Capital Dynamics: Outlook for 2008

Thomas Kubr's team at the Swiss private equity manager predicts a quiet time for mega funds and a fall in returns to historic norms in 2008.

Thomas Kubr

“2007 has been an eventful year. Private equity has seen the largest deals ever completed with unprecedented absolute amounts of leverage, while a correction in the debt markets slowed activity in the third quarter. The situation has normalised in the fourth quarter with debt markets remaining tight.

For at least the first half of 2008, we expect mega deals to experience difficulties and large and mid-size buyouts to be less affected. In addition, we anticipate more opportunities for distressed funds driven by an expected softening of overall economic conditions. To conclude, whilst we expect returns to come down to historic levels, we still believe private equity will continue to outperform public markets.”

Thomas Kubr, managing director and chief executive, Capital Dynamics

John Gripton

“2007 was a challenging year for private equity, but as we head into 2008, managers are taking those challenges seriously. They realise that a greater understanding of private equity by the general public is needed and that the image needs to be improved. The general partner community has realised that it needs to get its arguments over to the public through the media, and it is taking steps to do that.

There will be factory closures, there will be pruning of workforces required on occasions: but you have to overcome the perception that private equity is all bad and is aligned with reality. It must make the case that it can be for the long-term good of the company and its employees.

We have no inkling that appetite for private equity is diminishing – indeed, our perception is quite the reverse.”

John Gripton, managing director, Capital Dynamics