Private Equity to the Rescue?


November 18, 2011

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Clyde Blowers acquires Moventus. So that’s private equity to the rescue? Perhaps.

It certainly shows that there is a real potential for the private equity funds to become actively involved in the renewables industry. Moreover, it demonstrates that the financial sector has got involved in the right part of the industry – the supply chain. But before we go too far, let’s take a sensible look at what private equity really brings to the party.

After all, in this midst of this blame-it-on-the-bankers culture and with wider governmental pressures to provide jobs and support national renewables industries with domestic suppliers, any potential investor has got an awful lot of boxes to tick.

So, given the complexities of managing this area of the market, what can private equity bring to the party?

Well, without doing too much of their public relations, private equity firms often bring in specialist management, have a pool of expertise to draw on and of course, aren’t short of investors to tap for extra cash for crucial business processes like research and development and commercial expansion.

Although those, of course, are the ones that are run well.

In the build up to the financial crisis, many PE firms invested in opaque asset classes they didn’t understand, losing their investors money, and having to suddenly re-think their transparency on investments. And in the interests of balance, we can’t brush away accusations that some investors are only ever interested in short term gains, selling out when they believe they’ve made an adequate return, regardless of where this would leave the business and it’s employees.

For Moventus, thought, the Clyde Blowers acquisition is in the main, good news.

The business already owns David Brown gear systems, so should already be well aware of the market in which it operates. And although Moventus CEO Jukka Jäämaa has said there will have to be redundancies, this was almost certainly on the cards, regardless of the take-over.

Some may question whether the deal will give Clyde Blowers to much price setting power in the market, given its existing David Brown portfolio. However, it’s rare for funds to over specialise, since this prevents them from hedging the risk with other businesses in the portfolio.

On balance then, a good move and a smart buy. Given that the industry is crying out for investment, let’s hope we don’t wait too long for a repeat performance.

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