Sovereign Wealth Funds and Emerging Markets Major Factors
GEORGE TOWN, Grand Cayman, June 24 /PRNewswire/ -- Walkers, the global
offshore law firm of choice for companies, financial organizations, and
international law firms has looked at key factors in the global private
equity market over the last 18 months and has identified several changes
that could shape the future of the industry including the role of sovereign
wealth funds and the continuing influence of emerging markets.
According to Walkers, the rising costs of leverage and in certain
cases, the absence of availability of debt finance has meant that the old
private equity model of firms using leverage to enhance returns is
increasingly scarce. Increased competition from sovereign wealth funds
(SWF), which are at an all time high in terms of available capital, is
pushing private equity to revise its traditional model. As SWFs continue to
diversify their investment strategies by investing in emerging markets such
as China and India and leveraging the fall in asset values, partly caused
by the weak U.S. dollar, private equity needs to keep up.
"Private equity is entering a phase of 'evolve or perish' in terms of
models and strategies," said Ian Ashman, head of Walkers Private Equity
Group. "As the global economy changes, private equity needs to adapt to
keep attracting the capital that has traditionally gone to the sector."
Part of the evolution involves embracing emerging markets including
Brazil, Russia, India, China, the Middle East, Africa, and Asia. Many of
the top 50 private equity houses, including The Carlyle Group and
Cereberus, have opened, or in the process of opening offices in emerging
markets.
"There are a number of reasons to have a presence in these markets. The
obvious reason is to facilitate raising capital, but having an on-site
presence also helps to source deals in the emerging markets," said Richard
Addlestone, a partner in Walkers Private Equity Group. "We are seeing
high-growth rates of somewhere between 8-10% forecast in countries such as
China, India, the Middle East compared to U.S. forecasts of 1-2% at best.
Investing in emerging markets brings opportunities for high returns,
reduces the impact of the credit crunch, and offers more opportunities to
obtain debt finance without incurring prohibitively high costs."
The changes in the private equity market can also be noted by
significant acquisitions. For example, The Carlyle Group recently closed a
US$1.4 billion fund to buy distressed debt. Experts see this as a move to
take advantage of bargain basement prices caused by the credit crunch, as
banks attempt to dispose of their debt to restore balance sheets. This is
one sector which has been recently attracting private equity investment.
"It is rumored that like Carlyle, TPG, Apollo, Blackstone, and others
are working on deals for distressed debt, most notably working with
Citigroup to snap up $12 billion-worth of Citi's leveraged loans,"
continued Mr. Addlestone. "These transactions show two things. First, they
show the new world in which private equity is operating and what new
opportunities are currently out there. Second, they show that despite the
credit crunch, private equity still has significant capital to work with.
Carlyle also recently closed the largest equity investment ever made in
France by a single private equity firm, its 1.1 bn euro equity investment
in telecommunications companies Numericable and Completel."
Walkers' Private Equity Group offers broad and deep experience in all
aspects of offshore private equity transactions, working with the majority
of the U.S. leveraged buy-out firms and venture capital firms advising on
fund formation, formation of alternative investment vehicles and advising
on all aspects of international leveraged buy-outs and equity financing
where the structure involves offshore jurisdictional advice.
About The Walkers Group
From offices in the Cayman Islands, the British Virgin Islands, Dubai,
Hong Kong, Jersey, London, and Tokyo, the Walkers group provides legal and
management services to leading FORTUNE 100 and FTSE 100 global corporations
and financial institutions, private equity houses, capital markets
participants, investment fund managers, and growth- and middle-market
companies. The Walkers group is comprised of leading offshore law firm,
Walkers; fund services provider, Walkers Fund Services Limited; and SPV and
corporate services providers, Walkers SPV Limited, Walkers (Jersey)
Limited, and Walkers (BVI) Limited.
In 2006, Walkers was named as the Who's Who Legal Law Firm of the Year:
Cayman Islands, the PLC Which Lawyer? Yearbook Leading Cayman Islands Law
Firm, The Lawyer's Offshore Law Firm of the Year, and was one of two firms
honored as "Offshore Legal Team of the Year" by the Society of Trust and
Estate Practitioners (STEP).
For more information on the Walkers group, visit us on the Web at
http://www.walkersglobal.com or contact us by e-mail at
info@walkersglobal.com. To contact Walkers by phone, call our Cayman
Islands office at +345-949-0100.
SOURCE Walkers
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Related links:
http://www.walkersglobal.com
CONTACT:
Melissa Arnoff of Levick Strategic
Communications for Walkers, +1-202-973-1336, or Mobile,
+1-202-276-0070, marnoff@levick.com
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