Private Equity Services - Ernst & Young - United States

Limited partners globally agree that private equity remains an attractive asset class, but it will need to address challenges that have emerged in the last two years. "Shifting sands: limited partners perspectives on the future of private equity" (pdf, 163K) summarises the views of leading LPs about the future of the PE industry.

How do private equity investors create value?
A study of 2008 European exits

A review of how PE created value in nearly 300 European businesses over the last four years could provide some insight into how the industry can build on its success and also overcome the challenges it now faces. Our latest study shows that these businesses had average annual growth in profits of 15% during PE ownership. Download the report (pdf, 3.7M).

The FASB recently issued revisions to the consolidation model relating to the consideration of kick-out/liquidation rights for PE funds that are variable interest entities (VIEs). The new guidance could cause (pdf, 475K) a GP to consolidate funds that are VIEs, even though the LPs have kick-out or liquidation rights.

The industry has evolved from its early beginnings to today's business entrepreneurs. Currently, the industry is at a crossroad and is going through a transition. Where private equity firms invest and how they do business is influenced by an ever-changing landscape. Some believe there will be a shake-out, while others believe the industry will emerge to be stronger. The report discusses the two sides of the argument (pdf, 5mb), highlights the challenges facing private equity firms and covers possible lessons learned and deal flow.

Many PE portfolio companies are seeking ways to restructure, replace or modify the terms of their outstanding debt to cut costs and strengthen their balance sheets. This PE Alert reviews (pdf, 83.3K) and illustrates the complex accounting rules for modification or exchange of debt instrument and the financial reporting consequences.

The international tax reforms proposed by the Obama Administration will pose challenges for private equity firms, and existing fund and portfolio company structures will need to be assessed under the new guidelines. The Alert discusses the implications of the proposals (pdf, 78kb) and recommended action steps that private equity professionals should consider.

The economic downturn is making its mark. Debt and equity capital, the lifeblood of a thriving real estate private equity firm, are scarce, costly and highly coveted. However, we may be entering one of the best periods for acquisitions of distressed assets the industry has ever seen (pdf, 1M). So, what’s on the horizon? 40 US real estate fund sponsors get frank about their future expectations.

 Unlocking cash (pdf, 117k) is crucial during an economic downturn. There are various ways companies can curb spending and cut costs to preserve cash. Conventional cash drivers examine common working capital functions, while unconventional drivers explore cash opportunities across the entire business. Portfolio companies of private equity firms can benefit from analyzing both means to improve their cash positions and liquidity.