Debt drought forces caution in private equity dealmaking

Michael Bow
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A LOAN drought has crushed the number of private equity deals signed this year, sending deal values in the sector to a three-year low, figures showed yesterday.

Lower levels of debt financing mean private equity firms are unwilling, or unable, to stump up the money to back deals, leaving them trailing behind their private company counterparts.

This has sent total values paid in private equity-related deals down 36 per cent in the past year, to its lowest level since the winter of 2009.

The drought contrasts with private businesses, who are willing to pay about five per cent more for companies than they were a year ago, the data from accountant BDO show.

Yesterday’s figures tie-in with further numbers from Preqin, which shows the average holding period for a private equity-backed company in Europe is 5.2 years, compared to 3.8 years in 2008.

Economic conditions are to blame, the group said.