ­ the outside capital portion mostly lies at about 50 percent. A reason for the a little more restrictive grant of credit which is also to be expected in future are the increased demands for the company capital equipment of the banks.

Besides, the PE enterprises are equipped very well with own capital. Up to the beginning of the ­ financial crisis the PE funds with the investors have collected immense money­. Hence, the finance investors to the „private equity order report in 2010“ according to now worldwide of liquid means of about one billion dollar.

An especially important spring for investment capital are in this country the company heirs who would not like to continue own enterprise. They sell the company and invest the proceeds in other companies. Till 2020 a company property of about 250 milliard euros goes over all over the country to the next generation. Liquidate around half of the heirs. „Family of investor“ are called the enterprisers with pleasure who put in her heir in foreign companies and branches – and, besides, often a little bit other strategies pursue than pure finance investors. You invest very in the long term and finance conservatively. Nevertheless, they do not avoid the risk.

There is an other difference to the big anglo-saxo­ n finance investors. Companies like Blackstone, KKR or Texas Pacific fix with the entrance mostly immediately a time for the Exit in which the enterprise is brought at a profit to the stock exchange or is sold. The hold duration often amounts only two or three years. By contrast Family of investor like Equita up to ten years remain engaged. Thanks to the long time horizon of our investors we ­­ can accompany the ­ participation enterprises by one or even several economic situation cycles­.
However, with the profits enterpriser’s investors put on as high graduations ­ like Blackstone & Co. Expected company capital yields of 20 to 25 percent are usual with private equity. During the crisis many Family of investor have reduced the aim to about 15 to 20 percent. According to own information holding companies are especially profitable. Whether Family or finance investors ­- they take up for themselves to lead the participation enterprises better than the ­ hired managers of corporations­.

For his study the finance expert evaluated more than 4000 concluded private equity transactions. Then he compared the ascertained yields to investments in the stock exchanges. Besides, he calculated the high outside capital lever out which is usual with PE investments. With the comparison turned out: During the past 30 years participation threw down on an average a yield higher about 7.1 percent points than shares. Private equity does not reach such rates of return, admittedly, at times of an economic impetus; then it is getting better mostly also on the stock exchanges. However, for it the profit plus is the bigger in the recession: Then the distance to share yields amounts to 15 percent points. However, how can private investors profit from the rates of return? An immediate engagement in PE fund is kept small investors generally. Nevertheless, there is meanwhile worldwide more than 100 holding companies who are taken down on the stock exchange. Admittedly, the courses of private equity enterprise are very susceptible to variation as a rule. Hence, the investors are well-advised to buy, instead, a normal fund which ­ invests broadly scattered in holding companies­.

In the meantime, there are also the first index funds (ETF) on finance investors. With these instruments small investors in the new impetus of the private equity branch can participate – even if they cannot always earn with it profits of the format of New York pizza of burger.
Private equity deal slow upward trend
In the private equity branch there are the first signs for rest. In the first half-year in 2010 the new investments amounted worldwide to 85 milliard dollars. For the whole year branch observers expect a light plus towards in 2009. A main focus of the engagements are still small and medium-sized enterprises.

Ten gramms private equity profits with finance investors
The fund puts on his property predominantly in securities which are spent worldwide by private equity societies like partner Group and 3i Group. Shares, papers fixed-interest, change debentures, optional bonds, pleasure notes belong to it. During the past twelve months the growth of ­ the fund amounted to ­ 24 percent.

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