There has been significant deleveraging among European listed private equity firms since the beginning of the financial crisis, research by LPEQ, the group of now 18 European listed private equity companies, has shown.

The research surveyed 55 companies; of them, at the end 2008, 19 had a negative net liquidity ratio, such as net-levered companies, while 36 were net liquidity positive.

At the end of April this year, the 19 with negative net liquidity in 2008, had reduced their average net liquidity ratio by almost half, LPEQ said in a statement to the press.

Over the same period, the average net liquidity ratio of the 10 companies with the highest leverage improved from minus 33.5 per cent to minus 20.0 per cent. In other words, the proportion of net assets financed by debt fell from over a third to one fifth in 16 months.

The group of 36 companies that had positive net liquidity at the end of 2008 saw a decrease in their average net liquidity from 38.7 per cent to 34.5 per cent, due to the fact that they were net investors over the period, according to LPEQ.

“This is encouraging evidence which demonstrates that the European listed private equity market has successfully completed a deleveraging process since the beginning of 2009, said Peter McKellar of SL Capital Partners, a member of LPEQ.

“The changes, particularly evident among the most leveraged companies, have placed the sector as a whole in a better position to capitalise on investment opportunities,” McKellar added.

Joseph Malick of NB Private Equity Partners, also a member of LPEQ, added that the results show listed private equity companies now have an opportunity to focus on new deals.

The research was conducted by LPX Group, which examined companies representing more than 80 per cent of the total market capitalisation. 

Earlier this week, this publication reported that LPEQ expanded its ranks by bringing on board HBM BioVentures, the Swiss venture capital company, raising LPEQ’s membership to 18 companies (more here).