Guy Hands: Private Equity Biz Shrinking
April 30, 2009 at 5:24 AM (PT)
Private-equity firms will be paid "a lot less" and many may go out of business in the next few years as buyout-fund sizes shrink by 50%, said GUY HANDS, founder of TERRA FIRMA CAPITAL PARTNERS LTD, reports BLOOMBERG NEWS. "Life on the whole is going to get a lot tougher and a lot less financially rewarding," HANDS said at the Super Return private-equity conference in MIAMI. Private-equity firms "will become nicer, more humble members of the human race," he said.
"Investors’ commitments to private equity may drop 50% in the next two to three years," continued the BLOOMBERG report "as asset allocations declined 25 to 30%, HANDS said in an interview. He resigned as chief executive officer of LONDON-based TERRA FIRMA on MARCH 17th, two weeks after the leveraged-buyout firm reported a 2008 loss of 1.39 billion euros ($1.8 billion).
"TERRA FIRMA’s loss came after it wrote down by half the value of its 2.6 billion-euro investment in EMI GROUP LTD., the U.K. record label acquired in 2007.
"The issue with EMI is the question of valuation," HANDS said. The firm is valuing EMI based on the stock price of NEW YORK-based WARNER MUSIC, which has declined 44% in the past year, more than the 38% drop in the STANDARD & POOR’S 500 Index."