We stand in unprecedented times. None of us can be certain what the future holds, but what we can be certain of is that we need to adapt, innovate and change to both see us through the depths of the recession and to create value for our investors.
I don’t think any of us expect 2012 to be easy but so what! LPs expect us to do our job and we will just have to work harder and dig deeper to find and create value for our investee companies and investors.
For the lower-mid market we’ve cut our teeth working with smaller companies that are hungry to succeed, that are nimble enough to continue to innovate, and that operate in a segment of the market where it is still possible to drive growth, even in the depths of a recession.
Individual businesses with quality managers and differentiated market positions can still thrive. One such company, Tangerine, famous for its Butterkist popcorn and Barratt Sherbet Fountains and a homegrown business headquartered in Blackpool, has seen stunning growth. Despite a turbulent economy it has become the UK’s largest independent manufacturer of sugar confectionery and popcorn, quadrupling in size and increasing its turnover from £40m to £160m, and its base of employees by 300% to 1,350.
Growth of course needs to be funded. Businesses have an increasing need for flexible, patient capital and they will need to look for finance better suited to growing their businesses, something that is key to our recovery.
For the private equity industry as a whole, the flight to quality businesses will increase. Prices will remain competitive for good businesses, a surprising theme given the macro concerns, but there is still a lot of capital looking for a home.