November 17, 2006
Private equity funds are eyeing the opportunity to snap up income trusts, but are waiting to see whether the government's pending legislation proves tough enough to sink the sector even further.
The recent carnage in the trust market will undoubtedly throw out acquisition targets for cash-flush buyout firms, but experts predict that few are likely to plunge in just yet.
"Certainly our private equity clients are looking, but not too fast," says Phil Brown. "The worse the legislation ends up being [for trusts], arguably the better it ends up being for private equity. They're waiting to see, where will things shake out?"
Detailed legislation on the matter has not yet passed and the investment industry is grappling to understand whether it will include limits on the sector's growth. When the trust legislation will pass is also a matter of debate. Some observers believe the government will move quickly, but Phil predicts that the complexity of the issue could tie things up for several months.