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There has been lots of talk this month about the perilous state of the economy and its outlook for next year, a similar tale really from the rest of this year. I was interested by the comments of a couple of businessmen for differing reasons this last week. Firstly from a leading retailer who said that flat is the new growth and holding position over the next couple of years will compare to the high growth model of old that had the investment community buzzing. Then from one of the best known PE house owners who comments on the need for the industry to look for “long-termism” for future investments, and that the existing model is just no longer viable.
These are just opinions of course, but if they both hold true then how are investments going to be valued going forward, will there be an even greater stagnation in the deal market as perceived values from either side of the fence differ drastically as we all dispute what the bottom of the market really looks like.
I’m personally seeing quite an interesting marketplace at the moment where my clients are looking for long term operational sense in some of their portfolio businesses and short term cash grabs in others. We can help in both cases as well as assisting in their more traditional needs of executive gap management.
My question for today relates to the current position of the market that needs a good kick start. Are perceived investment valuations changing extensively at the moment due to economic forecasts (flat being the new growth) and as a result what activity will we see in the non distressed marketplace? Sadly I think I know the answer but would be really interested to hear your thoughts.
Simon Gough is a Director and Head of Private Equity.
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December 12th, 2011 at 5:42 pm
As far as my experience is concerned I have lately learnt of three transactions closed at a substantially low price compared to one year ago. Transactions that were not possible last year, due to different seller and buyer perspectives, have currently been possible. A common point in all the three transactions is a lower market assets valuation and stakeholders under stress due to other investments.
As a general view I would say that lower valuations at market value, diminishing expectations of growth and investors under stress are the factors that give great opportunities to long run and financially powerful investors.
Guess we will see more of this kind of investments, but it all seems we still have to see a bottom and a clearer activity pick up.