Flipping companies as a private equity firm is pretty tough these days.
If you’re lucky enough to get financing, its cost has gone up. If you are then even luckier enough to flip the company via an IPO, market valuations might not be much higher than what you paid for the company.
Thus despite signs of a global economic recovery, private equity buy-outs are unlikely to come back substantially any time soon.
According to a recent survey by KPMG, most private equity professionals expect their industry to be essentially dead through 2010. This could prove over-optimistic should the global recovery stagnate by end-2010 as some expect.
The largest reported challenges continue to be access to financing and the poor prospects for a bouyant IPO market.
KPMG: According to the survey, 58 per cent of respondents noted IPO demand won’t return until 2011 at the earliest, and 24 per cent said they expect companies will avoid the IPO route as alternative sources of funding, such as growth capital, become more popular. 30-seven per cent of respondents said they expect there will be a demand for public company offerings in 2010, and 6 per cent said it was too hard to predict in this economy.