IPEM, the international private equity trade show, is being held this week at the Hippodrome de Longchamp. The industry believes it is better equipped than in 2008 despite very high valuations and sometimes excessive recourse to debt.
The private equity industry is radiant and relaxed, only too happy to gather after 18 months of isolation and telecommuting. Almost euphoric, the professionals (managers, investors, advisors...) met yesterday for a new edition of the IPEM (International Private Equity Market). The international meeting takes place over two days at the Hippodrome de Longchamp in Paris rather than at the Palais des Festivals in Cannes as in previous years.
They came in great numbers (probably close to 3,000 participants over the two days) and many had to wait for more than an hour, sometimes two, in the queue before passing the sanitary pass control and finally entering the green and sunny enclosure.
Remote operations
"The success of the event shows how much the professionals were looking forward to see again", Mathieu Chabran was delighted. The co-founder of Tikehau Capital recalled that liquidity had never dried up despite the confinements, thanks to a strong capacity of adaptation of the professionals and to the generalization of virtual meetings.
Bernard Liautaud, managing partner at Balderton Capital, confirmed that business had continued almost normally during this troubled period, if not accelerated. "LPs (investors) tend not to meet GPs (managers) anymore. We all work much harder and faster than before", he testified.
"Many investments were made at very high levels during the crisis. This may also be due to the fact that transactions were concluded at a distance. Physical interactions are still absolutely necessary"Fleur Pellerin, a former minister and now a partner at Korelya Capital, said.
Record valuation levels
Market participants agree that valuations are at record levels thanks to the abundant liquidity that continues to flow. But all remain convinced that interest rates will remain low for years to come. "This is a universal trend even though there are regional differences. Nevertheless, we would rather pay 20 % more for a good company than buy a bad one at a discount"Fleur Pellerin tempered.
For Vladimir Lasocki, managing director, Europe Technology Group at Carlyle, even if the stratospheric multiples seem discouraging, there is no question of giving up investing because the exit opportunities (divestment via an IPO for example) are considerable.
Philip Freise, co-head of European Private Equity at KKR, deplored the excessive use of debt by some of his colleagues. "Many people trade with 8-9 times leverage, but it will blow up in their face".
No fear in the market
Michael Ogrinz, managing director at Advent International, said the amounts raised and the size of the deals, which have become mega-deals, were reminiscent of the 2006-07 period before the last financial crisis hit. But he also put his concerns into perspective, saying that the industry and GPs, which showed resilience during the health crisis, had significantly increased their skills since then.
Asked to compare the current situation with that of 2008, Michael Lindauer, co-head of private equity at Allianz Capital Partners, said: "I am very pleased to be able to say that I have been able to make a significant contribution to the development of our country.I wouldn't say we are in a bubble, but valuations are certainly high. On the other hand, I see a lack of fear in the market".
"Let's hope that we are not approaching anything bad," added Olivia Yedikardachian, head of non-listed investments at Caisse des Dépôts et Consignations. "Nevertheless, the situation is different because professionals are more qualified, calmer, liquidity cushions are much bigger today", she reassured.
"We must remain vigilant, because a new crisis can come at any time and from any place"Mathieu Chabran of Tikehau Capital warned.