Private Equity Industry Update

Private Equity Industry Video Update | THL Partners

Following yesteday’s look at the “new normal” of private equity, here is a good video update on the private equity industry from a partner at a major private equity firm. The economic recovery is still very shaky and private equity firms and investors are having to decide when is the right time to get back in the market again. Scott Sperling of Thomas H. Lee Partners, one of Boston’s largest private equity firms, says his firm is aggressively looking for new opportunities especially in the services and business outsourcing sector as well as retail but that this recovery is “fragile.” He also mentions the gap in valuation between what the company is valued at in the public market and what private equity firms think it is actually worth. E-mail subscribers can watch the video here.

Companies are still valued higher than private equity firms are willing to pay, and in order to pay 7-9 times cash flow Sperling says he must be certain that the economy is stable. Part of this may be a hope on the buyout side that these companies would be willing to sell for less than they are worth due to economic pressure. Sperling closes with the negotiations between the FDIC and private equity firms and the recent regulation, advocating strongly for lowering the reserve requirement so that private equity firms and their companies are not competitively disadvantaged.

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