Adveq presents market assessment and outlook for private equity

Zurich/Frankfurt, 28 October, 2008 – Adveq, a leading independent private equity fund of funds investment manager with offices in Beijing, New York, Frankfurt and Zurich, today presented its current market assessment and outlook for the private equity industry. At its annual Press Conference in Frankfurt, Adveq put forward its views on the likely impact of the current global financial crisis on private equity and highlighted the effects of a continuing economic downturn on different segments of the market.

Adveq believes that the crisis will impact private equity in three waves: first, through a correction of EBITDA multiples in the short term; second, through a contraction in corporate earnings caused by a reduction in GDP growth rates; and third, by the need of some companies to seek refinancing in a more challenging credit environment.

Overall, over the next few years, the private equity market will be characterized by certain key dynamics.

• The large buyout segments are likely to have to be redefined before any kind of come back can be expected. This may mean either a “right-sizing” of the segment or a refocusing towards more value oriented or distressed investments. There may also be a scenario where large buyout investors will move downscale into the mid-market.
• There will be an orientation back to the private equity segments that are at the core of what distinguishes private equity from other asset classes, namely proprietary deal sourcing, real operational and strategic value add and strong exit orientation. Therefore, the traditional private equity segments - small / mid-size buyouts and venture capital - and special situations are likely to offer the most attractive return generation opportunities going forward.
• Venture Capital will remain dominated by the US and there will be strong growth opportunities in Asia, especially in China. 
• The US is likely to go through a long healing process before fully recovering from the current crisis.
• Europe - as is so often the case – is expected to find itself “stuck in the middle” with some countries, in particular the UK, facing similar challenges to the US.
• The current market dislocations are also likely to result in a power shift from the Western world to Asia, which will be least affected by the reduction in GDP growth rates and earnings contractions.

There will also be a sharp correction in portfolio company evaluation. Peter Laib, Managing Director of Adveq, says: “Revaluation for the portfolio companies will be visible in three ways: managers are now correcting the earnings multiples in their respective valuations.  In the medium term, the profitability of portfolio companies will be lower.  Finally, the discount applied to companies which cannot refinance their credit lines will be evident.”

Bruno Raschle, CEO of Adveq, commented: “The world is currently experiencing financial markets turbulence that is unprecedented, at least for the past several decades, and this has a number of implications for the private equity market, both for existing and new commitments to the asset class.  However, while it is clear that there will be a reduction in the return expectations for past vintage years in certain segments, we believe sharp reduction in valuations will in fact create attractive opportunities for both current and future private equity fund commitments in most private equity segments.  In particular, we believe that these trends will, once again, increase the attractiveness of ‘traditional’ private equity segments, namely small and mid-sized buyouts and venture capital, while special situations funds will also benefit in the current climate.”

About Adveq
Adveq is a leading independent private equity fund of funds investment manager with offices in Beijing, New York, Frankfurt and Zurich. The company currently manages approximately USD 4 billion of assets for its clients. These clients consist almost entirely of international institutional investors including pension funds, insurance companies, family offices and other financial services providers, that are located primarily in Europe, Asia, Australia and the United States.

Further information
Marlene Caduff
Corporate Communications 
Adveq Management AG 
Affolternstrasse 56 
CH-8050 Zurich 
Telephone: +41 (0)43 288 32 00
E-Mail: marlene.caduff(at)adveq.com
www.adveq.com