Lack of liquidity stalls private equity investment in ICT

Private equity investors in the UK information and communication technologies (ICT) sector are facing a liquidity crunch, according to a report from finance and business adviser Grant Thornton UK LLP.

The report, called Where is the Smart Money Going in ICT?, is based on interviews with 40 private equity companies involved in the ICT sector.

It found that over 80 per cent of the respondents wishing to make an investment in the sector still see the shortage of debt finance available as an significant obstacle.

Some 68 per cent of those polled cite the price dislocation between those looking to buy and those looking to sell as the biggest problem for investors, while 28 per cent said that a preoccupation with preserving value in existing portfolio investments is preventing further investment.

The survey also indicated that smaller ICT firms are finding it difficult to secure finance as investors avoid startups with 'speculative' growth prospects. Some 33 per cent of companies said they are now more selective, favouring larger companies with robust revenue streams and eschewing riskier investments.

Overall deal sizes have gone down, with 53 per cent of deals in the ICT sector last year in the £15m-£100m range down from an average £250m, while 33 per cent were in the less-than-£15m range.