PR Newswire – As we begin 2007, 2006 can be summed up in a single word, “more,” according to Walkers, the global offshore law firm of choice for fund managers, corporations, financial institutions,and international law firms. The market saw more hedge funds and private equity funds involved in takeovers and buyouts, more varied use of alternative investment vehicles, and more investmentactivity in emerging markets last year.
One of the biggest market drivers was the increase in buyouts of public companies by private equity firms and bigger deals overall. As of December 2006, the value of private equity buyouts in the United States was on pace to almost triple, with U.S. deals approaching US$370 billion for the year. In the UK, companies had announced US$75 billion of takeovers in the first 11 months of 2006, compared with US$34 billion in 2005. Globally, 2,262 private equity deals worth US$563.2 billion had been struck by December 2006. In 2005, the total private equity deals were worth US$350.1 billion.
Takeover targets represented a wide range of industries and included brand names such as HCA Inc., Equity Office Properties Trust, Home Depot, T-Mobile, the London Stock Exchange Group, Dunkin’ Donuts, Clear Channel Communications, SunGard Data Systems, Neiman Marcus, and Metro-Goldwyn-Mayer.
“There are several contributing factors to the growth in number and size of these private equity deals,” Iain McMurdo, a partner in Walkers’ Investment Funds group said. “Some public companies are trying to avoid the burden of Sarbanes-Oxley regulations by going private. In addition, private equity funds have billions of dollars to invest, which is fueling the takeover activity worldwide.”
For a third consecutive year, pension funds continued to drive investments into hedge funds. This trend was supported by companies such as Unilever, whose pension funds in 42 countries will soon be able to invest into funds of hedge funds. Traditional hedge fund investors including New Jersey’s state pension funds and the Indiana State Teachers’ Retirement Fund, upped their investments. New Jersey increased its commitment to hedge fund investment from US$800 million in 2006 to US$4.6 billion in 2007. Even emerging markets got in on the activity. China’s state pension fund is preparing to make its first investments abroad, putting up to US$1 billion into foreign financial markets in an effort to improve returns on its reserves.
