KPMG Survey: Most Private-Equity Investors Don't Expect Economic Improvement For...

KPMG Survey: Most Private-Equity Investors Don't Expect Economic Improvement
For Their Sector Before 2010

Too Many Uncertainties Continue to Prevail in Market

NEW YORK, May 27 /PRNewswire/ -- Consistent economic improvement won't occur
until 2010 or beyond, according to many leading private-equity (PE) dealmakers
surveyed by the audit, tax and advisory firm KPMG LLP. But when the market
turns positive, most respondents expect the energy sector to be most
attractive for PE investors, while infrastructure offers long-term appeal.

"Uncertainty continues to pervade the marketplace," said Shawn G. Hessing,
National Managing Partner of KPMG's U.S. Private Equity Group. "Our survey
findings indicate that market conditions are making it difficult for PE
managers to make projections for their portfolio companies. In addition, the
PE sector expresses concern about the regulatory and tax landscape, funding
commitments and the availability of debt."

Some 43 percent of survey respondents attending a global PE conference in Key
Biscayne, Fla., on April 28 said the economy would begin picking up next year,
while 39 percent said it would occur after 2010. Just 7 percent of respondents
expected a broad recovery in mid-2009 and 11 percent said market could recover
before the end of this year.

"PE investors by their nature work to anticipate the downside in the market,
so I would say those who took this survey are planning for the worst in an
elongated cycle and hoping for the best," said Hessing. "They want no negative
surprises."

A Focus on Energy as Market Recovers, Infrastructure Long Term
More than 35 percent of the 200 PE investors surveyed said energy would be the
most appealing sector for PE investment as the economy recovers, with
financial services and technology sharing second place (15 percent), followed
by healthcare and business services tied for third (12 percent).

Longer term, meanwhile, infrastructure investments -- highways and sports
arenas, as well as public transportation and utilities -- were viewed by 40
percent of respondents as the next "meaningful" investment opportunity for PE.
In addition, survey respondents named emerging markets (33 percent) and
public-private partnerships (PPP) assets/financial services (27 percent) as
strong opportunities for PE.

"While infrastructure may not offer the historic PE returns of 25 to 30
percent, a 15 percent rate of return on an infrastructure project may appear
more acceptable when viewed against the significantly lower returns that have
become typical in today's market," said Hessing,

Public-Private Investments
In addition, respondents said the regulatory landscape raised concerns about
public-private partnerships. For instance, asked for their largest concern
around PPPs and potential investments in distressed bank assets, 46 percent of
the respondents pointed to "look-back legislation and regulation," and 25
percent worried about potential public backlash if eventual profits were
perceived to be too high. Meanwhile, 17 percent said the complexity of asset
valuation was their biggest issue, and 13 percent were apprehensive about
partnering with a government agency.

"The respondents are concerned that the rules of engagement on public-private
partnerships will likely change as the market develops, and the PE sector is
seeking more clarity before investing," said Hessing.

The survey was conducted by KPMG at the SuperReturn conference of PE
investors.

KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S.
member firm of KPMG International. KPMG International's member firms have
137,000 professionals, including more than 7,600 partners, in 144 countries.

Contact: Bob Wade
KPMG LLP
201-307-7482
robertwade@kpmg.com

SOURCE KPMG LLP

Bob Wade of KPMG LLP, +1-201-307-7482, robertwade@kpmg.com