Yesterday's news that Guy Hands has bought out three investors in his funds won't warm the cockles of anyone currently employed by Terra Firma.
Hands' move, which absolved the investors of paying a further €25m of commitments, is said to have valued the purchase at close to zero.
Combined with the fact that Hands has already declared that returns on deals done at the peak of the debt bubble in 2006 and 2007 (AKA EMI) will be "negative, very negative," it's not a good prognostication for Terra Firma employees hoping to collect carried interest after working hard on the EMI deal.
Several Terra Firma executives left EMI late last year.
However, one Terra Firma employee, speaking on condition of anonymity and therefore in now way obliged to be optimistic, says things are going quite well at EMI and everyone's perfectly happy.
"A lot of people are thinking that EMI is a good place to spend the medium term. It's been hard work, but from an operational perspective it's all taking shape," he says.
Private equity recruiters point out that the issue of absent carried interest isn't confined to EMI.
Abid Hussein, head of EM Financial Services, says most PE professionals have accepted that carry from current funds will be minimal. However, new funds are a different matter.
"Individuals are expecting that new funds raised will generate multiples of 5 and 6 times," says Hussein. "With lower leverage levels in the growth to mid cap market, a number of senior individuals at large cap organisations are considering making the transition to reputable mid market organisations where there will be a bigger appetite for deal activity."