Europes Biggest Concern: Keeping A Lid On Price Inflation

Europes private equity leaders predict that keeping a lid on rising asset prices and the cost of new regulation will be the biggest challenges facing the industry in the year ahead. Despite a strong year for exits in 2013, with 73.9 billion euros realized by European private equity firms, buyout firms suffered a slow 12 months for new investments last year. New deals fell by 7% from EUR54.2 billion in 2012 to EUR50.3 billion in 2013, according to the Centre for Management Buyout Researchs end of year figures. Senior market executives said they feared asset price inflation would affect deal flow in 2014. The main challenge for the industry in 2014 will be to stay disciplined as many investors have a lot of money to spend, said Simon Borrows, chief executive of U.K.-listed 3i Group . The big question will be whether funds adapt their return requirements or stay disciplined and potentially remain on the side-lines. Without doubt [the biggest challenge for 2014] is maintaining price discipline, Alex Fortescue, chief investment partner of U.K. midmarket firm Electra Partners , said. The market feels buoyed by macro optimism, dry powder and the debt markets, and while these influences are strongest in the larger buyout markets, we feel them too in the midmarket. We have seen prices for the larger European deals tick up further as the amount of liquidity available in the market [and] debt financing drives pricing, Paul Ward, managing partner of global investor Pantheon added. Full story: