PE to Keep Ships Afloat
International accountancy firm Moore Stephens says the shipping sector should approach private equity (PE) providers for funding to support the ‘significant investment’ in technology and services needed to achieve compliance with environmental regulations and to maintain competitiveness.
Private equity investors who have a firm grasp on the potential risks and rewards available in today’s shipping services sector could be a good match for well-founded shipping services and technology providers who have a clearly identified market for their products, says Moore Stephens shipping partner Richard Greiner.
Indeed, it could be argued that recent developments have created something of a perfect storm to bring the two together, he added.
At a recent seminar held by Moore Stephens, maritime efficiency specialist Fathom Shipping’s Alison Jarabo noted that technological solutions are emerging to control costs and comply with regulations – among them scrubbers, ballast water treatment and ship performance management systems.
But the market will fail unless ship-owners and operators have the finances to deploy the technologies, she added.
Meanwhile, industry analysts say that the purchasing of distressed debt by private equity funds is set to become a more prominent feature of the shipping market in 2015.
PE investors are seeking to buy distressed debt as a path to acquiring equity in the company and ultimately become the owners. Traditionally such investors have preferred to own ships which provide more direct control over their assets as opposed to buying shipping debt which has been seen as overpriced, say analysts.
Moore Stephens press statement said that shipping is a cash-driven business, and the combination of large, frequent and often short-notice receipts and payments does not sit well with private equity firms when considering cash management.
Over the last two decades, the industry has moved from one populated by owner-managed businesses with cash payments authorized by owners, to a corporate one with companies growing and turning to external sources for equity funding.
Despite the private equity industry taking a keen interest in the shipping space, significant cultural and knowledge gaps are frequently only coming to light for both the investor and the shipping company once an investment has been made.
