Jim Strang, serial private equity NXD and chairman of Hg Capital Trust, discusses the complexities of the private equity landscape on the Fund Shack podcast.
Fundraising and Market Dynamics: Market Polarization: Large platforms and top-performing specialists continue to raise significant capital, while mid-sized players face extended fundraising cycles.
Liquidity Challenges: Investors are managing overexposure from the 2021 boom, causing liquidity issues across different regions.
GP Strategy and Growth: Clear Ambitions: GPs focus on defining clear ambitions and achieving team alignment.
Strategic Growth: Balancing ambition with operational capacity, strategies range from maintaining a single focus to expanding into adjacent areas through M&A.
Wealth Market and Semi-Liquid Structures
Growing Market: Wealth market growth through semi-liquid structures designed for high-net-worth individuals.
NAV-Based Exposure: These structures offer accessible entry points for private market investments, requiring careful liquidity management.
ESG and Cybersecurity: Central to Strategy: ESG considerations driven by investor demand and talent acquisition needs.
Top Risk: Cybersecurity remains a top risk, with firms prioritizing mitigation measures to protect portfolios.
Thank you to our episode partner Quest Fund Placement.
The firm recently launched QuestInvest, the digital hub and gateway to alternative assets that connects accredited investors with leading GPs.
Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group and if you are interested in appearing on the show, wish to propose a client, or are interested in sponsorship, contact:
Sunaina Sinha, Global Head of Private Capital Advisory at Raymond James, talks to Ross Butler about the challenges of raising private capital funds in today’s market. Tl:dr – it’s not easy.
This episode is supported by Datasite, the leading M&A platform for dealmakers. https://www.datasite.com/en
Fundraising cycles have extended to 22-23 months on average, reflecting the challenging environment. Firms must offer co-investments, fee discounts, and management fee holidays to attract investors. The tenor of fundraising conversations has shifted, with private equity firms needing to provide various incentives to secure commitments.
We cover dry powder, the rise of co-investments, and the influence of Middle Eastern and private wealth in the market.
2023 was marked by significant challenges due to a liquidity squeeze and reduced exit activities.
This environment has been tough for institutional limited partners, leading to a shift in investment metrics. (i.e. DPI is the new IRR)
Rise of Co-Investments
How investors are leveraging their power to demand fee-free co-investments.
Sector Focus: Private Credit and Infrastructure
Private credit is booming due to bank pullbacks and high-interest rates, while infrastructure investments are attractive due to their tangible nature and inflation resistance.
Thank you to our episode partner Datasite, the leading M&A platform for dealmakers.
Contact Information: About Fund Shack: Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group. Contact: Katie Mitchell Email: katie@linearb.media Company: Linear B Group
Ross Butler hosts Patrick Turner, Managing Director at VSS Capital Partners, a US-based lower mid-market private equity firm founded in 1981, originally named Veronis Suhler Stevenson. Patrick joined VSS in 2014, bringing a wealth of experience from his extensive career in leveraged buyouts in the US, and private equity in China. VSS focuses on the US lower mid-market, specifically targeting three verticals: education, healthcare, and outsourced business services with a technology angle. VSS’s approach to structured capital, which includes debt, preferred equity, and equity, tailored to the needs of founders looking to grow their businesses without giving up control. This strategy allows VSS to be competitive and less dilutive compared to traditional growth capital.
Key Highlights:
VSS focuses on the US lower mid-market, specifically targeting three verticals: education, healthcare, and outsourced business services with a technology angle. VSS’s approach to structured capital, which includes debt, preferred equity, and equity, tailored to the needs of founders looking to grow their businesses without giving up control. This strategy allows VSS to be competitive and less dilutive compared to traditional growth capital.
Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group and if you are interested in appearing on the show, wish to propose a client, or are interested in sponsorship, contact:
Fatou Diagne is co-founder of Bootstrap Europe, which acquired the German portfolio of Silicon Valley Bank in 2023. The discuss is a fascinating insight into the elite world of lending to the top tier of venture-backed businesses.
This episode also features our supporters, RW Blears, a UK law firm specialising in fund management. If you are a UK venture capital manager or growth investor and need a trusted legal adviser, visit https://blears.com/
In this episode of the Fund Shack podcast, 🎙️ Ross Butler interviews Fatou Diagne, co-founder of Bootstrap Europe. Fatou offers a compelling look into the world of venture debt, focusing on its role in funding high-growth technology businesses and its strategic advantages compared to traditional equity financing.
Key Highlights:
Introduction to Venture Debt: Fatou Diagne explains that Bootstrap Europe provides debt funding to technology companies that have already received substantial equity investment. These companies are usually 5 to 7 years old, generating revenues of 5 to 20 million euros, and are backed by top-tier venture capital funds.
Target Companies: Bootstrap Europe targets mature technology companies that have a proven growth formula but prefer not to dilute their equity further. The firm focuses on sectors like semiconductors, life sciences, and energy transition, seeking to support technologies that can significantly impact society.
Venture Debt is way cooler than you think! Fatou clarifies that venture debt is often misunderstood. It is not a last resort for companies that cannot raise equity; instead, it is a strategic choice for well-capitalized companies looking to accelerate growth without further dilution.
Deal Flow and Timing: Bootstrap Europe follows potential investment opportunities for several years, waiting for the right inflection point to provide growth debt. The firm typically invests after one or two rounds of equity funding, although this can vary.
Benefits for Companies: The main advantage for companies using venture debt is the avoidance of dilution. Founders and early-stage investors can maintain larger stakes in the company, enhancing their returns upon exit.
Terms of Venture Debt: The terms are transparent, with interest rates typically around 8-10% over the base rate. The debt is repaid over 3-4 years, with monthly payments of interest and principal.
Bootstrap Europe’s Approach: The firm emphasizes a strong relationship with portfolio companies, focusing on providing support during both good and challenging times. They prefer to work closely with management teams to navigate growth and financing challenges.
Acquisition of Silicon Valley Bank’s German Portfolio: In 2023, Bootstrap Europe acquired the German portfolio of Silicon Valley Bank. Fatou discusses the strategic and operational steps taken to complete this acquisition, emphasizing the importance of speed and expertise.
Current Market Conditions: Fatou comments on the impact of global economic challenges on the tech sector, noting that while the market has cooled, there are still many high-quality investment opportunities. She highlights the importance of well-capitalized companies that can navigate difficult conditions to gain market share.
Future Growth and Challenges: The discussion touches on the growth potential of venture debt in Europe and the challenges of increasing market penetration. Fatou believes that with more education and understanding, venture debt can become a more prominent part of the funding landscape.
Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group and if you are interested in appearing on the show, wish to propose a client, or are interested in sponsorship, contact:
Mike Smeed is managing director of InMotion Ventures, the corporate venturing arm of Jaguar Land Rover.
In this episode of the Fund Shack podcast, he speaks to Ross Butler about what the company looks for in start-up candidates and the rapidly evolving nature of corporate venture capital.
Mike the Managing Director of InMotion Ventures, the corporate venture capital (CVC) arm of Jaguar Land Rover (JLR). Mike discusses his career background, including roles at a Shanghai-based joint venture and Walgreen Boots, and delves into the unique aspects of CVC compared to traditional venture capital (VC).
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Key Highlights:
Corporate Venture Capital (CVC) vs. Venture Capital (VC):
Similarities: CVC and VC both perform due diligence, focus on valuation and metrics, and aim for strategic investments.
Differences: Historically, CVCs were viewed skeptically due to fears of corporate overreach. Modern CVCs have adopted VC professionalism and often invest off their parent companies’ balance sheets, with some even taking external capital.
Role of InMotion Ventures:
Strategic Focus: InMotion Ventures aims to accelerate innovation and support JLR’s strategic transformation, especially in areas like climate, industrial, and enterprise technologies.
Investment Approach: Unlike many CVCs, InMotion invests in early-stage startups (seed to Series A) to add significant value to both JLR and the startups.
CVC Evolution:
Professionalization: Many CVCs now operate with the same rigor as traditional VCs, including thorough background checks and strategic valuations.
Integration with Parent Companies: CVC leaders often come from within the parent company, blending corporate insight with investment acumen.
Strategic Mandate:
Innovation and Collaboration: InMotion Ventures aims to help JLR achieve carbon neutrality by 2039 and focuses on technologies critical to this transformation.
Partnerships: The firm prefers co-investing and does not lead funding rounds, maintaining about a 5% equity stake to ensure active involvement without overwhelming influence.
Investment Justifications:
Ecosystem Access: Being an active investor attracts other investors and startups, facilitating ecosystem engagement.
Innovation and Speed: Investing in startups accelerates innovation and market readiness, providing JLR with early access to cutting-edge technologies.
Capital Efficiency: Strategic investments leverage larger rounds by financial VCs, maximizing impact with relatively small contributions.
Success Stories and Examples:
Investments: Mike discusses successful investments, such as in companies developing head-up displays and augmented reality technologies.
Collaboration with Competitors: InMotion Ventures collaborates with other automotive giants like Volvo and BMW to co-invest in promising technologies.
Value to Startups:
Strategic Support: Startups benefit from JLR’s extensive resources, including engineering expertise and testing facilities.
Mutual Benefits: While InMotion seeks financial returns, the primary goal is strategic alignment with JLR’s broader goals.
The interview highlights the evolving landscape of CVC, emphasizing strategic partnerships, professional investment practices, and the mutual benefits of fostering innovation within large corporate structures. Mike underscores the importance of balancing financial returns with strategic goals to drive both corporate growth and startup success.
Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group and if you are interested in appearing on the show, wish to propose a client, or are interested in sponsorship, contact:
Foresight Group was a pioneer in renewable energy investment back in the 1990s. Today, it is a diversified investment group listed in London. Its founder and chairman, Bernard Fairman, talks to Ross Butler about
Its expansion into global infrastructure;
Why he favours hydrogen over electric, and
His plans to build out the firm’s UK venture investment arm into an international-regional growth equity franchise.
RW Blears: Our sponsor for this episode is RW Blears, a UK law firm specialising in fund management. If you are a UK venture capital manager or growth investor and need a trusted legal adviser, visit https://blears.com/
Fund Shack podcast, host Ross Butler interviews Bernard Fairman, the Executive Chairman of Foresight Group. Bernard discusses the evolution and growth of Foresight Group, a sustainability-led investment manager co-founded by Bernard in 1984 and listed on the London Stock Exchange in 2021. The conversation covers various aspects of the business, including infrastructure, private equity, and capital management.
Key Highlights:
Company Evolution:
Foresight Group started with a focus on venture capital but shifted to renewable energy infrastructure around 2006, foreseeing solar energy as the cheapest form of energy due to Moore’s Law.
The company now also focuses on hydrogen as the next significant step in the energy transition.
Private Equity Strategy:
Foresight Group has become one of the largest regional private equity players in the UK by partnering with local authority pension funds.
The company aims to invest in local businesses to create jobs and generate regional wealth.
Investment Approach:
The firm’s strategy includes investing in renewable energy projects and regional private equity deals.
Bernard emphasizes the importance of scale in renewable energy to drive down costs and the role of government policies in supporting industry growth.
Challenges and Opportunities:
Bernard discusses the competitive landscape of infrastructure investment and the convergence of private equity and infrastructure skills.
He highlights the massive opportunities in solar energy and the energy transition, predicting it to be a multi-trillion dollar industry.
Future Goals:
Foresight Group aims to significantly expand its infrastructure business and possibly enter international markets, starting with raising local funds before expanding further.
Market Insights:
Bernard provides insights into the challenges of electric vehicles, emphasizing the need for coherent government energy policies and the regressive impact of rapid transitions without proper planning.
Listing on the Stock Exchange:
The listing on the London Stock Exchange has increased the company’s visibility but has not been effective as an acquisition currency due to low market liquidity.
Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group and if you are interested in appearing on the show, wish to propose a client, or are interested in sponsorship, contact:
MidEuropa pioneered private equity buyout investing in Central Europe, launching in 1999. Robert Knorr has been a partner since 2007. He was recently awarded Private Equity Mid Market Leader of the Year at the Real Deals private equity awards for his pivotal role in investment in the region. In this podcast he talks to Ross Butler about opportunities from Poland to the Med, and a very big win in Romania with Profi.
Key Highlights
In this episode of the Fund Shack podcast, Ross Butler interviews Robert Knorr, Managing Partner at MidEuropa, to explore the firm’s pioneering role in private equity investment across Central Europe. MidEuropa, established in 1999, has become a key player in the region, transitioning from venture capital to buyout funds. The discussion highlights their strategic focus on sectors such as consumer goods, healthcare, and technology, emphasizing the importance of sustainability and digitalization in their investment strategies.
Private Equity and Buyout Funds: MidEuropa has been instrumental in shaping the private equity landscape in Central Europe. Their transition from venture capital to buyout funds has been a strategic move to capitalize on the region’s economic development and emerging markets.
Investment and Economic Development: The firm’s investments have significantly contributed to the economic transition and development of Central European countries, integrating them into the broader European Union market.
Sector Focus: MidEuropa targets consumer goods, healthcare, and technology sectors, areas that offer high growth potential and align with their strategic investment goals. Sustainability and Digitalization: Emphasizing sustainability, MidEuropa promotes energy transition and sustainable practices. They also leverage digitalization to enhance business services and operations.
Corporate Carve-Outs and Cross-Border Investments: The firm has successfully executed corporate carve-outs and cross-border investments, demonstrating their expertise in managing complex mergers and acquisitions (M&A).
Nearshoring: Leveraging the talent pool in Central Europe, MidEuropa facilitates nearshoring of services, providing cost-effective and high-quality business services.
Financial Returns and Investor Relations: The episode details MidEuropa’s approach to delivering strong financial returns and maintaining robust investor relations.
Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group and if you are interested in appearing on the show, wish to propose a client, or are interested in sponsorship, contact:
In this Fund Shack podcast with Ross Butler, Etienne Deshormes, founder of Elm Capital, reveals where the market for private equity secondaries is headed.
Key highlights
In this engaging episode of the Fund Shack podcast, 🎙️ Ross Butler interviews Etienne Deshormes, CEO of Elm Capital, to delve into the intricacies of the private equity secondary market. Elm Capital, founded in 2004 by Etienne after his career in investment banking at JP Morgan, specializes in providing liquidity to private market investors.
Private Equity Secondaries: Etienne Deshormes explains how the secondary market provides liquidity to an inherently illiquid sector. He outlines the development of the market from its early days in the 2000s when it was discreet and associated with distress sales, to its current, more accepted status.
Global Financial Crisis Impact: The 2008 financial crisis was a turning point for the secondary market. Etienne highlights how the crisis forced many LPs to seek liquidity solutions, leading to a surge in secondary transactions. This period marked the only time in his career when assets were sold at a 100% discount, underscoring the desperation for liquidity.
Liquidity Solutions: The discussion includes how the secondary market has evolved as a strategic tool for managing portfolios, not just in distress situations. Etienne notes the rise in the use of secondary transactions to handle overexposure and liquidity issues exacerbated by recent economic challenges such as inflation and rising interest rates.
Current Market Dynamics: Etienne describes the current market conditions, emphasizing the impact of the denominator effect and rising interest rates on private equity portfolios. He explains how these factors have increased the need for secondary transactions as a liquidity solution.
Denominator Effect: The podcast covers the impact of the denominator effect, where declines in public market values cause private equity allocations to exceed target levels, forcing LPs to sell stakes to rebalance their portfolios.
Continuation Funds: Detailed insights are provided into continuation funds, which allow GPs to manage assets beyond the typical fund life by selling them to new vehicles backed by secondary investors. Etienne discusses the evolution of continuation funds from being a last resort to a strategic option for managing high-quality assets and mature portfolios.
Investor Strategies: The podcast delves into how LPs and GPs navigate the secondary market to optimize their portfolios. Etienne discusses different strategies, such as selling single fund interests or entire portfolios, and the factors influencing these decisions.
Market Pricing and Discounts: Etienne explains how secondary market pricing works, particularly during downturns when discounts can be steep. He provides examples from 2022, where buyout funds were trading at significant discounts due to market conditions.
Role of Elm Capital: Elm Capital’s role in the secondary market is highlighted, including how they assist clients in finding buyers or sellers for secondary transactions. Etienne describes their integrated approach to serving both primary and secondary market needs.
Future Outlook: Etienne shares his outlook for the secondary market in 2024, predicting increased deal flow and a gradual recovery in pricing as public markets stabilize. He also discusses the long-term potential for the secondary market to become more mainstream as more investors recognize its strategic value.
Etienne Deshormes explains the evolution of the private equity secondary market, highlighting its importance as a liquidity solution for LPs. Initially met with reluctance, the secondary market gained traction post-2008, providing a necessary outlet during financial crises. Deshormes discusses the current market conditions, emphasizing the challenges posed by rising interest rates and the denominator effect. He elaborates on the mechanisms of continuation funds, their acceptance, and strategic importance in today’s market. The conversation also touches on the operational role of Elm Capital in facilitating these transactions and the future potential for technology to streamline secondary market processes.
Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group and if you are interested in appearing on the show, wish to propose a client, or are interested in sponsorship, contact:
With a deal drought across the global private equity industry, we talk to Chris Field of global law firm Dechert about what’s next for M&A and buyout deal flow for 2024. We discuss valuations and defensive deal structures as vendors and buyers find ways to come together.
Top quote: “I have never worked on an earn-out, ever, that has not resulted in some form of dispute.'”
In this Fund Shack podcast with Ross Butler, Chris reveals what it takes to make it as a top private equity lawyer.
Fund Shack Podcast Featuring Chris Field of Dechert
In this engaging episode of the Fund Shack podcast, 🎙️ Ross Butler interviews Chris Field, a partner at the global law firm Dechert, to discuss the current state of international private equity markets and the intricacies of private equity lawyering.
Highlights:
Market Sentiment and Interest Rates: Chris Field highlights the fluctuating sentiment in the private equity market, noting the anticipation of rate cuts and their potential impact on deal-making. He explains how interest rates have become the biggest challenge for private equity firms, affecting deal volume and value.
Deal Volume and Value: Despite a significant drop in deal volume and value over the past year, 2023 outperformed 2019 levels. Chris explains this apparent paradox, attributing it to the short-term memory of market participants and the exceptionally high activity levels in 2021 and early 2022.
Fundraising Trends: Chris discusses the bifurcation in the fundraising market, with capital being concentrated in large multi-strategy managers at the expense of smaller and newer funds. This trend is influencing the strategic decisions of private equity firms.
GP Stake Sales: A significant portion of private equity firms are considering selling stakes in their own businesses. Chris outlines various motivations behind these sales, including succession planning, liquidity injection, and bringing in external expertise to enhance the firm’s capabilities.
Valuation Gap and Deal Structures: The podcast explores the creative deal structures being employed to bridge the valuation gap between buyers and sellers. Chris highlights the increased use of deferred consideration mechanics, such as earnouts and vendor loan notes, to align the interests of both parties.
Regulatory Environment: Chris delves into the evolving regulatory landscape, focusing on antitrust scrutiny and foreign direct investment regulations. He explains how these factors are shaping deal-making strategies and the need for private equity firms to navigate complex regulatory requirements.
Private Equity Innovation: The discussion covers innovative liquidity solutions in the private equity space, including the rise of NAV facilities, collateralized fund obligations, and GP-led secondaries. These innovations are helping firms return liquidity to investors despite challenging market conditions.
Technological Impact: Chris touches on the role of technology in private equity transactions, particularly in the context of regulatory compliance and deal execution. He discusses the potential for AI and other technologies to streamline processes and improve efficiency.
Dechert’s Positioning: Chris outlines Dechert’s strategic positioning in the private equity market, emphasizing their global presence and expertise in complex transactions. He highlights the firm’s commitment to providing high-quality advisory services across various geographies and sectors.
Summary:
Chris Field provides a comprehensive overview of the current state of the private equity market, emphasizing the challenges posed by interest rates and the creative solutions being employed to navigate them. He discusses the evolving regulatory environment and the impact of technological advancements on deal-making. Dechert’s strategic positioning as a global leader in private equity advisory services is highlighted, showcasing their expertise in navigating complex transactions and regulatory landscapes.
Private equity is a great way of investing in uncertain, high growth environments. Strange then, that the African private equity industry is so small. In fact, Stephane Bacquaert of Adenia Partners argues that the Western, established private capital industry has systematically misunderstood the African opportunity, and in particular its risk profile.
In this Fund Shack podcast with Ross Butler, he talks about managing one of Africa’s largest control buyout funds, and the value that so many investors are missing out on.
Key Highlights:
Stephane’s Journey: Transitioned from strategy consulting to private equity in Africa, driven by personal connections and a desire to support African businesses. His initial venture failures led him to focus on supporting management teams through investment.
Investment Strategies: Emphasis on control buyouts and majority deals, which provide more influence over business outcomes. Investment decisions are driven by bottom-up analyses, focusing on companies with strong growth potential, robust management teams, and pricing power. Importance of being embedded locally to source and execute deals effectively, given the lack of structured deal flow and the necessity of relationship-based deal sourcing.
Market Dynamics: Africa’s high growth potential is driven by demographic trends, urbanization, and a burgeoning middle class. The continent’s economic fundamentals include rapid population growth, significant urban migration, and high GDP growth rates in several countries. These trends create opportunities in sectors such as consumer goods, retail, financial services, and infrastructure. Challenges include currency devaluation, regulatory complexities, and the need for infrastructure development.
Challenges and Opportunities: Navigating Africa’s complex regulatory landscape requires deep local knowledge and adaptability. Currency devaluation is a significant risk, necessitating investments in companies with strong local demand and pricing power. Building infrastructure is crucial, from establishing retail chains to upgrading production facilities.
Impact and ESG: Private equity investments in Africa have a profound impact on job creation and economic development. Adenia Partners focuses on improving ESG standards, such as transitioning companies to more sustainable practices and ensuring compliance with international environmental and social standards. Examples include the transformation of a retail chain in Kenya and the shift to water-based paints in East Africa. These efforts not only enhance business value but also attract international buyers and investors.
Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group. Contact: Katie Mitchell Email: katie@linearb.media Company: Linear B Group
