Lovering warns delegates
The returns achieved on the sale of retailers by private equity investors will be lower than previously for the next five to ten years, said Debenhams and Somerfield chairman John Lovering (right) at the World Retail Congress in Barcelona today.

'I believe that the returns we have seen will be lower, but conversely the desire to support good managers will go up,' he said in a panel debate on the role of private equity financing.

Lovering also warned that private equity houses with diverse investments should avoid 'becoming like conglomerates' and said that they should remain focused on deals and not on looking for ways of developing relationships between their companies.' After all, private equity has out-lasted the conglomerate dinosaurs,' he said.

John Pfeffer, partner of equity firm KKR, added that property portfolios were often priced into valuations and so easy property sale wins were generally no longer available. Value is now more likely to be achieved by improving management and generating sales growth.

'It is important that there is a significant upside for every manager who can make a significant difference,' he said.

At Maxeda, the Dutch-based retail group, executive chairman Tony DeNunzio said that the investment group, which includes KKR, identified a strong brand, strong locations, but poor management and with its shareholders pressurising the management to respond.

'We felt there was a certain laziness about the way the brands were being managed and so we focused on cash flow, investment and a more dynamic management,' he said.