Private equity market to slow

Leisure Report, May, 2008

The private equity industry is heading for tougher times, according to a survey of business leaders conducted by McKinney Rogers, the consultancy.

The credit squeeze is cited as the chief cause, with 71% of respondents believing it will have a large impact on the industry, while a further 68% think that general economic uncertainty will affect private equity's growth. The majority of those questioned expect the market to show zero net growth over the next 12 months and grow 'only a little' for two years after that.

Up to half of respondents thought regulation such as Sarbanes-Oxley will contribute to poor growth.

The study, which interviewed 58 business leaders in four continents, found consensus in the popular belief that Asian markets will be less hurt by the credit crunch. Respondents in the Asia-Pacific and Africa expect the tightening of credit to have less impact on private equity investment than their counterparts in the US and Europe.

On balance, respondents feel that private equity firms make companies 'leaner' and more competitive, with 70% either agreeing or strongly agreeing with this statement.

However, two-thirds of respondents believe private equity firms put 'large profits' ahead of employees' welfare, and 57% believe that the industry should address its 'negative' public image as a matter of urgency.