Topic
Private Equity
PE deal-making, value creation, and portfolio management.
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private equity
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it will take time if they require a substantial repivot in order to get them into a position where they can be liquidated at an attractive rate of return. When you look retrospectively at this environment of low interest rates, increasing multiples,...
How does the historical experience inform what might need to happen on operational improvements so that private equity can drive returns in the future? The data is really, really clear on this. If you look at the last fourteen years of realized...
the industry had figured out that unloved businesses that weren't part of somebody else's core, but were good businesses in and of themselves could be invested in, and you could get revenue growth margin expansion and multiple expansion on the back...
That has contributed roughly zero to value in the buyout markets over the last ten to fifteen years. We've had wonderful conditions that have allowed multiples to expand. For a good part of that time, zero central bank interest rates in the ECB and...
I told you exits were up, and that's part of the recovery. That's part of the good news. But I also told you that deal making in terms of TEV was up to 600,000,000,000. Exits were 470,000,000,000. So it was a $130,000,000,000 gap there, meaning some...
$600,000,000,000 worth of transactions in the buyout world got done. To put that into context, that's the fifth biggest year ever in the history of buyouts. So a big uptick in deal making and not just on the amount side, but the number of deals was...
Now in the last decade or so, the average carve outs earning more like one and a half times and trailing the rest of the industry. It used to be the best source of deals in terms of value. Now it's one of the more challenging sources simply because...
I just don't know that that's really where a lot of limited partners tend to go. So we've talked a bunch about private equity markets. Would love to hear some of your thoughts on venture and growth equity. Yeah. That's been the place to be. I think...
Lastly, just a differentiated piece amongst the entire category of alternative assets. We went from a piece of private equity to maybe being an entirely different sub asset class. If you look at the value creation piece, In the old days, if it was...
So when you get big, there's a definitional issue that you're going to run into more public companies. And it turns out that many of them, buyers felt, right at value where they could pay a control premium, take it private, and hopefully make an...
the exit alternatives are limited for that. It's very different when you were writing an equity checkup 50. The exits available to you were multifold. You could get out through another sponsor. You could do more m and a. There was always someone big...
with a halfway done leverage buildup in order to create value if I can't do the rest of the buildup part of it? There's questions like that that are the big ones that you have to think of, okay. I have a valuable asset here. I can't go with plan a,...
total enterprise value. And so we thought no company was ever gonna be big enough to hire Bain once they were a portfolio company because they were so small. Now the average transaction size is a billion dollars, so that's a whole new product line....
All the cash flow can't go into customer acquisition and customer success or wherever it's been going that's caused a lot of these businesses that have grown real fast to not grow margins or even have margins shrink over time. So getting back to and...
I've been going to the same eye doctor for the last twenty years, and I'm unlikely to switch unless there's some affirmative reason for me to switch. And so industries getting recognized for their true underlying value by private equity and then for...
Most of those companies don't wanna buy a $7,000,000 EBITDA company. It just doesn't move the needle for them. But if a company can grow to 20 or 30,000,000 or more, it all of a sudden can be an important add on. And those folks have been active for...
what do I do about that? Well, I still need my revenue growth. That's good. But that margin expansion on average cannot be zero going forward if we wanna have attractive returns. I mean margin expansion in both senses. One is, yes, there's still...
to 60 to $90. And the liquidity buffer reduced by 10% to get to 54 to 81. How will private equity grow? Even as institutional pacing slows, private equity can still grow if the wealth channel adopts scalable structures that balance access with...
that's worth 16 times and it has a billion dollars of equity in it and you wanna just do some basic math and you wanna earn a 15% return over five years, well, that's a double. You gotta take a billion and turn it into 2,000,000,000. A lot of these...
The average free cash flow yield of North American buyout is in the low single digits now. And so it's no longer really supposed to be a metric for free cash flow. There's been a emergence of a new way of thinking about private equity, which is...
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