Private Equity
Private equity investors are becoming increasingly cautious about investing in companies
with defined pension deficits. Indeed there are some private equity houses that
have a blanket ban on investment in companies with any DB obligations.
Typically most VC?s are looking to realise a return on their investment within a
3 to 5 year timeframe and believe that businesses with significant pension scheme
deficits cannot deliver returns in the short term. In addition, existing longer
held investments may also have exit routes blocked by scheme deficits.
But the issue is not that simple and private trade buyers may well be missing out
on opportunities to acquire businesses with existing DB obligations that may well
deliver the returns they require. The key is to have a systematic and logical way
of incorporating pension cost and risk into the investment model.
By using the rounded advice available through PCS equity houses can gain competitive
advantage by understanding the actual expected costs and risks as opposed to taking
the IAS19 liability at face value.
