GLOBAL - The private equity industry is turning the corner, as markets provide opportunities for private equity managers and their investors, according to research by Towers Watson.
The research, entitled "Private Equity - emerging from the crisis", showed that portfolio-company operating performance was stabilising.
The report also found that pricing for new deals was becoming more compelling from a buyer's perspective and that financing packages were increasingly available.
Mark Calnan, global head of private equity research at Towers Watson, said: "A flurry of deal activity in the first half of 2010 is testament to the potential for transactions to be created for the right businesses, if managers have the skill and capacity to aggressively seek new deals, particularly in the SME and emerging markets space."
The research points to the relationship between periods of economic contraction and strong performance in private equity, although it urges caution about the sustainability of this relationship, citing the significant capital overhang as a potential obstacle to the pattern repeating itself.
The winding up of Candover at the end of August was a stark reminder of the problems facing some private equity funds in the wake of the credit crunch.
Candover's move to sell its portfolio of companies, including the oilfield services firm Expro, and return cash to shareholders and investors followed a failed attempt to sell the business last month and ended months of uncertainty over its future.
Research from law firm Eversheds suggests the $2.5trn (€1.95trn) private equity industry is finding that the easy money may be gone, as pension funds, endowments and mutual funds cut new commitments to buyout funds by more than 50%.
But it added that this did not spell the end of private equity as an asset class.
Mark Spinner, private equity partner and head of the corporate team at Eversheds, said: "The allocation to private equity is relatively small and, due to enhanced returns available in relation to private equity, it means it remains attractive on a risk-based investment strategy approach."
He added there was still a mountain of funds already committed and awaiting investment.
Preqin, the private equity data firm, recently reported that institutional investors were holding back from private equity, preferring to hold onto capital or channel it into direct investment and joint ventures.
A poll of 160 investors found that less than a quarter had committed capital to a private property fund in the first half of 2010 and 58% planned to invest in funds over the next 12 months, while 73% said they had failed to reach their target allocation to the asset class this year.
Nearly 40% saw opportunistic vehicles, such as distressed assets and debt, as being able to generate strong returns, while property investment was seen as less attractive.