Interview, Fireside Chat
The Private Equity Landscape
- Clients anticipate long-term holding periods of four to seven years to navigate business cycles, while expecting a broader trend toward private companies and away from public listings.
- Large alternative asset managers are becoming institutionalized with expanded teams including debt, equity, sourcing, and operating experts, though some will remain focused on specific sectors like tech or geographies rather than expanding broadly.
- Portfolios are expected to exclude hard-hit consumer discretionary, oil, and gas sectors, while LPs will encourage investment in opportunities ranging from growth companies to those requiring support, avoiding the defensive posture of the financial crisis.
- Deal activity is projected to remain robust post-COVID with IPO and ECM activity up 75% year-over-year, as M&A markets recover from early crisis quietness and processes return to pre-COVID or early crisis levels of one-on-one engagement.
- Sellers in popular sectors such as fintech, software, pet care, and healthy consumer face high demand, with a specific push to close deals in 2020 to leverage potential tax changes, while buyers are expected to be aggressive and opportunistic.
- The prolonged low-interest-rate environment may reduce pressure to achieve 20% IRRs, allowing flexibility for lower-hurdle transactions and diverse deal types.
- SPACs are expected to play an increasingly central role, with 185 SPACs representing $58 billion in capital seeking deals, as clients plan to raise multiple SPACs for ESG or growth angles and sell portfolio companies to them as viable public alternatives to IPOs.
- Private lenders are expected to grow as aggressive participants in debt financing markets, often delivering superior returns compared to public lenders for client funding needs.
- Remote tools like Zoom and drone factory tours are expected to persist in enabling resilient IPO and M&A processes.
- Board diversity is projected to remain a priority with goals of one to three diverse members, particularly as companies taken public require diverse representation.
- Investment strategies will emphasize ESG and impact, focusing on energy, electric vehicles, sustainable farming, and healthy living, alongside a desire to acquire women and diverse-owned businesses.