Conditions in the UK private equity industry are forecast to improve over the next five years as debt markets ease, buyers return to the market and firms exploit large cash balances and cheap valuations, new research claims.
Industry revenue is expected to grow at an annualised rate of four per cent over the next five years, reaching £1.7bn in the year from 2016 to 2017, according to the latest report from IBISWorld.
However, private equity activity has been hurt in recent weeks as revenue is estimated to grow by 1.6 per cent for the current year. Next year, a slight uptick to 2.1 per cent is expected.
The rapidly deteriorating economic outlook and turbulent financial markets are expected to hammer asset valuations, increase debt costs and weigh on deal volume, says IBISWorld.
“Regulation poses a threat to the industry, with banking reforms and changes to takeover laws expected to increase borrowing costs and make it harder for private equity firms to engage in leveraged buyouts,” said IBISWorld analyst Steven Connell.
In the five years leading up to 2011, the UK’s private equity industry revenue is thought to have contracted by 3.8 per cent to reach this year’s £1.4bn.
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