PRINT THIS PAGE CAM survey on the impact of subprime crisis on private equity21/05/2008. Source: CAM Private Equity. 
Despite the subprime crisis, the overwhelming majority of private equity fund managers are still seeing outstanding investment and return opportunities, according to a survey from CAM Private Equity. According to private equity experts interviewed, favourable entry valuations for financing structures, albeit conservative, are a deciding factor for the level of optimism.
More challenging financial conditions but lower purchase prices
From a global perspective, covering all private equity markets, the majority of those asked agreed that average borrowing costs were already climbing and will continue to climb in the current cycle in comparison to the situation before the “credit crunch”. Moreover, so-called covenants (contractual commitment of the borrower for the term of the credit agreement) have become more stringent. Also, exit conditions have become less attractive for the time being - although significantly less so in Asia than in the “mature” markets in the US and Europe. Entry valuations have also fallen, which is reflected in lower purchase prices for investments.
European mid market buyouts appear to be crisis-resistant
A detailed analysis of individual private equity market sectors in Europe and North America shows a more differentiated picture. While credit costs for mid market buyouts in North America have already risen and will continue to rise according to all of those surveyed, 23 per cent of the experts have not to date seen an increase in the European mid market. For large buyouts, all fund managers agree that financing costs have already risen and will continue to rise in the USA. In Europe, only 20 percent expect financing costs to continue to climb. Private equity funds managers agree that covenants for large LBOs in both the US and Europe are becoming stricter than before subprime crisis. In contrast, the credit crisis had no negative consequences for venture capital in terms of entry prices and financing options according to those surveyed. However, in the short and medium term, the exit situation for venture capital portfolio companies via IPOs and secondary sales is expected to be less attractive.
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CAM Private Equity was established in 1998. The firm has over €2.7bn in assets under management for institutional investors, family offices and private investors. For more information go to www.cam-pe.com.
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