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Liquidity problems holding back private equity IT investment

Simon Quicke


Problems getting hold of finance are going to undermine potential investment in the  ICT sector as private equity firms struggle to get hold of funds.

According to research from Grant Thornton UK LLP a liquidity crunch is holding back investment making it difficult for the 80% of private equity players looking to buy into the IT sector to fulfill those plans.

Of those private equity players quizzed by the legal specialists 80% expressed a desire to make a purchase in the IT sector in the next year but 75% listed the shortage of debt finance as a significant obstacle.

The consequences are being felt by the smaller IT companies looking for investment as investors are avoiding start-ups and trying to minimise risk opting to go for more established operations.

The sizes of deals have also gone down with more than half of the deals last year being in toe £15m to £100m range.

Niki Dixon, technology partner at Grant Thornton, said that companies looking for investment had to put an emphasis on the value they could bring to a backer.

"There are several steps ITC companies can take to be seen as an attractive investment opportunity by potential investors. They must enter the market with realism about multiples, deal structures and timetables and the supporting story about their growth potential must be robustly defended," she said.

Those IT companies that navigated the last down turn in 2001 are already in a stronger position to attract backing.

"Far more attention is being paid to historic performance as opposed to simply focussing on the growth potential," said Dixon.


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