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London Roundtable (Dec. 6th): How Challenging Markets Drive New Exit Strategies

Colin Lloyd
Investment Writer/Presenter/Consultant
In the Long Run- Colin Lloyd Consulting

The bitcoin bubble will burst but blockchain will be the foundation of the next technology revolution.’ Opus Connect Member.

The second Opus Connect London event was kindly hosted by Hogan Lovell on Wednesday 6th December at their City offices. Tom Whelan – Head of the Private Equity practice – welcomed more than thirty family office and private equity delegates and introduced the discussion topic:

‘How Challenging Markets Drive New Exit Strategies’

Many delegates agreed that the length of the current bull-market has made it increasingly difficult to find attractively valued opportunities. They noted that the five year private equity deals, which were common prior to 2008, are now typically seven or ten years in duration due to the slower turn-around seen in the new low interest rate/low growth environment.

A major topic of discussion was real estate. New York and London were both regarded as expensive, although a number of members mentioned Chinese interest as a result of the decline in the value of sterling. Rental yield remains the key factor with 5% or higher opportunities still available outside the prime locations.

The discussion then switched to the technology sector. Several members made comparisons with 1999, however a number of family offices still see value. The smaller family office appears to be in a favourable position since they are seldom forced to invest capital in the same manner as the giant VC operators. Relieved of the pressure to invest, the family office can take its time identifying better value propositions and by making direct investments. The general view was that many recent VC and PE fund launches have been obliged to pay hefty multiples of earnings in order to allocate their capital. Investors in these vehicles may have acted in haste, they may repent at leisure.

The large scale capital in-flows, which have been dominated by the giant VC and PE firms, has created a lively secondary market in its wake. Several members suggested that, whilst the term structure of deals has increased the ability to exit via the secondary market has redressed the balance to some extent.

Inevitably the discussion moved on to the bubble in digital currencies. There was general agreement that the bubble will burst at some point but a similarly contrary consensus about the future of blockchain – distributed ledger – technology. As one member put it, ‘The bitcoin bubble will burst but blockchain will be the foundation of the next technology revolution.’

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