By Emma-Victoria Farr and Amy-Jo Crowley
BERLIN (Reuters) – Advisers and investors congregated at the annual SuperReturn conference in Berlin this week as a still struggling private equity market cast a shadow over the meeting for a second year, although there were flashes of optimism among the attendees.
At a long row of streetside alpine huts where an overflow of the globe’s top deal brokers conversed, some talked of resilience in the face of adversity as higher borrowing costs continued to put the brakes on the private equity industry.
Attendees complained about a lack of deals, with gaps in valuations between buyers and sellers persisting. One lawyer, who declined to be named, said there was a “survive to 25” mindset among some private equity clients, who hope deal-making might recover next year.
“Probably the biggest challenge we face is the geopolitical uncertainty and the resulting volatility and reduced visibility,” said Daniel Pindur, managing partner at CVC in an interview ahead of the conference. “We are optimistic, while resilience and the ability to adapt remain essential criteria.”
The conference, mainly held behind the chessboard facade of the InterContinental Hotel with an expected 5,000-plus attendance, takes place as buyout funds sit on an ever growing mountain of assets to sell amid a collapse in fundraising.
This year saw the slowest start for private equity deal making since 2020, with the smallest number of transactions year to date across Europe, Middle East and Africa, according to Dealogic.
Still, deal values have crept up to $101 billion, compared to just $68 billion at the same point in 2023 but still less than half at this time in the peak years of 2021 and 2022.
Global buyout-backed exits fell 44% to $345 billion last year from 2022 and globally the value of ageing, un-exited companies hit a record high of $3.2 trillion, according to consultancy Bain & Company. There was also a 38% drop in funds closed to 449 in 2023 versus 2022.
Speakers at the conference, which is covering issues such as the rise and use of artificial intelligence and the pressure on private equity to deploy its cash, include some of the industry’s biggest asset managers such as Carlyle and Apollo.
“Within private markets green shoots are appearing, for example in infrastructure, which is being recognised for its defensive attributes,” said EQT (ST:) partner Asis Echaniz, while conceding that any upturn in mood was far from across the board.
While companies have taken advantage of subdued private equity activity to seize cheaper rivals, with relatively lower valuations in regions like the UK, investors believe they can find profitable opportunities.
Mark Danzey, head of capital Markets and institutional client solutions in Europe at KKR & Co (NYSE:), said he sees a healthy pipeline of M&A activity including corporate carve outs as well as public to private deals involving companies that are not being rewarded by markets.
Investors also pointed to opportunities in the energy transition and decarbonisation of the economy, and the roll out of digital infrastructure.
“The market for high quality businesses with proven management teams and track records is very active,” said Max Fowinkel, managing director at Warburg Pincus.
The gap in valuations bestowed by buyers and sellers may bedevil some deals but it is significantly smaller in the case of “high quality companies with a great management team and a strong financial profile”, said Florian Kreuzer, head of the German-speaking region at buyout group Permira.
Pressure remains on private equity to invest funds raised and one investor, speaking on condition of anonymity, said executives are working away at “quality” deals, putting in more time to build relationships that might facilitate a successful completion.
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