Private equity emerges as a force for growth

News release

10 November 2011

Private equity emerges as a force for growth

Grant Thornton has released a new report showing how a turbulent global economy is transforming the private equity industry. Given the increasing competition for quality assets, increasingly discerning investors and the continuing economic uncertainty, the report concludes that there will be private equity winners and losers.

The report, based on interviews with private equity professionals across the world, highlights that the private equity sector has rolled up its sleeves and now exhibits a very hands-on approach with portfolio companies. Nearly half of firms now view performance improvement with portfolio companies as the main way to drive value. With debt markets still constrained, financial engineering’s role is now negligible, with just 2% of those interviewed citing it as a value driver.

Martin Gray, Head of Lead Advisory with Grant Thornton New Zealand, said: “Over the last three years, we’ve seen the private equity model evolve to meet a new set of challenges. Investors have become more analytical, demanding transparency from private equity partners – a sentiment echoed by regulators and the public. Investors want growth, but they also want to know how it’s being delivered and to have the assurance that it’s being achieved in a responsible way. Given the economic backdrop in the developed economies, private equity can’t look solely to market growth to drive value. This means that there’s a pressure on practitioners to really perform and build demonstrable track records in order to prosper.

Martin Gray added: “From a New Zealand perspective the findings mirror key issues discussed at the recent NZVCA conference in Auckland. Given stretched holding periods for investments, generating quality exits is vital. With relatively few IPO exits the burgeoning markets for secondary buyouts and strategic trade buyers have helped fill the void.”

Grant Thornton New Zealand has responded to the need for companies to improve business performance in order to drive value growth by recently acquiring Management Toolbox, a business which has a strong reputation within both the corporate and public sectors for improving business performance through better strategic planning, enhanced operational efficiency and reduction in costs.

Global Private Equity Report download pdf file

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