No return to the glory days as private equity advisers hunker down for a changed market

It's not easy to write about private equity right now – half of London's buyout partners seem to have headed to the beach early and, in the current market, who can blame them? With deal volumes plummeting and brand name houses including Candover, Permira and Terra Firma going through very public difficulties, there does not seem much reason to stay in the office.

Freshfields Bruckhaus Deringer private equity co-head Chris Bown says it could take 20 years for private equity to return to the heights of the credit boom. A depressing statement but, in the circumstances, a reasonable assumption. As one well-known private equity partner comments: "Some people didn't realise at the time that that freaky two or three-year period was madness."

The accepted view is that the industry will be constrained by lack of debt for three years at best, with one veteran buyout lawyer predicting that half of the UK's active funds will go out of business. The best guess is that, during the next 10 years, private equity will be lucky to get back to the position and influence it held in the mid-nineties, so you can forget the noughties heyday.

Ironically, such sentiments come despite a recent lifting of the mood of private equity advisers. Earlier this year, firms including Allen & Overy, Ashurst and Latham & Watkins won roles on Charterhouse Capital Partners' £553m acquisition of Candover-owned energy consultancy Wood Mackenzie, and the general consensus is that activity levels have started to creep up.

CVC only narrowly missed buying Barclays' iShares business earlier this year in a deal that generated roles for SJ Berwin, Freshfields and Clifford Chance (CC), while Ashurst and Weil Gotshal & Manges are among the firms understood to be working on the Candover and Cinven auction of Springer Science.

Set against that, work is more document-intensive, and debt harder to secure and typically requiring syndication even for smaller deals. And with buyout houses pushing down on fees and heavy write-offs common on the aborted transactions, firms are having to do "harder work for less money", as Bown puts it. What will be interesting now is the extent to which major City law firms remain committed to the sector, after a period in which many firms were obsessed with recruiting private equity lawyers.

As such, some point to Linklaters, which has struggled to build a practice to rival the likes of CC or Freshfields. Despite mounting speculation that the practice does not fit with the firm's strategy of focusing only on the most profitable work, it remains resolute.

Corporate partner Charlie Jacobs commented: "People talk about us being focused on the big guys, but we are also opportunistic. We want to grow clients for the future and we very much use our private equity business to acquire new portfolio clients in much the same way as we do with our IPO business."

Nevertheless, there is no doubt that the attraction of sponsor clients versus major corporates has diminished and any kind of revival looks unlikely for years.

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