BDO analyst Will Baxter: Investors either love or hate this market

Investors split over forecast for leisure market

15th March 2010, 2:05pm

Four in 10 mid-market private equity houses think that valuations in the leisure and hospitality industries will continue to drop over the next 24 months.

And one third of private equity (PE) houses ranked them in the bottom three sectors for attracting investment activity, according to new research among private equity managers by corporate finance advisers at BDO LLP.

However, the research shows there are plenty of enthusiastic investors who are emerging from the recession with a different view.

Nearly one in five private equity houses actually rank hospitality in their top three sectors for enjoying the highest growth in mergers and acquisitions (M&A) valuations.

Will Baxter, Corporate Finance Director, BDO LLP says: "Private equity are preparing for huge ramp up in investment activity with over 90% cent saying they need to increase the rate of investments and close more deals. But leisure and hospitality is the Marmite sector.

"Buyers and investors either love it or hate it. Knowing the right investors to discuss M&A with is essential.

"PE managers say the sales of their older investments were unsustainably low in 2009, with most citing delays of between one and two years, but the forecast for the next 18 months heralds a resurgence of exit activity growing by 53% next year and 76% in 2012.

"With high demand for deals now evident and the emergence of a core of enthusiastic investors in the leisure and hospitality space, owners of growing businesses who are quicker to bring their business to market may get a better price because if they beat the rush next year they will get special attention."

The research included interviews with 100 financial directors and chief executives of private equity backed business and 50 private equity funds in November 2009.

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