Fortune favours good timing(2)

Nicholas Lockley, Editor, PEO

The Carlyle Group closed its latest fund yesterday, a €5.35 billion fund with an appetite for deals ranging from the upper end of the mid-market at around €700 million right up to mega-fund targets. For the latter it will have to call on co-investors and perhaps additional capital from its bigger US sister fund.

This is good news for investors in the latest fund: plenty of dry powder, just as Longview Economics are predicting a turn in sentiment in the equity markets after the summer sell-off. Chris Watling at Longview argues valuations are reasonable and global fundamentals are in decent shape ready for the final leg of a bull market.

All that remains for buyouts to continue their run of investment is for the banks to return. This is where it might be trickier. Watling says renewed risk aversion cannot be ruled out. The continued distress in the money markets underline the real fear of a further collapse.

But the buyout funds remain bullish, and of course it is in their interest to smooth sentiment. However, if the economists are right, their joy may be short-lived. The final leg of a bull-run is a great time to make money, but as history shows it always ends in tears.

The successful recovery in 1999 from the Russian default in 1998 ended in the stock market collapse of 2000. Of course that could mean Carlyle's fund and other '07 vintages will have two bites at the cherry.

The firm's timing could not have been better if it tried.