Dechert in a recent webinar outlined a rosy global outlook for private equity in the coming year.
The general sense among the participants was that private equity is enjoying post-pandemic momentum, and that there is little sign that this momentum is going to let up.
What are the facts behind the momentum? Corporate governance reforms and rising shareholder activism have generated a wave of announcements about businesses being restructured, and boardroom seats being reshuffled. This has generated opportunities for private equity funds in take-privates and divestitures.
One very high-profile example was CVC Capital Partners’ effort to acquire Toshiba in April in a $20 billion deal. In 2018, pre-Covid, Toshiba had sold its memory business unit to Bain Capital for $18 billion. The CVC offer for Toshiba came after scandals had hit the company and activist shareholder Effissimo Capital had demanded an investigation into management practices.
The CVC/Toshiba deal did not close. But other analogous deals are closing, such as Blackstone’s $2.3 million buyout of Takeda Consumer Healthcare. This was a carve-out of the over-the-counter subsidiary of Takeda Pharmaceutical.
Although healthcare and consumer goods deals are plentiful, the hottest section, the speakers at Dechert’s seminar agreed, is technology, media & telecoms (TMT). In APAC, 43% of the deal value for the first three quarters of 2021 was in TMT.
Early on in the Dechert webinar, Jérôme Nommé , KKR Partner and head of France, highlighted what he sees as the main reason why firms like KKR have been expanding of late into new asset classes, such as real estate, infrastructure, and private credit.
Nommé said that “on a daily basis on the ground” there has been a change in how KKR interacts with its partners. KKR is constantly talking to them about “what your needs will be.” Its ability to invest across all capital strategies is key to those conversations.
In the growth equity field, Nommé said later, “Often we don’t have an intermediary — we network with founders, we’re dealing with founders.” That differs from their past practice.
He also made the point that since KKR’s investing is both global and thematic, particular teams devoted to ESG and tech can be “used as resources across asset classes.”
Christopher Field, Dechert’s co-chair of the private equity practice, observed that 2022 will be “a case of know and trust.” In the present environment “the default is to go to your trusted provider” especially if that trusted provider of financial services can provide bespoke solutions.
When asked where the traditional banks fit into the picture for the years to come, Field replied that banks are still in the mix, in scaling up and where a target needs a revolver capacity. “Banks can be helpful,” he added.