Conference Presentation, Panel
Private Equity: Creating Value Against Increased Competition
Milken InstituteJim Moglia, Virginie Morgon, Jonathan Rotolo, Scott Sperling, David Wasserman, Andrew Weinberg
- Private equity is projected to remain a significant, meaningful component of global capital markets, expected to deliver sustainable performance and returns significantly higher than public markets over three, five, 10, and 20-year horizons.
- Firms anticipate continuing to outperform through flexible, patient, and active capital structures, with a specific focus on operational value creation, accelerated growth, and shared time horizons of three to seven years.
- The industry expects to become more global, requiring companies to operate as "global day one," while permanent capital and third-party money are forecasted to converge in the coming years, potentially leading to an increase in publicly quoted private equity firms.
- Barings and other firms plan to expand their company universe, co-investment as a core business model, and corporate M&A activity driven by divestitures over the next four to five years.
- Despite current market conditions resembling 2006 where mistakes are inevitable, the sector believes it will successfully navigate volatility and economic stress through professional adaptation and lessons from the 2007-2009 crisis.
- Substantial dry powder held currently is predicted to become enormously valuable capital when the economy shifts, a tipping point anticipated to occur within the next five years, positioning the industry to provide liquidity, reduce costs, and support businesses during downturns following at least two more years of a "Goldilocks economy."
- The business model is expected to evolve into a more labor-intensive operation that supports bold moves by management teams more effectively than public markets, while a secondary LBO market will emerge as firms strategically limit the scope of actions within individual deals.
- The private equity network is forecasted to see its value rise geometrically as members contribute to one another, while firms must work hard to maintain success in an environment that requires significant operational capabilities to integrate acquisitions and achieve lower effective entry points.