Rate of private equity exits is slowing down

Ernst & Young found in 2012 there were just 61 exits from Europe-based businesses which had an enterprise value of more than £127m – 150m euros – at the time private equity made its investment, down from 85 exits in 2011.

As a result, the average period for which private equity holds a European investment is now 4.7 years, said E&Y, the longest in the study’s eight-year history.

Private equity firms buy up companies with the aim of selling them later at a profit. A sale – known as an ‘exit’ – can be either a straight sale to another private equity firm or a company or a stock market listing.

E&Y estimated at last year’s rate, it will take 13 years for private equity firms to exit their current portfolio of European businesses, taking the average ownership period to 11 years.

“Private equity will need to increase its focus on realising the backlog of companies to be exited to return capital to investors,” said Harry Nicholson, a partner. “Exit rates need to increase two to fourfold over the coming few years if this overhang is to be is managed successfully.”

One of Yorkshire’s biggest private equity owned companies, The Card Factory, has appointed Goldman Sachs to advise on its future options.