Money-go-round

2 July 2004 By Bill McIntosh

One financial sponsor buying assets from another may be keeping money circulating around the industry. But secondary deals are only partly making up for weakness in traditional exits. And they raise questions over the industry s fees.

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The value of European secondary privateequity transactions – in which one financial sponsor buys assets from another – was five times higher in 2003 than 2002, according to a study by KPMG, the consulting firm. These deals now account for 20% of all realisations in the industry.

KPMG says current realisation levels are under 40% of what might be expected given the investment levels in the late 1990s. It notes that the proportion of exits taking place within four years has halved for most categories of investment, while holdings of four years or longer have more than doubled over the last three years.

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