PE Firms Break Fund-Raising Record in 2007, Battle for Senior Talent Continues in 2008
Turmoil in the credit markets put an end to the multi-billion-dollar “mega buyouts” of 2007, but fallout from the credit crunch has not crippled private equity fund-raising. As of November, U.S. private equity firms surpassed the $270 billion fund-raising mark for the year, topping the $258.2 billion record set in 2006, according to the latest report from Private Equity Analyst. The report states that the ability of private equity firms to continue raising billions of dollars, even as many of them find it harder to do deals, demonstrates continued investorconfidence in the industry.
So what can we expect in the year ahead? In Mesirow Financial’s fourth annual Investment Outlook, Marc Sacks, senior managing director, Private Equity, predicts a slowdown in the investment pace by leveraged buyout sponsors and says that the ability to drive increased cash flow and improved operating performance will be critical in generating strong LBO returns going forward. However, Sacks also expects several of the world’s largest buyout firms (notably Blackstone and TPG) to launch new funds of record size during 2008. The firm also anticipates a slight increase of 10% in venture capital investment in the coming year. Executive search firm, A.E. Feldman, says this could translate into key opportunities for qualified candidates seeking private equity jobs.
Leveraged buyout firms drew in $213 billion or 77% of the total capital raised in 2007, according to Private Equity Analyst. Venture capital firms raised $27 billion. The report also states that the private equity industry is in a state of evolution, citing Blackstone Group’s landmark IPO, the increased involvement from limited partners in deals as well as increased scrutiny from legislative bodies.
In the midst of the so-called evolution, Morgan Stanley continues to build its global private equity team. The firm recently announced that it would continue to expand its roster of senior professionals. Morgan Stanley Private Equity currently has offices in New York, London, Hong Kong, Seoul and Tokyo and invests in large and middle-market private equity transactions around the world.
“Since the start of 2007, Morgan Stanley has been focused on building a world-class private equity platform for third-party investors, which has at its center professionals uniquely positioned to identify and capitalize on leveraged buyouts, corporate divestitures, sponsored recapitalizations, joint ventures and other direct investments across various sectors,” said Steve Trevor, co-head of both Morgan Stanley Private Equity and the Merchant Banking Division in a recent press release.
A.E. Feldman notes that top firms are seeking to build teams of investment professionals that bring expertise in structuring complex financial transactions and the ability to partner with entrepreneurial management teams.
