Just when you thought that private equity was dead, it’s back in business – and where better than at the Super Return conference in Berlin?
Just when you thought that private equity was dead, it’s back in business – and where better than at the Super Return conference in Berlin? That said, this year’s conference was more about warnings and cautions than the glitzy networking that the private equity community is used to.
Some of the tough talking came from industry doyen Henry Kravis, co-founder of Kohlberg Kravis Roberts, who sternly told delegates that in the midst of a global downturn, if private equity strategies don’t change, life will become increasingly hard for industry players. The squeeze on capital will mean deals will be smaller and less leveraged, he said:. ‘We have to adapt, and if we don’t we will get left out.’
That advice applies to all the beleaguered parts of the financial industry. The word may be full of talk about bailouts, capitalisations and cost cutting, but many financial sector fold still fail to understand the realities of the new era the industry is experiencing.
With leverage being withdrawn by banks and investor capital drying up, Kravis says, nothing is more important than effectively managing portfolio companies: ‘That means efficiently managing balance sheets, preserving capital, and seeking new opportunities.’ He also told firms to embrace new types of deals with new structures.
Kravis, of course, has been through rather more boom and bust cycles than most people in the industry. Some heed to his advice might help to make the current downturn shorter, and less painful, than it might otherwise be.
