European buyout funds must find a profitable way to exit the boom year investments and companies.
US buyout funds facing high valuations. Rising purchase price multiples for high quality companies, which over the last year have hovered at around 9.0x earnings before interest, taxes, depreciation and amortization (EBITDA) and sometimes more will be a challenge.
Secondary market players gets more competitive – attractive opportunities are a challenge to find in an increasingly transparent and crowded market.
Investor Relations has to rise to challenge of more demanding LPs – more information and greater transparency. GPs are now meeting face to face with significant LPS on a quarterly basis, with full portfolio reviews, including all major changes, cash flow statements and details of drawdowns, distributions and any valuation changes. Many GPS many have doubled their staffing in the last five years.
The China challenge for PE investors is threefold – not all RMB private equity firms have experienced and professional teams, there is a risk that funds are raised by government bodies for political motives and competition is increasing as a result of large scale RMB fundraising.