The future of PE is inspired by purpose and transparency, focused on digital transformation, fueled by value creation and driven by a diverse workforce.
Join Winna Brown, EY Americas FAAS Private Equity Leader, as she explores the emergence of NextWave Private Equity and its impact on the economy and society.
Why family offices are playing in PE’s sandbox
Entrepreneurs and companies seeking investment may find a family office (FO) a compelling alternative to private equity (PE).
According to Preqin, family office deals currently represent 2.5% of total M&A deals, a small share but one that has been steadily increasing since the great financial crisis. The Economist estimates family offices manage assets worth an estimated US$4 trillion, with individual offices averaging $500 million to $1 billion in AUM according to Forbes.
Our guest is Katherine Hill Ritchie, Director and Board Member of Nottingham Spirk, a 50-year-old innovation firm with a family office. Katherine has 18 years of finance, investing and family office experience and started her own firm working with family offices and alternative investment funds and companies. Katherine is also an Angel Investor and advisor who supports and invests in female and diverse founded venture capital funds and companies and is on the board of several organizations. She has spoken at over 100 global investment conferences, lectured at universities, and was recently awarded a lifetime achievement award for her family office work.
Contact Katherine: KHillRitchie@nottinghamspirk.com
8 things companies should know about FOs:
FOs can and do compete with PE for direct investments. FO fund structure, investment thesis, acquisition requirements, portfolio and shareholder mix are frequently opaque. FOs have flexibility to change their focus. FOs are not beholden to a 7-10-year exit timeline. IPO is not always the exit strategy for a FO. FOs don’t face the same regulatory requirements as funds. FOs may or may not care about ESG requirements for their investments. Companies must build relationships with FOs to ensure alignment of objectives.
PE Pulse: five takeaways from 3Q 2021
Pete Witte, EY Global Private Equity Lead Analyst, explores the key themes and market dynamics from 3Q 2021 that are top of mind for PE investors.
PE Pulse is a quarterly report and corresponding podcast miniseries that provides analysis and insights on private equity market activity and trends. Visit https://www.ey.com/pepulse to view this quarter’s summary and infographic.
Five takeaways from 3Q 2021:
Global M&A markets are on their way to a record year, with private equity (PE) in the driver’s seat. PE as an asset class continues to grow, with retail and insurance markets positioned to drive future asset growth. PE firms’ continued focus on the technology sector is driven by rising needs for security, automation and the digital transformation of critical organizational functions. Health care is garnering significant interest from PE due to favorable macro tailwinds, long-term growth expectations and an anticipated increase in consumer spending. Deal activity is not limited to large-scale deals; middle market deployment is the highest since the global financial crisis.
How PE can plan for climate risk with confidence
Hanne Thornam, EY Norway Head of Climate Change and Sustainability Services, joins Winna Brown to share why PE is in a unique position to lead our transition to a low-carbon, circular economy.
Contact Hanne: email@example.com
As private equity (PE) firms focus on ESG, they must also pivot to a long-term, forward-thinking mindset.
For an industry accustomed to using historical data to project the next four to five years, this is no simple task; however, it is an existential one. Climate change will mean our world looks very different in a decade regardless of the action we take (or don’t take), and PE firms are uniquely equipped to lead this mission, should they choose to accept it.
ESG topics have both financial and commercial relevance, and PE must define and track KPIs that are specific to each portfolio company. It is no longer optional to engage in the ESG conversation, as a lack of awareness is an inherent business risk.
Two overarching climate scenarios are possible, both of which require comprehensive adaptation and imagination:
A warming scenario in which rising temperatures impact access to raw materials, stoke political stability and disrupt value chains A transition scenario characterized by increasing regulation, bans and changes in technology and consumer preferences Six ways PE firms can shift their mindset to increase their climate competence and confidence:
Champion a long-term, forward-looking perspective Cross-pollinate climate data across workstreams Incorporate climate scenarios as core data points Engage diverse perspectives Embrace complexity and curiosity Verify competence on climate and environmental risks in investment teams
Three geopolitical risks PE investors should watch
Political risk is creating challenges and opportunities for global organizations, including private equity (PE) firms and investors who are increasingly exploring cross-border deals as valuations soar across the US and Europe.
On a previous episode, we talked about why PE firms must embed a geostrategy so they are able to recognize unique opportunities and use that strategy to inform their investment decisions. Today, we dive into three specific areas of geopolitical risk that are especially impactful for and relevant to private equity funds right now:
COVID-19 pandemic: increased tension and competition between big regional powers will lead to an environment in which PE must carefully consider and anticipate the implications for cross-border deals. Tech sector: governments and regulators will have a massive influence on the tech sector in the coming years and it will create both political risks and opportunities for investors. Climate change: increasingly active governments and regulators will create a patchwork of environmental legislation which will make it much more difficult to operate across markets. Contact Famke: Famke.Krumbmuller@fr.ey.com
Why PE can thrive in Southeast Asia
Luke Pais, EY ASEAN Private Equity Leader, explores why Southeast Asia is a vibrant region for PE investors who adeptly navigate local dynamics.
Contact Luke: firstname.lastname@example.org
According to the Preqin Investor Survey conducted in November 2020, Southeast Asia is among the top three emerging markets ideal for private equity (PE) and venture capital (VC) investment in the next 12 months. The region is welcoming to foreign capital, with entrepreneurs and family conglomerates actively seeking capital and focusing on succession planning.
PE’s field of play in the region is dynamic. Because the region demands quality infrastructure to support its burgeoning and young population, the field of play includes specialist funds focused on real estate, infrastructure, renewable energy and digital. The technology sector is especially vibrant and impact funds are becoming more prevalent. While credit has historically been a domain of banks, PE credit products are emerging in the region given balance sheets have become healthier since the great financial crisis of 2008. Lastly, family conglomerates in the region often function like PE funds and compete against PE funds in the deal space.
PE has historically done well in the region by carefully selecting the right companies and preparing them to expand internationally. As a result, PE-backed companies have been attractive to multinationals and trade sales to strategic investors in the US, China, Europe and Japan have been the dominant exit thesis in the region.
PE should consider localizing their strategy to include a regional headquarters in Singapore in combination with strong market coverage in various other Southeast Asian countries. PE firms must be clear about the value they bring to the table in a competitive deal environment in which discussions have shifted from valuation to value proposition and value creation. Successful PE funds have built local relationships over time as companies seek partnerships rooted in shared aspirations. ESG is increasingly important during due diligence, as access to capital depends on achieving ESG benchmarks and commitments.
How cybersecurity creates value in PE
Cybersecurity professionals John Nugent, Vice President at Apax and Paul Harragan, Associate Partner at EY-Parthenon, explore how PE can manage cybersecurity risk and why it should be viewed as a value creation lever rather than a cost.
Contact Paul Harragan: email@example.com
Cyberattacks happen constantly, and companies display a wide range of preparedness. Private equity (PE), like any other industry, is not immune from this growing threat. 1H2021 saw increase in ransomware attacks in PE portfolio companies, which is especially troublesome for an industry that has traditionally taken a less rigorous approach to information security and cyber defense. PE has, however, begun to embrace the necessary investments needed to understand their intrinsic risk, prepare for the inevitable breach and respond quickly.
While it is inherently difficult to gauge or predict the monetary cost of a breach, PE must consider that a breach can degrade an asset’s sale price or, in rare cases, be a “dealbreaker” altogether. In addition to potential impact on transactions, skyrocketing insurance costs render the cost of negligence far greater than the cost of investing in a comprehensive cybersecurity strategy.
Cybersecurity due diligence is increasingly becoming industry standard and should focus on past, present and future. For PE, future risk is an especially critical consideration since capital deployment can dramatically change the threat landscape of an asset.
Five gold standard cybersecurity practices for PE include:
Understand your threat landscape Identify what a hacker would find valuable and attractive about your company Identify critical business functions and adopt procedures to monitor, defend and preserve functionality in the event of an attack Inform security leadership of the technology strategy and broader business plan so they can anticipate changes to the attack surface Understand how new technology can generate new attack vectors and impact your threat landscape
Private Equity Leader
Really fantastic podcast. Topics are of great interest. And guests are on point and insightful. Great way of staying on top of the most important opportunities and issues in our industry.
Great insights on the PE market
Lots of deep insights on what’s going on in the PE market. Great mix of topics and guests. Well worth the listen.
Super helpful podcast with great insights from industry leaders!! Highly recommend for anyone interested in learning more about PE