Terra Firma says IPOs tough; returns, deals lower

* Exit by IPO will be hard to achieve

* Equity markets could be flat, at best

* Returns, deal flow likely to be disappointing

By Simon Meads and Megan Davies

BERLIN, Feb 10 (BestGrowthStock) – Guy Hands, founder of buyout
house Terra Firma, said IPOs of private equity-owned companies
will be hard to achieve this year, returns will be lower and
deal opportunities will be scarce.

Banks may raise their lending for deals but regulation
changes means it won’t be in as substantial a way as people have
been hoping, Hands said at the Super Return conference on
Wednesday.

Thus, deals will be done with less debt and expected returns
will also be lower, Hands said, meaning exits through IPOs will
be more challenging.

Terra Firma’s most prominent investment is loss-making music
company EMI. It is in a legal dispute with U.S. bank Citigroup
(C.N: ) which advised on the 2007 deal and provided financing for
the 4 billion pound ($6.3 billion) transaction. [ID:nLDE6132NY]

Hands said on Wednesday: “Equity markets, after their
meteoric rise last year, are likely this year, at best, to be
flat but probably with more volatility than we would like.

There was talk last year “from some industry leaders of how
they would do seven or eight IPOs in the near future. Those IPOs
have not happened yet and I would guess they will be more
difficult than people expect,” he said.

A number of private equity firms have been bullish about
opportunities to exit portfolio companies through IPOs.
U.S.-based Blackstone Group (BX.N: ) said last year it planned to
take advantage of improved equity markets to list up to eight of
its portfolio companies.

Hands also said returns to investors in 2010 will be scarce,
while the time taken to invest capital will take longer and
ultimately returns will be lower.

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Terra Firma says IPOs tough; returns, deals lower