BDO: Exit delays causing friction

The backlog of portfolio companies waiting to be exited until economic conditions further improve is creating friction with corporate executives, according to research conducted by BDO.

GPs who choose to delay exiting older fund investments until prices creep further back to pre-crisis levels is resulting in portfolio company managers expressing worry over the uncertainty in ownership, according to accountancy and advisory house BDO.

A notable 38 percent of portfolio company management teams say a delay in planned sale dates has adversely impacted their growth ambitions and 46 percent of respondents stated a change in ownership would help accelerate growth, according to BDO's research.The firm interviewed 150 senior executives and decision-makers of private equity-backed companies in the UK.

“In the past, the private equity industry was often accused of being too focused on quick exits and critics would say this was detrimental for a business making long-term investment decisions,” said Alex White, a corporate finance partner at BDO. “For many chief executive officers, the reverse seems to be true, with companies feeling they have been owned too long by their existing private equity partner. Delays to planned sales are holding up growth and management teams are getting itchy feet,” White added.

Delays to planned sales are holding up growth and management teams are getting itchy feet

Alex White

The findings run counter to a recent survey by the British Private Equity & Venture Capital Association, which revealed 70 percent of senior managers at private equity-backed businesses feel confident their companies will grow significantly over the next year.

The survey, which received roughly 200 respondents, asked UK portfolio company managers about their perceptions of the private equity ownership model and found that 90 percent of executives feel the model is beneficial to their business.