Metamorphic Search’s Post

🚨NEW PAPER🚨 Private equity has become a significant player in corporate acquisition and restructuring in the UK and globally. But what impact does private equity have on productivity? Find out: https://lnkd.in/e-7h3is5 In this paper, University of Glasgow Adam Smith Business School's Paul Lavery and John Tsoukalas, and Leeds University Business School's Nick Wilson compare private equity transactions and data on no-private equity-backed firms to study the impact of private equity funding and ownership on firm-level productivity. #productivity #firms #privateequity

New Horizons in Private Equity Landscape In recent years, the private equity (PE) landscape has undergone significant transformations. With economic shifts and rising interest rates shaping the market, the strategies that once drove substantial returns for PE firms are no longer as effective. Here’s a simplified look at what’s changing and what it means for the industry: - From Financial Engineering to Operational Excellence: The focus in PE is shifting from leveraging financial tactics to driving value through operational improvements. As borrowing becomes more costly and less effective due to higher interest rates, the emphasis is on enhancing the day-to-day operations of portfolio companies. - The Rise of Operational Efficiency: In today's economic climate, operational efficiency isn't just a strategy—it's a necessity. PE firms are investing more in making companies they own more productive and profitable through better management practices, technological upgrades, and smarter organizational structures. - Longer Holding Periods: The quick flip of investments is becoming less common. Instead, PE firms are preparing for longer investment horizons, allowing them to implement comprehensive improvements and realize the full potential of operational enhancements. - Internal Transformations Within PE Firms: There's a significant internal shift within firms as well. Greater emphasis is being placed on teams that specialize in boosting company operations, moving away from those focused predominantly on financial structuring. The evolving PE model reflects a deeper, more sustainable approach to value creation—one that leverages operational prowess to navigate through economic uncertainties. This shift not only aims to enhance the stability and growth of investments but also ensures that PE can continue to offer robust returns in a changing financial landscape. Read the full article - https://lnkd.in/da7aKgeq #PrivateEquity #InvestmentStrategies #OperationalExcellence #EconomicShifts #BusinessTransformation

Last week, I shared 2 posts on how to evaluate career opportunities in VC firms ( links in comments if you missed those).   Many of you DM-ed me on how fund economics work, how it may be linked to your compensation as you evaluate two firms on career opportunities.   Fund economics are very simple yet opaque to most employees. So, here is how it works.   A VC firm that acts as an "Investment Manager (IM)" to the fund, earns a typical 2 % fee every year for the life of the fund plus a 20% share of carried interest ( think of it as profit share) if it crosses a hurdle of say 12% IRR.   Thus, on a Rs 250cr fund, total fee collected is Rs 5cr pa. The fee gets reduced by the amount that is written off as folio cos shut down.   Now, comes the catch. Do all firms earn 2% pa. No.   The fund raise , if done directly with investors (LPs), nets a full 2%. Thus, you can imagine that for a 1st time VC, they can have 2 Co founders cum Managing partners x 1 cr each, 1 CFO x 0.75 cr , 3 analysts x 0.33cr = Rs 1cr and leave aside Rs 1.25 cr for other usual expenses like office space, travel, events, legal.   However, most 1st time VCs ( Fund #1) raise a big % of the corpus say 60% via wealth firms who "place this with their HNI clients" and charge 4.5% to the firm on an average !   Thus, the VC firm is actually out of pocket in the 1st two years itself and the GPs ( Founder / Managing Partners) need to shell out a good Rs 3-4 cr p.a. for running the firm as initial investment while they catchup in Yr 3, even after sacrificing their own market salary.   They look at making this up when they raise their Fund#2 hoping it to be more direct in % and netting thus, more fee.   Thus, you as an employee esp senior, when seeking opportunities with such a firm would often be asked to take a salary cut vs your market compensation and given a projection of the 'share of carry' you stand to earn as the Fund #1/#2 exits over the next many years. It is usually projected to be high enough so you feel the dopamine rush :) No issues with that but the sacrifice pinches with time.   Thus, the questions to ask your prospective employers are :   ✅ 1. What % of your fund(s) is directly raised from LPs ? More the better.   ✅ 2. How many years to exiting Fund #1 ? Fund #2 ? ( Lesser the better )    ✅ 3. If I am being asked to take a salary cut, how will you make it up in the coming years in a guaranteed fashion, as part of my contract ? ( most will not initiate this so you must). What happens to this if fund gets extended as you aim for higher IRR to make more carry ?   This is extremely critical as you need to be made whole. Why ?   Because, the Founder Partner(s) earns most of the carry ( nearly 70% + in most cases - more on this in my next post) as also holds the decision button on exits and thus, has every temptation to keep waiting for the "right time to exit" while your sacrificed salary is piling up with no end in sight. #careers #transparency #venturecapital #culturematters

Thoughtful detailed explanation of the VC and money equation. ..like I say God is in the details.. #vc #investment #fund #career #pe #startupmonk

🚨NEW PAPER🚨 Private equity has become a significant player in corporate acquisition and restructuring in the UK and globally. But what impact does private equity have on productivity? Find out: https://lnkd.in/e-7h3is5 In this paper, University of Glasgow Adam Smith Business School's Paul Lavery and John Tsoukalas, and Leeds University Business School's Nick Wilson compare private equity transactions and data on no-private equity-backed firms to study the impact of private equity funding and ownership on firm-level productivity. #productivity #firms #privateequity 

Learn how a career in private equity can significantly increase your earning potential. Read more on our blog!

What makes a business productive? #Innovation, better #management, and investment in #technology and #people. Something which #privatecapital investors do in spades. So I am excited to share the The Productivity Institute's latest research exploring the relationship between private equity financing and #productivity, published last week using a comprehensive UK dataset. The report underscores the pivotal role #privateequity plays in shaping our #economy, shedding light on its impact and capacity to drive #businessgrowth. Key takeaways: 1.     Private equity-backed firms experience a significant productivity boost after acquisition 2.     Higher productivity persists even after private equity investors exit 3.     Private equity-backed firms have been more resilient during times of economic downturn i.e. during a global financial crisis and Covid-19 An important contribution to the literature from Dr Paul Lavery, Chair of the British Private Equity & Venture Capital Association (BVCA) Research Advisory Group, who co-authored the report with Dr John Tsolkas and Professor Nick Wilson. You can read the full report here - https://lnkd.in/e7nScXMh #research #productivity #data Karim Palant Michael Moore Juliette Gerstein James Gribben Sarah Adams Isobel Clarke Tom Taylor Martin Senk Ewa Skornas Hind Jbala Adèle YanLun Leon de Bono Laura West

- Why Myopic MBA-led Private Equity Firms Must Change in 2024 - The 1980s saw the rise of the leveraged buyout (LBO) specialists. Backed by wealthy families and fueled by deregulation, these Private Equity (PE) firms targeted struggling companies. Armed with Ivy League MBAs, they'd swoop in, slash costs often through layoffs, and squeeze profits before a quick resale. This ruthless approach to corporate turnaround defined PE for decades. Their mercenary and inhumane company culture was notorious. However, the focus has shifted towards Value Creation, with firms now seeking to invest in companies with long-term potential and working alongside management to unlock growth. According to McKinsey, bridging the gap in value creation within the PE sector is paramount for sustainable growth and success. By implementing strategic measures and leveraging innovative approaches, PE firms must now enhance their portfolio company's overall value. This involves optimizing operational efficiency, exploring new market opportunities, and fostering strong relationships with key stakeholders. Research has shown that companies with a robust value creation strategy will outperform their status-quo competitors. Embracing continuous improvement and adapting to market trends are key factors in closing this value creation gap. However, this change requires new growth-oriented leadership and business operational talent to foster new ideas and innovations. That's why uplifting change management practices must become the new PE ethos. #PrivateEquity #Culture #ValueCreation #ChangeManagment #Leadership

Day 5 : Sharing financial learnings Finance students aspiring an IB role or doing one are usually perplexed about career opportunities after getting into IB. So this post is for all if them as I’ve explored Exit Opportunities from Investment Banking- Investment banking offers a wealth of exit opportunities that can shape a dynamic and rewarding career path. Let's break down the key options and understand why they are so appealing. 1. Private Equity (PE): - What is it? PE firms specialize in leveraged buyouts, where they acquire majority stakes in companies using significant debt. - Why is it attractive? The hands-on role in transforming companies and the lucrative compensation structure make PE a top choice. 2. Hedge Funds: - What is it? Hedge funds invest in public securities, aiming for high risk-adjusted returns. - Why is it appealing? The diverse strategies, such as long-short investing and arbitrage, offer a thrilling and intellectually stimulating environment. 3. Venture Capital (VC): - What is it? VC firms invest in early-stage startups with high growth potential. - Why choose VC? The excitement of backing the next big innovation and the possibility of achieving massive returns are significant draws. 4. Growth Equity: - What is it? Growth equity firms invest in late-stage, high-growth companies. - Why is it interesting? You can help companies expand and prepare for an IPO, witnessing and contributing to their success. 5. Real Estate Private Equity (REPE): - What is it? REPE firms focus on acquiring, developing, and improving properties. - Why opt for REPE? The tangible nature of real estate and the strategic improvements you can make provide a unique satisfaction. Other Opportunities: - Corporate Development: Work within a corporation to drive strategic growth. - Startups/Entrepreneurship: Apply your skills to build something from the ground up. - FP&A (Financial Planning & Analysis): Influence a company's financial strategy and planning. How do you prepare for these transitions? Gaining relevant experience, networking, and understanding the specific skills required for each role are crucial steps. Remember, each path offers unique challenges and rewards. Which one aligns best with your career aspirations? Investment banking is just the beginning of a journey filled with diverse and exciting career paths. Each option offers unique challenges and rewards, allowing you to find the perfect fit for your skills and interests. 🌟 #InvestmentBanking #CareerPath #PrivateEquity #HedgeFunds #VentureCapital #GrowthEquity #RealEstate #CareerGrowth

Interesting piece for all professionals interested in private equity.