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Welcome to the December issue of Pilot's Log
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 As we head into the last days of 2009, it would be tempting to commiserate about the difficulties endured by almost everyone in the private equity market (aside from turnaround gurus for whom the year has been busy if not as fantastic as some had predicted). Instead I thought to build upon several positive developments and highlight comments made by several contributors to this year ending Pilot’s Log
The upside from deal flow being a mere fraction of the bonanza days of 2-3 years ago is that almost every sponsor group has taken advantage of the down time to focus on existing portfolio companies. Creating value through operational improvement instead of relying upon high multiples and deal hungry advisory firms will result in stronger companies, better able to compete in the challenging marketplace.
Many firms are enhancing their portfolio management teams, seeing the clear advantages that come from introducing a central reservoir of knowledge, best practice implementation skills and sharing the best management teams across their portfolio. Indeed, several firms are adding operating partner / senior advisors to further improve their internal capabilities.
With Christmas upon us we have included pieces by several retail experts in this month’s Pilot’s Log.
Andy Meehan, who is well known for the very pro-active roles he takes on boards when appointed to help sort out messes, points out that private equity will need to seek out and embrace chairmen who are capable of being much more involved in portfolio businesses, mentoring both the CEO and board at large.
Tony Lahert of Step Solutions, arguably one of the leading barometers of the UK retail economy, has been kind enough to allow us to reproduce his 2009 Q3 Review. Tony rightly points out that retail/consumer tendencies continue to be the best barometer of the ‘real’ economy, which is critical for the UK as we move into the ever important Christmas and New Years selling season. Retail/consumer behaviour remains the bell weather sector for private equity, especially within the stressed and distressed side of their portfolios.
Ian Gray, one of the best known independent CRO’s with some major feathers in his cap this year including Robert Dyas & Stylo, is interviewed by my better half, James Wheeler. Gray is very clear that 2010 will bring many more challenging and interesting opportunities for top level CRO’s, though he questions whether there are enough truly talented CRO’s available to take on all of the messes that will continue to arise. These CRO’s will need to sort out bank relationships, balance sheets, leases, creditors and deal with the ramifications from the outcome of Christmas trading.
One of the most important outcomes of the Turnaround Management Association’s annual conference chaired by James on November 19th was their timely and most welcome announcement that in 2010 TMA (UK) will be setting up their ‘Certified Turnaround Practitioner’ programme, a formal qualification for the pan European turnaround industry based on the already successful US model. This is distinct from the Institute for Turnaround’s recent statement that they will be establishing a policy framework for an IfT ‘Practising Certificate’ and ‘Professional Licence’. The IfT proposals whilst well intentioned, appear to wish to restrict the practice of turnaround management only to those holding some form of licence. Given the need for professionals engaged in turnaround to have the widest possible range of skills, and indeed the way the market in UK at least actually works, in PILOTpartners’ view this will be counterproductive and has the potential to restrict the very flexibility and transparency that turnarounds often demand. Furthermore the increasing requirement of turnarounds to need pan European credentials makes a UK focused programme half baked at best.
Enjoy the holidays!
Michael Gebauer
Partner – private equity practice
E: m.gebauer@pilotpartners.eu
T: 0783 423 5458
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