I have been looking at the "Credit bust" and the Big banks performance and what there impact on the VC market and debt finance for early stage / Start up companies will be ,and I have seen a number of articles on the stagnation of the VC market and the IPO / AIM, anyone have any comments, I have experienced neither , but it could be sector dependant.
Private equity ‘to stagnate’ By Nick Britton
The private equity industry is heading for tougher times, according to a survey of business leaders conducted by consultancy McKinney Rogers. Respondents expect the market to show zero net growth over the next 12 months and grow ‘only a little’ for two years after that. The credit squeeze is cited as the chief cause, with 71 per cent of respondents believing it will have a large impact on the industry, while some 68 per cent think that general economic uncertainty will affect private equity’s growth.
Regulation of one kind or another, including Sarbanes-Oxley and MiFiD, is expected to contribute to poor growth by around half of the survey’s respondents.
The study, which interviewed 58 business leaders in four continents, chimes with the popular belief that Asian markets will be less hurt by the credit crunch. Respondents in the Asia-Pacific and Africa expect the tightening of credit to have less impact on private equity investment than those in the US and Europe.
On balance, respondents feel that private equity firms make companies ‘leaner’ and more competitive, with 47 per cent agreeing and 23 per cent strongly agreeing with this statement.
However, two-thirds of respondents believe private equity firms put making ‘large profits’ ahead of employees’ welfare, and 57 per cent state that the industry should address its ‘negative’ public image as a matter of urgency.
Cash raised in AIM IPOs falls 70 per cent
The value of initial public offerings (IPOs) on AIM in the first quarter of this year was £339 million, 70 per cent less than in the same period of 2007. Overall, companies on AIM raised £1.13 billion, 60 per cent less than last year’s £2.815 billion, according to research from advisory firm Grant Thornton.
Philip Secrett, international director of capital markets at Grant Thornton, says that the beginning of the year has provided ‘one of the most challenging backdrops for [AIM] since its inception’.
Secrett adds: ‘The surprise with [AIM’s first quarter performance] is not that it has suffered as a result of the credit crunch and resulting equity market turmoil, but that its constituents were still able to raise over £1 billion.’
The number of new companies listing also dropped to 34, down from 54 in Q1 2007.
Secrett says several sectors remain popular among AIM investors, especially energy and commodity firms, which accounted for over half of the cash raised through IPOs during the quarter.
He concludes: ‘AIM continues to be open for business, but only for those companies with stories that are in line with the very specific demands of investors at present.
‘Investors are now sitting on their hands, and while they may be more willing to participate in secondary issues for AIM-listed firms they already know, raising substantial sums of money for new companies will only be an option for a select few.’
I am interested in your experience over the last few months ?