The credit crunch was supposed to have marked the end of private equity's reign as supreme dealmakers but already the sector is coming back into the fray, albeit with a different business model.
Whereas PE was previously about being able to access more debt at cheaper prices, and hence financially engineer its returns, it is now about having cash when most others do not.
And the cash is continuing to roll in. According to Private Equity Intelligence, $163bn was raised by PE funds in the first quarter of 2008. Only in the second quarter of 2007 was more raised.
The latest play by PE in the hotel sector came this week with the £25m acquisition of four hotels by Zeus Private Equity through its Hallmark Hotels vehicle.
The hotels, in regional UK cities – Carlisle, Bournemouth and two in Derby, join a Cheshire property bought late last year. Together they form the foundation for a chain of branded four-star properties which is intended to be created by acquiring three-star properties.
Zeus has to date spent £35m on its buy and build strategy in the hotel sector and is looking to make further buys this year. Zeus partner Ed Fazakerley and managing partner Gary Tipper sit on the Hallmark board. The hotel chain is headed by CEO Arnold Schnegg, formerly of Q Hotels and Paramount. Funding for the latest deal is provided by Allied Irish Bank.
Meanwhile, David Pantin, the former managing director of Rocco Forte Hotels, is launching a group of luxury properties with backing from the Royal Bank of Scotland. He opens his first property, the Ellington, a 35-room boutique hotel in Leeds, this August. He will open another in the city in 2010, a 90-room property called Crispin House. Gerhard Schaller is director of operations at the company and Lord Lamont, a former Conservative finance minister, is the chairman.