Private equity — prospects through entrepreneurial action

Less use of outside capital, more hard work on the company for solid operational value creation: Successful private equity funds have set new priorities in the sign of the crisis. Regardless of the current market environment, their companies can benefit from structural advantages and thus generate interesting long-term earnings opportunities from an investor's perspective. To exploit the potential of the asset class and avoid planning errors, institutional investors should seek professional and holistic advice.

Following the financial crisis of 2008/09, the industrialized nations are back on the growth track. Even if economic activity in the USA and Europe is slow to pick up, the worst recession since the 1930s has been overcome with massive government aid, and the signs of normalization on the financial markets are unmistakable. This also applies to the private equity market. Overall, private equity investors have actually suffered smaller losses during the crisis than equity investors and can thus continue to record positive returns over the long term: While a ten-year investment in European equities was a losing proposition as of the end of 2009, European buyouts had an average annual return of around 13 percent over the same period.

This shows that private equity offers the potential for stable and attractive returns even and especially in difficult market phases. Experienced private equity funds have reacted quickly and flexibly during the crisis, cutting costs, implementing restructurings and taking all necessary measures to secure financing for their companies. In other words, they have preserved the value of their investments through classic entrepreneurial action. Solid work on the company will continue to be the order of the day: In the coming years, successful private equity transactions will be characterized primarily by operational value creation and stable cash flows, and less by the massive use of debt capital.