A year ago, private equity had all the money in the world. Today, the beleaguered industry struggles to fund deals of a billion euros.

It is a fact that the millionaire buyout bosses gathering at this week's annual SuperReturn conference know only too well.

While many predicted the buyout boom would be back in full swing by now, the hangover from the past three years' acquisition binge continues to hover over the sector like a black cloud.

With billions of unsyndicated debt still clogging the pipelines, buyout chiefs have privately written off 2008 for dead, with many crossing their fingers they might just get one or two deals successfully away.

Masters of the universe prepare for sequel

The credit crunch may have hampered private equity industry since summer, but buyout groups are playing the long game

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BACKGROUND

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"By now, people expected that we'd be largely through the problems but we're not," Kamal Tabet, the global head of Citigroup's financial sponsors group, which advises private equity firms, said. "Things are very tough."

The credit crunch has wiped out the private equity world as we know it. The investors who rushed to snap up leveraged debt like it was going out of fashion have scarpered, leaving behind them a trail of unloved loans that are weighing heavily on banks' balance sheets.

Although some of that debt is gradually being sold into the market, progress is snail-paced, and until the backlog is cleared and investors return, the buyout world has all but ground to a halt.

Mr Tabet said: "Until the $250 billion of banks' backlog funding is somehow syndicated, it is unlikely that private equity financing is going to resume on any kind of scale. And until then, the firms are going to be severely constrained.

"The problem is, we don't know where the market is right now."

The story couldn't be more different from last year, when the spotlight was so fiercely focused on the industry you could smell the smoke in the air.

The buyout bosses were being attacked on all sides, for their secrecy, use of excess leverage and exploitation of tax loopholes that enabled them to cream off millions of dollars in profits largely tax free.

The media swarmed to last year's event as the unions took up their positions outside the conference centre alongside the TV cameras and broadcast trucks. It was a jamboree to beat all jamborees, the apex of the industry's successful 25-year history.

SuperReturn 2008 will feel something of a backwater by comparison. Nonetheless, all the bigwigs are still arriving in their droves. Jon Moulton will kick off the conference on Wednesday, no doubt with more than a sideswipe to bankers for their role in bringing the industry to its knees.

David Rubenstein, the founder of Carlyle, is set to gaze into his crystal ball with his annual predictions for the year ahead, presumably laced with a lot more doom and gloom than last year's.

David Bonderman, the head of TPG, will give his offbeat views on the meaning of life, the universe and private equity and, no doubt, explain how his industry stands to gain from the restructuring opportunities that inevitably will come as the world's economic woes deepen.

And Sir David Walker, the man responsible for making the buyout world more transparent, will also put in an appearance, as will Simon Walker — no relation — the new chief executive of the British Venture Capital Association.

Outside the keynote speeches, the executives will be hoping to rub shoulders with their buyout buddies and, hopefully, pick up tidbits on upcoming deals they might get cut into. But right now, the truth remains that without the financing on offer, deal sizes will remain stuck around the €1 billion to €2 billion mark.

As Mr Tabet says: "The first six months of this year are a definite write-off and there's a question mark as to what will happen in the second half."

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