Private Equity Golden Age

Silver Lake CEO Predicts Private Equity “Golden Age”

The CEO of Silver Lake, a large private equity firm focused primarily in technology and growth industries, has a rosy prediction for the near future of private equity.  Silver Lake CEO and co-founder, Glenn Hutchins, forecasts “The financial markets may be on the cusp of a new ‘golden age’ for private equity.”

The financial crisis which has brought ruin to many private equity firms and their portfolio companies may now be ending as credit markets open up and the stock markets recover.  Hutchins points out some important and promising indicators but he does not provide a clear explanation for why it will be a “golden age” rather than simply a return to average private equity activity.  After all, even a very modest recovery in the industry will be seen as a significant improvement but it would still fall short of the boom a few years back.

“Now that the sort of panic of ’08 is over and capital markets seem to be returning to some degree of normality … companies will be able to access debt and equity markets like they have in the past. And that is no surprise,” Hutchins said.

But he added that investors needed to be mindful that valuations in 2007 should not be defined as normal. They were an “overshoot in another way,” he said.

“Now risk premiums are at attractive levels. Investors are being paid to take risk again. That means when you look back on this, when you get back to economic recovery, this will have been a good time to invest,” Hutchins said.
 
“If you need financial engineering to enter a deal and multiple expansion to exit a deal, then your business is fundamentally challenged,” Hutchins said.   Source

Read more about Silver Lake at our Private Equity Tracker profile.

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