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Investing with Permira’s Tara Alhadeff

Goldman SachsTara Alhadeff, Alison Mass, Alison Nathan
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  • Big-ticket discretionary items like new cars and TVs are expected to suffer first during economic pressure, whereas small-ticket items may see growth as consumers reallocate savings from larger purchases.
  • Businesses serving high-income consumers are anticipated to remain robust over the coming months and years due to their record-high balance sheets and wealth, while low-income consumers facing week-to-week living costs will see discretionary spending negatively impacted by inflation.
  • The firm is not attempting to predict discretionary spending accuracy for the next 18 months to two years, but is instead prioritizing long-term winners with strong business models and pricing power.
  • Average valuation multiples are projected to be lower over the next five years compared to the prior five-year period due to differing interest rate environments.
  • Investment activity is likely to be lower in the next 12 months relative to the previous year as the market awaits resolution of the disconnect between seller and buyer valuations.
  • Private market valuations are expected to require at least one year to work through the current gap between seller expectations and buyer willingness to pay.
  • The current environment is characterized by unusual conditions following the COVID pandemic, where all-time high savings rates and withheld spending on holidays and events may create pockets of explosive growth as consumers catch up.
  • The "lipstick effect" is expected to persist, with affordable treats and trade-up luxury items performing well during recessions by offering a "feel good" factor without significant expenditure.
  • Technological disruption is anticipated to allow great brands to reach global audiences within months or years, enabling winners to leapfrog sales from zero to 200 million or 200 million to a billion in just a couple of years.
  • Brands are projected to grow at historically similar rates on average, even though select winners may experience accelerated growth through technology.
  • Growing a mature business within a flat or stable category is described as an extremely difficult challenge akin to pushing water uphill, necessitating a reality check on investment theses.
  • Investors are advised to update their thinking to consider "really outlandish upside scenarios" for well-performing businesses, as companies may become significantly larger than originally anticipated.
  • Investors are cautioned against assuming that seniority, experience, or confidence equates to knowing the "right answer," as the correct solution is often unknown.
  • Creating a virtuous cycle for the next generation of women to reach senior leadership positions to mentor future generations is expected to take years and remains a significant challenge for the private equity industry.