40-41-debt-outlook.qxp 16/2/09 15:56 Page 40
Dealmaking
in the downturn
Fund managers move to diversify their portfolios as CEOs shed
non-essential assets. Andrew MacLeod reports on doing deals in
the tough, yet extremely profitable, times ahead
P
atrick Dunne has some down-to-earth everything they do, from winning deals to
advice for investors wondering how raising money.”
to weather what promises to be a Dunne says this has been the focus of
turbulent 2009 – they should spend more most private equity investors for some
time and thought on their portfolios. time, and will continue to be at the top of
As 3i’s communications director, Dunne their agenda – or thereabouts – for the
is not alone in forecasting that the foreseeable future.
difficulties facing the capital markets in He also makes the point
the coming year with be “challenging”. that an
That euphemism can rarely have been so economy
heavily charged with understatement as it is can only
today, considering the problems funds are draw in its
facing in attracting investors. horns for so long, and sooner
“The general macroeconomic or later a degree of normality returns. points to the disastrous
environment looks pretty tough,” Dunne Dunne says: “We’ve been through a effects on the market
concedes, pointing out that the chill number of cycles before, and they are of the credit crunch
facing capital markets is mirrored by the all different. What we do and the worldwide
debt freeze that has slowed new deals to know is that there comes a fluctuations in the price
a glacial pace. point when the private of commodities.
“I think the picture is different from one equity firms decide it’s time to While the banks
country to another, and even from region go shopping again. We’re not at remain too paralysed
to region, but there has certainly been a that stage yet, and the rosy with shock at the
general slowdown,” he says. “For most PE scenario would be that it comes revelation of their own
firms, the three words for 2009 are portfolio, in the second quarter. mortality to resume normal lending
portfolio, portfolio.” “More realistically, it’s probably patterns, the dealmaking climate will
Diversity is vital, he says. not going to happen before the third remain tough, but at the same time
quarter, and the most likely view is that enormously profitable.
MODUS OPERANDI it will be the fourth.” “If you look back at previous difficult
“The ability to protect value in the short The uncertainty arises because outside times, they are exactly when the best
term, then grow it afterwards, is basically influences are at work that affect the speed vintages have occurred, for example,
a PE firm’s track record, and that is key in of the sector’s recovery, says Dunne, who 1992-93 and 2001-02,” says Dunne.
40 Mergers & Acquisitions
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