Wednesday, 30 April 2008

Private equity round-up

After a bit of a quiet period on the buyout front, there are a number of interesting stories around about private equity.

First up, the position of private equity houses as employers standing behind pension funds. Today the FT reports that Terra Firma could face a £170m bill because of the ongoing spat with the EMI scheme's trustees. The Pensions Regulator has been called in to decide how much more money the scheme needs. A seperate report in The Times suggests that Guy Hands is looking to offload the scheme to a pension buyout body.

By strange coincidence BVCA chief exec Simon Walker has just penned a piece arguing that the Regulator's powers go too far (see 'Pensions regulation will overstep the mark' on the BVCA site). Presumably he is having his ear chewed off by Hands and others who are facing bigger pension costs than they had expected. From an image point of view all this squabbling with trustees can't be doing the industry any good.

Separately the BVCA has also just issued an interesting bit of research about the performance of private equity-backed IPOs (FT report here, full report (pdf) here). Here are the main findings from the report:

private equity-backed IPOs outperform other IPOs by more than 9% one year after their public listing
they also outperform the FTSE ALL Share Index by 20% over the same period
venture capital-backed IPOs typically spend up to five times as much on R&D as their non private equity-backed counterparts at the time of flotation
typical private equity-backed IPOs spend twice as much on capital expenditure in relation to total assets as non private equity-backed companies

Presumably this research is meant to counter the accusation - based on cases like Debenhams - that PE firms float badly indebted companies etc. Notably venture-backed companies do pretty badly, which isn't a great story given that's the more fluffy bit of the market.

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