Unlisted infrastructure fund managers across the globe completed 130 deals in 2009, the lowest annual total since 2005. This represented a drop of nearly a third from the number of deals in 2008, the first since unlisted infrastructure funds emerged as a distinct investment strategy. However, given the market conditions, infrastructure deal volume has shown resilience. Between 2008 and 2009, the annual infrastructure deal volume fell by 33%, compared to an 82% decrease in infrastructure fundraising.
The decline in the number of deals executed in 2009 can be attributed to a number of factors. At an industry level, fund managers were restricted by the severe contraction in debt availability, the lack of available assets with relatively simple deal structures, and sellers’ high asset valuations. Conditions were also difficult at a fund manager level, most noticeably the intense competition resulting from a record number of fund managers operating in the asset class.
Although some believe that the worst of the crisis is over, it is still difficult to predict when we will see a major upturn in the number of deals being made by unlisted infrastructure fund managers, as the credit markets remain somewhat restrictive. Going forward, many deals will be dependent upon increasing equity ratios or, alternatively, a reduction in vendors’ price aspirations.
For more information on the infrastructure deals involving unlisted fund managers in 2009, please click here to view our latest press release.