Kyle Geers, CPA’s Post

Check out the latest insights and capital market trends and what they mean for PE going into 2024 in the latest edition of EY's PE Pulse. It was great to see that that PE Firms expect deal activity to continue to increase and I personally found it particularly encouraging to hear that PE Firms are continuing to embrace sustainability, with many looking at environmental, social and governance (ESG) as a critical value creation lever. More details can be found in the report: https://lnkd.in/gkxkh3Sx and podcast: https://lnkd.in/gxtPM7-w, including how PE firms are responding to ESG. Peter Witte, CFA Chase Jordan John Hodges Sophie Reiser Alan Holm #privateequity #esgstrategy #ey

Lots of great tidbits in this article: "CAIS Group, which consults on alternative investments, sorted through figures on deals from the Institute for Private Capital and found that boosting revenue growth and margins added almost twice as much value than multiple expansion during the decade following the 2008 financial crisis." "In the over-stimulated post-pandemic economy, where consumers snapped up goods with abandon, companies never had to sell a thing, Romanowicz said. Now you really need to hustle. You need to create a sales force, so firms are trying to rebuild that capability, because that muscle was kind of lost.” "Without the tailwind of low rates and tame inflation, private equity firms will have to concentrate on basics like margin expansion that make companies better, Anuj Ranjan, Brookfield’s head of private equity, said at the firm’s investor day this month."

Chris Thel, Andrea Steiner and I shared our thoughts, and hopefully some wisdom, on developing trends in the private equity industry, regional innovation opportunities, and essential considerations for businesses considering a liquidity event. Read the full article: https://ow.ly/SYqh30sBnyG

Good insights on capital market trends and what they mean for Private Equity going into 2024 in the latest edition of EY’s PE Pulse. Check out the report: https://lnkd.in/gkxkh3Sx and EY’s new Private Equity Pulse podcast: https://lnkd.in/gxtPM7-w

How can private equity firms adapt their growth strategies to thrive in today's challenging market? The article discusses the critical need for private equity firms to revise their value-creation strategies amidst a decade-low in global exits. It highlights that firms must demonstrate tangible, action-driven successes to attract buyers in a high-interest rate environment. They must shift from financial engineering strategies to business growth (and profit growth) strategies as their core rationale for value creation. LTV Partners believes that showcasing evidence of strategic actions and future growth potential is important for firms aiming to navigate these turbulent times effectively. Read this article to understand how to implement these strategies and enhance market appeal. #PrivateEquity #GrowthStrategy #ValueCreation

Carta looked into data from over 17,000 initial funding rounds since 2020 and found: - In 2023, Seed Rounds usually resulted in giving up about 20.6% of the company, showing a small drop from 2020 but stable compared to last year. - Series A funding rounds typically saw companies hand over 20.1% to investors, maintaining a gentle decrease over the past four years. - For Series B, the average share given to investors was 17.6% in 2023, up slightly from 17.1% in 2022. This indicates a subtle change in how equity is shared between founders and investors at this phase. - As for Series C and D Rounds, the data shows founders keep more of their company, with dilutions averaging 13.4% and 11.5%, respectively, in 2023. This suggests more control over ownership as businesses grow. Equity sold to investors varies by funding stage, with trends showing changes in how much is given away as companies progress through different funding rounds. --------------------------------------------- 📌 Subscribe to my newsletter to learn about building, scaling, and exiting businesses. Link in the Comments!! #carta #equity #investors

What do you do when the #privateequity formula no longer works? If both the debt and the company you're buying are too expensive to flip for a gain, how do you put your client's money to work? And if you can't invest their money, how will you give them the return you've promised, with your tidy 20% of profits taken off the top? Macroeconomic conditions have crimped private equity's style, and dealmaking has slowed. Now, attention turns to the portfolio operations team. Once considered just the steward of a deal between purchase and sale, they're now an essential part of creating value for firms' investments. While they are unlikely to take the place of dealmakers in the industry's hierarchy, they are the rising stars of a new era of private equity, private equity 3.0 says Kevin Desai of PwC. Kevin walked me through how the industry is changing, and why portfolio operations have become more important than ever in my latest for Business Insider https://lnkd.in/e5QNGXus

Promising article in which private equity execs predict that there will be a meaningful uptick in deal activity in 2024. Subscription required, so the short summary: the disconnect on valuation expectations between buyers and sellers is closing, due in part to limited partners increasing pressure on investment firms to sell long-held investments and begin making distributions. https://lnkd.in/e2J_MEcC

You couldn’t make this up. The private equity industry has been on a massive sales and marketing drive in recent years, telling us how much better returns are going to be in private markets than public ones. Consequently, both retail and institutional investors are more heavily exposed to private equity than ever before. Now the industry appears to be changing its tune.. with PE executives warning of LOWER returns for years to come. #PrivateEquity #AlternativeInvestments #Investing #AssetManagement Ivan Levingston Ludovic Phalippou Richard Ennis James Watkins, III JD, CFP Board Emeritus™, AWMA® Brian Schroeder Christopher Tobe, CFA, CAIA Mark Higgins, CFA, CFP® Nicolas Rabener, CAIA https://lnkd.in/ephUEza4

This is another interesting read from Robin Powell. It highlights the problem with the approach adopted by the vast majority of Private Equity firms. Put simply, they are the corporate vultures, interested in value extraction, not value creation. This is explained well by Gretchen Morgenson in “These Are The Plunderers.” That they are able to operate in the way they do is one of the biggest business and political scandals of our time. And the reason it goes on is because too many of those that should be protecting us have skin in the game. All that said, there is no reason PE could not be a force for good, but the business model would need to be entirely different - focused on value creation over the long-term, not maximum value extraction in a few years. Sadly these plunderers will continue to operate as they do whilst they continue to corrupt our politicians. And whilst we have politicians who are so easily corrupted. This story needs to be better reported and understood. But it is complex and most journalists are not up to the job, or they work for implicated publications. It needs to be understood because it is a major reason we see so many companies fail, and a major contributor to the housing crisis, crumbling schools and hospitals, bad school meals and so many other of our problems.