PE players might seem happy to blithely go where others fear to tread, reports DealBook, but there are some eventualities that strike fear into the hearts of even the most hardened buyout veteran.

During a panel discussion at the Super Return conference in Frankfurt, moderator Mario Giannini, the chief executive of Hamilton Lane, asked several prominent PE managers what they worried about, from an investing point of view.

DealBook lists some of their responses:

• Blackstone‘s Stephen Schwarzman worries about “the political stuff that’s going on” – the spate of attacks on private equity, particularly out of the UK. His response to the growing chorus of criticism? “We have to sell what’s good about our industry [...] If we don’t get out and tell that story that’s going to have a potential negative on returns.”

• Steven Puccinelli, Investcorp‘s European PE chief agrees with Schwarzman, while also worrying “about the amount of money that isn’t flowing into private equity, into firms like the five firms here [on the panel] who have been around for 20 years, are geographically diverse, who have set up institutionalised processes to truly add value to companies once we own them.” Puccinelli is concerned that money is “flowing to groups that don’t have those processes in house to bring the rewards of active ownership.” (FT Alphaville wonders: is he referring to increasingly-activist hedge funds?)

• Enterprise value multiples and the debt market keep Scott Sperling, co-president of Thomas H. Lee Partners, awake at night. “The debt markets have certainly played a role in the returns that we’ve been able to achieve as an industry,” says Sperling. “The pricing that we have seen in the industry has not only crept up, but in the last year or so has had a pretty good leap, based on the much higher levels of debt. When we use that debt to acquire companies that trade within their historical enterprise value ranges, we’re comfortable with that; where we get uncomfortable is where we use the debt to pay and just to buy much higher enterprise value multiples than these industries or companies have ever traded at before. And I think that’s one thing that all of us are paying attention to.”

Increasingly, so is everyone else.

This entry was posted by Stacy-Marie Ishmael on Wednesday, February 28th, 2007 at 8:18 and is filed under People, Private equity. Tagged with blackstone, investcorp, scott sperling, stephen schwarzman, steven puccinelli, thomas h lee. Edit this entry.