Despite Uncertainty, Private Equity Remains Bullish on Europe

BERLIN - David Rubenstein is still bullish on Europe.

Speaking at an industry conference in Berlin, the co-founder of the Carlyle Group said European companies were now more open to offloading assets, and that sales related to the bank bailouts from local governments could provide one of the best opportunities.

“Whenever you can buy assets from a government entity in Europe, you should do it,” Mr. Rubenstein told attendees at the Super Return private equity conference on Wednesday. “You will see distressed sellers sell assets at judicious prices.”

His comments echo similar remarks last year when Mr. Rubenstein told the same conference that Europe was “one of the world’s greatest investment opportunities” because “there’s no part of the world that will see so much assets sold at a discount as in Europe.”

On Wednesday, the Carlyle co-founder added that prices for potential investments were gradually falling. In particular, European firms with operations outside th Continent could prove a wise bet because they were not dependent on region’s economy, which has been sluggish.

For many private equity firms, the Continent’s economic troubles and the refusal by some sellers to either sell, or reduce the price tag of, assets has been frustrating. Local banks, for example, have received more than a combined $1 trillion of short-term credit from the European Central Bank, which has reduced the pressure to get rid of defaulting assets.

But as the fears about the debt crisis have eased, some managers now see opportunity in areas that previously had been off-limits.

Lionel Assant, European head of private equity at The Blackstone Group, said on Wednesday that debt-riddled Spain had become an attractive market despite double-digit unemployment and a banking industry that remains troubled
Mr. Assant said the country’s structural reforms aimed at liberalizing its local labor market, close ties to the fast-growing Latin American markets and the l! ikelihood of a domestic economic recovery were three key drivers for potential investment.

“There’s no doubt Spain will recover, it’s just a question of when,” said Mr. Assant, adding that most European deals in the short-term would likely be valued between 500 million euros ($654 million) and 2 billion euros.

Guy Hands, chairman of the private equity firm Terra Firm, also said Europe’s economic conditions had improved over the last 12 months, thanks in part to financial support for many southern European countries from German taxpayers.

While private equity continues to look for deals, Europe still has its risks. On Monday, the financial markets reacted poorly to a political impasse resulting from the Italian national elections that have left no single party in control.

When asked what the result in Italy could mean for investment in the country, Mr. Rubenstein said the election results were a surprise, but declined to comment on how the result would affect the industry.

“Anything I say will get me in trouble,” he said, comments that received laughter throughout the conference hall.

Mr. Rubenstein, who participated in a couple of panel discussions at the private equity conference on Wednesday, showed off his comedic flair.

During a question and answer section, someone told him that at another conference in Las Vegas just before the crisis, the Carlyle co-founder had said the industry was living through a golden age of private equity.

After a moment to think, Mr. Rubenstein responded: “Whatever is said in Las Vegas should stay in Las Vegas,” which was followed by laughter from the packed conference room.

At the end of one of the panels, the conference attendees were asked to vote anonymously for an ‘Open Mike’ award for the conference panelist who had proved to be the most controversial and entertaining. The contestants included Mr. Rubenstein and Mr. Hands.

“For all the Carlyle people here, we do know how you’re votin! g,” the! Carlyle co-founder quipped to the audience.