“The World Has Changed” – Grant Thornton White Paper And Panel

This afternoon ACG, Grant Thornton and NASDAQ hosted a panel discussion on a White Paper written by Harris Smith of Grant Thornton. The white paper explores seven “top trends” in private equity, including hot sectors and exploding cross-border M&A, available for download below.

With a crowd of around 50, the discussion between PE professionals and those serving the industry was somewhat informative, touching on questions like: Could sovereign wealth fund Investments dry up? Is the golden age of private equity over? and Where are mid-market multiples? Highlights after the jump.

Is the Golden Age of Private Equity Over? The (clearly biased) answer was a resounding “no” from PE pros Bela Szigethy of Riverside Company and Mark Jones of River Associates Investments. Instead, we’re seeing a shift from financial engineering to value creation. These are two buzzwords that have been tossed around so many times they’ve nearly lost their meaning, but the idea behind it is probably more important now than ever. As Jones said, “loan pricing is up by a third and leverage is down by a third,” so returns simply can no longer come from debt.

What else is being affected by the events of recent weeks? “People are realizing there’s less diversification, and that the hedge funds, bond funds and PE funds are all related and in it together,” Jones said. Also, any pushing of the envelope regarding covenants will likely result in a “put in your own money,” answer from lenders.

Could Sovereign Wealth Fund Investments Dry Up? “There’s always the sovereign wealth fund from Omaha,” one panelist joked. No one believed the SWF trend would go away, despite the NY Times article to the contrary, since the funds’ strategies require diversification.

What Have We Learned From Apollo/Huntsman? “You better not count on a broadly defined MAC to get you out of a deal,” said Dan Reid of Grant Thornton.

Where Are Mid-Market Deal Multiples? 1.5 turns below where they were in the so-called “Golden Age,” according to Szigethy.

What’s The Future Of Cross Border Deals? Nothing but increase, according to Den White of McDermott Will & Emery. The advent of electronic data rooms has increased the ease 100-fold. Meanwhile, the weak dollar has increased the amount of foreign buyers entering the US. “Anyone selling a company is doing malpractice if they aren’t going to international buyers,” White said.

What deals are getting done? Ones under $100 million, said the two lower middle market PE pros.

Download Top Trends In Private Equity, with coverage of the credit crunch, cross border M&A, SWFs, operational partners, mid-market compensation, three hot sectors, and “the natural evolution of private equity firms.”