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Private equity looks beyond the banks

Approximately 75 per cent of UK private equity firms expect to receive part of their debt financing from sources other than banks.

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Approximately 75 per cent of UK private equity firms expect to receive part of their debt financing from sources other than banks.

According to Grant Thornton's latest private equity barometer, a quarterly survey of more than 100 private equity executives in the UK, over a quarter of respondents expect to receive as much as a quarter of the their debt from lenders others than banks.

"Mezzanine funds are showing an increasing interest in UK private equity deals in recent months. That partly explains why private equity respondents have achieved higher debt multiples on their investments than expected and are confident that these will remain stable in the year to come," commented Mo Merali, head of private equity at Grant Thornton.

Over the next 12 months, respondents expect to achieve debt multiples of 3.3 times Ebitda on average, a similar level to what was achieved in the last year.

The survey also found that 38 per cent of respondents feel there will not be a good exit environment in the next 12 months, while 22 per cent feel there will be and a further 40 per cent are neutral.

"Few private equity professionals now speak of a good exit environment, but many are planning to make up lost ground by implementing performance improvement measures. That is how 45 per cent expect the value of their portfolio to increase by more than ten per cent,” said Merali.

Merali also pointed out that three quarters of those surveyed expect their portfolio companies to meet or exceed targets set out by their business plans over the next 12 months. “Against the backdrop of a challenging economic environment a growing number relies on performance improvement measures to achieve their objectives,” said Merali.