Guernsey: Private Equity In Guernsey

Last Updated: 16 January 2017
Article by Adam Moorshead

Most Read Contributor in Guernsey, November 2018

Adam Moorshead, Managing Director of JTC Fund Solutions (Guernsey), examines the trends being seen across the private equity sector, both in Guernsey and globally, over the past 12 months.

How would you characterise private equity dealmaking in your region over the last 12-18 months? What kinds of transaction values are apparent and is there strong competition for deals?

Moorshead: We have seen encouraging levels of transactions over the last 12-18 months; however, YTD 2016 is trailing its corresponding period from 2015. The short term economic and political uncertainty means a mismatch in the valuation expectations, so depressing deal activity. This is understandable given this has been a year of surprises, with the UK referendum and the US election producing unexpected results. There remains a lot of competition at the deal level, with managers holding onto assets for longer and an increasing amount of dry powder in the market as PE firms wait patiently for investment opportunities. Infrastructure, real estate and debt are still proving to be popular. The overall volume of deal flow in 2016 has slowed considerably but showing a corresponding increase in the deal size. Locally, the market has been busy with a number of consolidators of funds and fiduciary businesses active in the period and multiples of 12 times achievable for businesses of scale. I am sure there is more to come over the next 24 months.

To what extent are banks eager to provide financing for leveraged buyouts? Are 'non-traditional' lenders also visible in the market?

Moorshead: Obtaining traditional bank finance is a significant challenge for financing leveraged buyouts. This is a twofold matter with regulatory scrutiny on how much leverage should apply to PE transactions and concerns over the syndication of buyout loans resulting in banks moving away from financing. Financing has proved increasingly difficult to obtain for PE transactions, even for some big name firms. KKR, for example, underwrote a significant portion of an acquisition in November 2015, however most PE firms are unable to do this on their own book. Alternative lenders are filling the gap at both senior and mezzanine levels.

Could you outline the most significant legal and regulatory developments facing the private equity industry? In your opinion, how will they shape the asset class in the long term?

Moorshead: There have been a vast number of regulatory changes that have impacted, and will continue to impact on, the industry, with regulatory initiatives such as AIFMD, BEPS and Dodd-Frank requiring a huge change in the focus for firms. What was historically a business model focusing on performance has transformed into a model that must cope with regulatory reporting on risk, operations, performance and remuneration, all while controlling costs. Additionally, there is a focus on cross-border tax matters and taxation to be dealt with as jurisdictions try to improve revenue collection. All these additional reporting requirements come at a cost, and it is a significant challenge for GPs to manage.

How are private equity firms actively reducing risk and improving returns across their portfolio?

Moorshead: Nothing has fundamentally changed in terms of reducing risk and improving returns across portfolios. PE firms have always sought to achieve risk adjusted returns and are continuing to follow the traditional model of improving and strengthening management, capital expenditure and growth into new markets, with the added upside of embracing technology opportunities, which, of course, are advancing at an incredible rate. Reporting requirements have increased though, with both regulators and investors demanding greater transparency.

How are private equity exits playing out in your region? Is there an emphasis toward trade sales, IPOs or secondary buyouts, for example?

Moorshead: Looking at Europe, exits in the region are slow, clearly being impacted by economic and political matters, but this is in tune with a global market which remains cautious. Uncertainly over Brexit, the eurozone and now the US election results means we are seeing more managers taking a 'wait and see' approach. IPOs are reduced in both value and volume, again reflecting the global IPO trend – with the exception of Asia. Secondary buyouts had a flurry of activity in 2015, but this has not continued throughout 2016. Looking back over the last decade, however, the trend in the secondary buyout space is increasing to levels seen prior to the financial crisis, so the longer term trend for PE exits seems very positive. Locally, there has been an emphasis on PE-backed trade sales with a notable IPO earlier in the year.

Could you provide an insight into the major issues shaping the relationship between general partners (GPs) and limited partners (LPs)?

Moorshead: GPs continue to be under pressure on fees, so we see a trend of higher hurdle rates compared to previous years, as managers attempt to appease investors. LPs are also finding increasingly alternative ways of deploying capital by ways of co-investment, joint ventures and even direct investing, competing for the very same assets as the PE funds themselves. Larger GPs have remained successful in being able to raise funds, and LPs are still keen on seeing the GPs have some 'skin in the game'. In terms of due diligence, given the growing impact of regulatory reporting, LPs are demanding more transparency on the same issues, such as risk reporting, operations, performance and valuations.

Looking ahead, what are your predictions for private equity fundraising in the coming months?

Moorshead: In the short-term, the outlook is excellent. We have already seen some considerable funds raised in 2016, such as Macquarie's European Infrastructure fund raising €4bn, Park Square's €1.2bn fund and Cinven raising €7bn. Opportunities should be presented by a transitional Brexit that should prove positive, the reduced value of the pound making UK valuations more attractive, together with deals that were impacted in the run-up to Brexit and the US election that are likely to restart. In the longer term, the impact for the UK depends on its negotiations with the EU, as nobody knows how this will impact on UK funds' rights to market to European investors. Guernsey, on the other hand, has a proven track record with an established route into Europe using national private placement regimes, as well as a new private investment fund regime, so is well placed to continue its role serving the PE industry.

First published in the Financier Worldwide 2016 Private Equity Annual Review.

For more information about Guernsey's finance industry please visit www.guernseyfinance.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions