Accordion Market Update Private Equity Family Game Night “Attention. Here’s an update on tonight’s dinner. It was veal. I repeat, veal. The winner of tonight’s mystery meat contest is Jeffrey Corbin who guessed ‘some kind of beef.’” - Tripper, Meatballs (1979)
Good Start! Continued GDP growth and low interest rates from US and European central banks helps drive PE investor confidence. ROLL AGAIN
January 2011
Whew! Reckless behavior by some GPs does not distort prices drastically and low-cost credit remains available. MOVE FORWARD ONE SPACE
The build up of dry powder (almost $1 trillion worldwide) among PE firms, combined with cash rich corporate acquirers runs deal multiples up to 8.5 times EBITDA in the US and 8.6 times in Europe. MOVE AHEAD TWO SPOTS IPO values crater! Total value drops nearly $13 billion over one quarter. SKIP A TURN
With almost $1 trillion in dry powder worldwide, most of which was raised in 2007 or 2008, sitting in private equity coffers around the world, GPs are eager. MOVE AHEAD TWO SPOTS
January 2012 Watch out! Transactions stall with costlier leverage and volatility in the equity markets. 70% of GPs claim asset values are overpriced, according to Preqin. MOVE BACK ONE SPACE
Potential: Capital markets stabilize: cost of debt decreases and supply and demand balance. ROLL AGAIN Potential: Portfolio company growth stalls due to a disparity in valuation expectations between buyers and sellers. Exit activity stalls. SWITCH PLACES WITH LAST PLACE OPPONENT
Potential: Capital markets DON’T stabilize: cost of debt increases and supply and demand fall out of step. SKIP A TURN
Potential: GPs work closely with portfolio company managers to create additional value (with the help of Accordion Partners). Global economies and capital markets firm up. IPOs increase, as sponsor-to-sponsor deals hold strong. MOVE TO FINISH
January 2013
Source: “Global Private Equity Report 2012,” Bain & Company, Inc. Contact us at 646.233.0133 or learn more at our website, accordionpartners.com