2013: Zombie Apocalypse or Groundhog Day? Jon Freeman, Coller Capital

Transcription

1 2013: Zombie Apocalypse or Groundhog Day? Jon Freeman, Coller Capital

2 Taking Stock Predictions: PE will continue to grow in size and robustness Large buyouts will be back Banks will find a way back to PE Dividend recaps re-appearing However... GPs take a long time to disappear But the fundraising environment will quicken the process

3 PE will continue to grow in size and robustness 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% LPs plans for their percentage of assets targeted at PE in next 12 months 0% S S S S S S S 2012 Decrease Stay Same Increase Source: Coller Capital Global PE Barometer

4 Large buyouts will be back 100% Proportion of Aggregate Value of PE Buyouts by Value Band 90% 80% 70% 60% 50% 82% 75% 50% 35% 47% 47% 53% 86% 40% 30% 20% 10% 0% YTD Less than $100m $100m-249m $250m-499m $500m-999m $1bn or more Source: Preqin

5 Banks will find a way back to PE But they never left! Regulation not biting Some bank divestments but still large amount of PE held Bankers will find ways round regulation!

6 Taking Stock However... GPs take a long time to disappear But the fundraising environment will quicken the process

7 GP Shakeout Predictions made during crisis 20-40% of the 100 largest LBO firms to disappear within 3 years BCG-IESE study in Dec-2008 Majority of large LBOs completed in will fail due to over-leverage In the wake of the financial crisis, 23% of buyout firms and 28% of VC firms are expected to fail, (ie, unable to raise another fund within 7 years) Coller LP Barometer, Summer 2009 Approximately half of LPs have zombie funds in their portfolios Coller LP Barometer, inter 2011 Funds-of-funds consolidation would take place as their traditional selling points of GP diversification and market access diminish - Coller LP Barometer, inter 2010

8 LBOs Company Deal Value ($bn) Status TXU 43.2 Still held, investment written down by 95% Equity Office Properties % sold shortly after purchase, remaining debt restructured HCA 33.0 IPO in March 2011, 60% listed. Held at 2.7x initial investment First Data 27.5 Investment written down by 30% Kinder Morgan 27.4 IPO in Feb 2011, 70% listed. Held at ~3x initial investment Source: Economist

9 GP Shakeout Today s reality & outlook Preqin shows same number of active GPs today as during crisis. There have been few casualties: Candover, AAC Capital Partners UK, Balmoral Capital, Advantage Capital LBO s from have exceeded expectations Long-term nature of funds means it s hard to kill a GP Approximately half of LPs have zombie funds in their portfolios Coller LP Barometer, inter 2011 As much as $100 billion of the $1.5 trillion currently invested in PE is locked-up in zombie funds. This amount could reach $500 billion over the next few years, according to Triago, a PE advisory firm Funds-of-funds consolidation has not taken place, yet. However, capital committed to FoF from is <1/3rd amount in $38bn vs $99bn Funds-of-funds have become more concentrated in 2006, the top-5 FoF raised 22% of the year s capital vs 30% in 2009 and 43% in 2012

10 Zombies

11 Advice for LPs?

12 But the fundraising environment will quicken the process Value ($bn) 800 Global Fundraising Source: Preqin

13 Zombie Apocalypse or Groundhog Day?

14 It s Groundhog Day PE model GP/LP dynamic Regulation