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Poll: private equity to face a bleak future

Steve Dinneen
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THE private equity industry could face years in the wilderness according to an industry poll.

Despite a glut of big money deals over the past week, more than two thirds of deal makers said the industry could take years to recover from the financial crisis, according to Private Equity News.
Experts say private equity firms will be forced to merge in order to raise enough capital, or drop out of the market altogether.

Nearly 80 per cent of respondents expect to see major consolidation amongst funds.

Unease over the future of private equity could fuel a boom in IPOs this year as firms seek an exit from their holdings. An astonishing 90 per cent of respondents expected to see an increase in IPOs.

New funds will struggle to get off the ground as firms struggle to raise capital, with just 36 per cent of private equity vehicles planning to raise a new fund in 2010. This is down from 41 per cent a year ago. The outlook of the 550 industry sources quizzed was far more pessimistic that last year, when only 45 per cent said the private equity market was in serious trouble, and just 13 per cent the year before that. Just a fifth of respondents thought the industry would bounce back within a year.

A glimmer of hope was that two thirds of industry figures said they expected to see higher returns than in 2009, although this is largely due to poor returns last year. Only nine per cent believe private equity firms will make large numbers of job cuts this year.

In the poll, the fear of a double dip recession and the expectation of tough new taxes were the cause of much of the pessimism.

The results of the survey fly in the face of the big money bids that took place last week. KKR paid Bridgepoint a staggering £955m for Pets at Home, Advent International bought Xafinity from Duke Street for £190m, ICG acquired CPA Global for £440 and Warburg Pincus picked up Survitec Group for £280m. More big money deals are thought to be in the pipeline.