Turmoil hits growth and exit options for private equity firms

City A.M. Reporter

NESS confidence among finance chiefs at firms backed by private equity has slumped to its lowest recorded level on the back of increased market uncertainty, a survey released today shows.

The study from business advisory firm Deloitte, which polled 70 finance heads at to private equity-backed businesses, found optimism about future revenue growth had fallen from 70 per cent last year to just 54 per cent today.

“The results of the survey very much reflect current market sentiment and we have seen a dip in the overall outlook for the coming months”, Deloitte lead partner Emma Cox said.

The vast majority of CFOs were behind schedule in their original management buyout plans in terms of earnings, with 69 per cent below target compared to just 10 per cent of respondents ahead of target by more than 10 per cent.

And just four per cent have plans to exit a business within the next year, down from 18 per cent a year ago, as the uncertain outlook impedes exit options. An initial public offering, last year seen as the most likely option by nearly one in five, is now the favoured exit choice for just four per cent.

The poll also found CFOs were keener on cutting costs to protect margins this year, with 24 per cent saying this was a top priority compared to just 11 per cent last year. Revenue growth remains the most important focus for CFOs.

Deloitte head of private equity Chris Hyams said: “Historically, funding has been the main requirement of a private equity house from an investee company.

“However, as markets have become more challenging in recent years, we have seen a shift in focus to a greater emphasis on strategic and consultative advice.”