Buyout firms to struggle finding exits in Europe

LONDON - Reuters

European buyout firms are to struggle exiting deals, sector player says.

European private equity firms will struggle to find profitable ways to exit their boom-time deals, as the industry’s traditional exit routes remain largely shut, a report said.

Altius Associates, one of the largest investors in the private equity industry, said the market for initial public offerings - one of private equity’s favoured routes for selling down the stakes in firms they own - remained largely closed.Sluggish economic growth and the euro zone debt crisis have combined to heighten volatility in stock markets in the past few years, leading many companies to put off IPO plans until markets are more stable.

Meanwhile, private equity firms are unlikely to be able to get the financing required to purchase portfolio companies from their rivals in the secondary market.Sales to trade buyers - or those in the same industry - will struggle to get done as companies hoard cash in the tough economic climate.

“In many cases the clock has reached the five-year mark and is very definitely ticking,” Charles Magnay, partner at Altius, said in the report.

Altius said private equity flows into China, Peru and Colombia were set too boom, while too much money had flowed into Brazil, Turkey and Indonesia in recent years.