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Central Europe buyouts: a surprisingly big opportunity | Robert Knorr, MidEuropa | Ep 56

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.

#privateequity #investment #centraleurope #sustainableinvestment #emergingmarkets #businessgrowth #economicdevelopment #venturecapital #digitaltransformation #infrastructure #telecom #consumergoods #HealthcareInvesting #poland #techinvestments

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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:

Katie Mitchell

katie@linearb.media

Linear B Group

Etienne Deshormes, Secondaries, Fund Shack

Private equity secondaries: everything you need to know, with Etienne Deshormes

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.

#PrivateEquity #SecondaryMarket #LiquiditySolutions #PrivateMarkets #InvestmentBanking #FinancialCrisis #DenominatorEffect #ContinuationFunds #InvestmentStrategies #Fundraising

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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:

Katie Mitchell

katie@linearb.media

Linear B Group

Chris Field, Dechert, Fund Shack podcast

Private equity gets defensive: a global lawyers perspective

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.

#PrivateEquity #MergersAndAcquisitions #InterestRates #Fundraising #GPStakeSales #ValuationGap #DealStructures #RegulatoryCompliance #LiquiditySolutions #InnovationInFinance #Podcast #BusinessPodcast  #FinancePodcast #Entrepreneurship #ThoughtLeadership 

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Fund Shack is a private equity podcast and global media channel for alternative investment professionals.

If you are interested in appearing on the show, wish to propose a client, or are interested in sponsorship, contact:

Katie Mitchell
katie@linearb.media

Stephane Bacquaert

Private equity in Africa. A conversation with Stephane Bacquaert

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.

#PrivateEquity #AfricaInvestment #ImpactInvesting #ESG #VentureCapital #InvestmentStrategies #EmergingMarkets

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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

Henry Freeman, The Fund Society, Fund Shack

Repackaging private equity, with Henry Freeman

Private equity fund managers are racing to find structures that will allow small private investors to invest with them. Meanwhile governments are introducing ELTFI and LTAF structures to encourage retailisation. Henry Freeman has been working at the nexus of public and private equity for two decades. And he has concerns.

Henry is founder of the Fund Society, an insight aggregator for investors, launching imminently. Sign up here for free and be among the first to benefit: https://thefundsociety.com/

An in-depth discussion with Henry Freeman, a seasoned investment manager and founder of the Fund Society. The conversation covers private equity’s accessibility to mass markets, the evolution of investment structures, and the launch of the Fund Society.

Key Highlights

Henry’s Journey: Henry Freeman has a diverse background in public and private investment markets, fintech entrepreneurship, and investment trust board membership. His career includes roles at Lloyds Private Bank, Foresight Partners, and Liberum, showcasing his extensive experience in managing and structuring investment funds.

Investment Strategies:

  • Semi-Liquid Structures: Emphasis on creating investment vehicles like LTIFs and ELTs that offer some liquidity while maintaining the benefits of private equity.
  • Commitment Focus: The critical role of commitment in private equity, arguing that commitment is a feature rather than a bug, essential for achieving the high returns associated with private equity investments.
  • Public-Private Hybrids: Development of funds that invest in listed private equity firms, providing liquidity and accessibility while capturing private equity’s growth potential.
  • Risk Management: Approaches to managing liquidity risk, including the potential for forced asset sales during market downturns and the implications for fund performance.

Market Dynamics:

  • Historical Discounts: Analysis of historical opportunities in listed private equity during the 2008 financial crisis and recent market conditions, highlighting significant discounts to net asset value (NAV) and the impact on investor returns.
  • Current Opportunities: Examination of current market conditions post-COVID, with a focus on identifying value in listed private equity and the potential for significant returns as market conditions stabilize.

Challenges and Opportunities:

  • Scalability Issues: Discussion on the scalability of closed-end fund structures versus open-ended vehicles, emphasizing the challenges and potential solutions for scaling private equity investments.
  • Mis-Selling Risks: Concerns about the risks of mis-selling private equity products to retail investors, particularly with open-ended structures that may not align with the traditional private equity investment model.
  • Technological Integration: The potential for leveraging technology, such as tokenization, to streamline the transfer and management of private equity interests, enhancing liquidity and accessibility.

Fund Society:

  • Platform Overview: Introduction to the Fund Society, an online hub for investment professionals, providing curated intelligence-based content, news aggregation, and thought leadership.
  • AI Integration: Use of AI and large language models to curate and prioritize content, ensuring relevance based on market trends and news events.
  • Community Building: Efforts to build a community of investment professionals, facilitating knowledge sharing and networking opportunities across asset classes.

#PrivateEquity #InvestmentStrategies #FundSociety #MarketDynamics #Commitment #InvestmentProfessional #LTIF #ELT

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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

Daniel Zwirn, Arena Investors on Fund Shack private equity podcast

Avoiding moral hazard in private markets, with Daniel Zwirn

Daniel Zwirn is CEO of Arena Investors LP. In this episode of the Fund Shack private equity podcast, he talks to Ross Butler about the opportunities in private markets, and how to prosecute them in a way that truly aligns incentives with underlying investors.

Key higlights

  • Arena Investors’ Philosophy:
    • Historical Best Practices: Arena is inspired by successful financial models dating back to the 1600s, focusing on strategies from the Rothschilds, global grain traders, and Asian merchant houses.
    • Moral Hazard Prevention: Prioritizing structural advantages where Arena’s scarce resources (capital) are needed, reducing the risk of moral hazard.
  • Investment Strategies:
    • Cyclical and Opportunistic Investing: Identifying and exploiting cyclical opportunities across various sectors and geographies, avoiding overreliance on a single strategy.
    • Regulatory and Structural Arbitrage: Taking advantage of inefficiencies and regulatory differences across markets, providing a unique edge in capital deployment.
  • Market Dynamics and Opportunities:
    • Global Macroeconomic Trends: Analyzing the impact of QE, fiscal policies, and inflation on asset bubbles and market corrections, and strategically positioning investments accordingly.
    • Sector-Specific Strategies: Focused on distressed assets, special situations, and high-value sectors like real estate, structured finance, and commercial lending.
  • Operational Complexity:
    • Global Multi-Strategy Approach: Operating across North America, Europe, and Asia with a diversified portfolio including corporate, real estate, and structured finance.
    • Joint Ventures: Leveraging over 50 joint ventures worldwide for deep domain expertise, aligning interests, and maintaining variable cost efficiency.
  • Ethical and Social Responsibility:
    • Social Utility Investments: Focusing on investments that provide social benefits, such as healthcare and rehabilitation centers, while maintaining high returns.
    • Consistent Ethical Framework: Avoiding trends like greenwashing, with a focus on long-term ethical investment practices.

Daniel Zwirn highlights the importance of a disciplined, ethical approach to alternative investments, focusing on long-term value creation and strategic flexibility. His insights provide a comprehensive understanding of navigating private markets amidst evolving economic conditions.

#PrivateEquity #InvestmentStrategies #MoralHazard #MerchantBanking #ArenaInvestors #MarketDynamics

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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

Private equity history, Hans Lovrek

Hans Lovrek on private equity’s ancient precedent

Hans Lovrek stumbled on Medieval Florentine documents that showed structures were being used to align interests in ventures with high information asymmetry that were uncannily similar to today’s limited partnerships.

Through a method of historical institutionalism, Hans demonstrates how the same techniques have been used to solve similar problems, down the ages, and that today’s private equity industry is based on ideas that successful trading nations have used before.

This episodes was recorded in March 2019 and is released on podcast for the first time in December 2023.

Medieval Foundations of Modern Private Equity – Hans Lovrek on Fund Shack’s Private Equity Podcast

Hans Lovrek, Founder of Commenda Private Equity uncovers the historical foundations of modern private equity by analyzing medieval Florentine documents, revealing structures similar to today’s limited partnerships. His method of historical institutionalism demonstrates how successful trading nations historically addressed information asymmetry, influencing contemporary private equity practices.

Historical Parallels:

  • Medieval Commenda and Modern LPs: Lovrek discovered that medieval commenda contracts from the 6th to the 14th centuries share striking similarities with today’s limited partnerships (LPs), highlighting features like profit sharing, limited liability, and limited duration.

Structural Analysis:

  • Profit Sharing: Medieval contracts typically had a 25% profit share for the general partner (GP), akin to the 20% carried interest in modern private equity.
  • Limited Liability: Essential for allowing families and other investors to participate without risking their entire fortunes.
  • Duration: Projects were financed for specific ventures (e.g., sea voyages) with fixed terms, similar to the ten-year lifespan of modern funds.

Regulatory Influence:

  • Role of Regulation: Increased regulation in Venice facilitated the rise of commenda contracts by providing a framework that reduced moral hazard and ensured fairness, leading to a thriving venture investment environment.
  • Comparison to Modern Regulation: The historical necessity of regulation for venture success parallels modern regulatory practices, suggesting that a codified international structure could simplify private equity investments.

Due Diligence and Moral Hazard:

  • GP Clawback: Medieval practices included mechanisms to ensure GPs returned excess profits if investments later underperformed, a concept still relevant today.
  • Challenges of Information Asymmetry: Both medieval investors and modern LPs face similar challenges in monitoring GPs and ensuring aligned interests.

#PrivateEquity #HistoricalInstitutionalism #LimitedPartnerships #Commenda #VentureFinance #MoralHazard

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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

Yaron Valler on the Fund Shack venture capital podcast

A deep tech VC on the state of innovation

Yaron Valler is a founder of venture capital firm Target Global. He is a successful entrepreneur and investor, and was part of the team at Intel that invented the Pentium Processor. In this episode of the Fund Shack podcast, he talks to Ross Butler about how AI will change ‘everything’, virtual reality, how government’s should direct innovation and risk capital, and much more.

AI and Innovation in Venture Capital – Yaron Valler on Fund Shack’s Private Equity Podcast

Yaron Valler, Founder of Target Global discusses the transformative potential of AI, its applications across industries, and the role of governments in directing innovation and risk capital. Drawing from his background, including developing the Pentium processor at Intel, Valler provides insights into how AI will revolutionize sectors like healthcare, finance, and agriculture, and emphasizes the importance of strategic government investment to foster technological advancement.

Key Highlights:

AI’s Transformative Potential:

  • Widespread Impact: AI will profoundly affect various industries, including healthcare, finance, agriculture, and manufacturing.
  • AI Applications: From medical diagnostics to real-time tax classification, AI promises significant advancements in efficiency and capability.
  • Pattern Recognition and Innovation: AI excels in pattern recognition and generating new content, revolutionizing tasks like email composition and medical image analysis.

Large Language Models (LLMs):

  • Valuation Challenges: Overvaluation of LLM infrastructure could lead to market crashes. It’s crucial to evaluate LLMs based on their real-world applications and market potential.
  • Decentralization Potential: While AI might centralize around major providers, localized LLMs could also proliferate, allowing more decentralized AI applications.

Government’s Role in Innovation:

  • Strategic Investment: Governments should strategically direct investments to address inefficiencies and foster tech proliferation, particularly in underserved regions.
  • Public-Private Partnerships: Examples like Germany’s public-private tech initiatives highlight the benefits of collaborative investment in fostering innovation and regional economic growth.

Investment Trends and Future Technologies:

  • Augmented Reality and Quantum Computing: Valler is excited about the potential of augmented reality in daily life and the revolutionary impact of quantum computing on various industries.
  • Geographic Focus: Target Global is exploring investments in regions like Africa and the Arab world, recognizing their potential for significant tech-driven growth.

Yaron Valler’s insights emphasize the vast potential of AI to transform industries and highlight the strategic role of government in fostering innovation through targeted investments. His experience underscores the importance of evaluating AI technologies based on their real-world applications and long-term market potential.

#privateequty #AI #Innovation #VentureCapital #LLMs #GovernmentInvestment #TechProliferation

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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

Sanjay Panchal, Livingbridge, private equity podcast

Prosecuting a mid-market healthcare strategy, with Livingbridge

Sanjay Panchal is a partner at Livingbridge, a leading international growth capital investor, where he specialises in healthcare. In this episode he speaks to Ross Butler about the opportunities for private equity investors across the healthcare sector.

Investing in Healthcare – Sanjay Panchal on Fund Shack’s Private Equity Podcast

Sanjay Panchal, Partner at Livingbridge discusses the dynamics and opportunities in the healthcare sector from an investor’s perspective. He explains how Livingbridge focuses on thematic investing, identifying long-term trends like aging populations and technology adoption. Sanjay emphasizes the importance of improving healthcare outcomes and the role of private equity in driving innovation and efficiency in the sector.

Key Highlights:

Healthcare Investing Approach:

  • Thematic Investing: Identifying key growth trends and focusing on businesses driving change in healthcare outcomes.
  • Mid-Market Focus: Investing in UK mid-market businesses and helping them scale, targeting areas with growth rates significantly above GDP.

Investment Philosophy:

  • Outcome-Driven: Partnering with businesses focused on improving healthcare outcomes, believing that commercial success follows quality care.
  • Employee Focus: Emphasizing the importance of recruiting and retaining skilled staff, crucial for sustainable healthcare businesses.

Service vs. Capital-Intensive Businesses:

  • Service Models: Primarily investing in service-oriented businesses, including technology services, rather than capital-intensive sectors like hospitals.
  • Examples: Investments include businesses like Helping Hands (home care services) and Nourish Care (digital record management for elderly care homes).

Changing Healthcare Trends:

  • Ten-Year Truths: Identifying long-term trends such as aging populations and shifts in care from hospitals to the community.
  • Technology Adoption: Significant focus on healthcare technology to improve service delivery and patient outcomes.

Life Sciences and Biotech:

  • Complex Drug Pipelines: Trends towards more specific, complex drug developments targeting smaller patient populations.
  • Outsourcing in Pharma: Increasing reliance on third-party providers for drug discovery, clinical trials, and commercialization.

Geographic and Sector Focus:

  • International Presence: Investments in various geographies, including the US and Australia, with a focus on scalable, specialized healthcare services.
  • Consumer Healthcare: Noting a shift towards greater consumer control and visibility over health, though the private pay sector still has growth potential.

Sanjay Panchal’s insights highlight Livingbridge’s strategic approach to healthcare investing, emphasizing thematic investing, improving healthcare outcomes, and leveraging technology. The firm focuses on scalable service models and recognizes the critical role of private equity in driving innovation and efficiency in the healthcare sector.

#HealthcareInvesting #PrivateEquity #ThematicInvesting #HealthcareOutcomes #LifeSciences #HealthcareTechnology

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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

Marcus Maier-Krug, Arcmont, Fund Shack private equity podcast, private credit

Where next for private credit?

Marcus Maier-Krug is partner and co-head of portfolio management at Arcmont. He has been working in private credit since before the global financial crisis. 

In this episode, recorded in November 2023, we discuss what constitutes alpha in private credit, what it’s attractions are as an asset class, whether it can retain the market share it has taken from the traditional banking world, the different mindset and culture of private credit lenders vis a vis their borrowers, and much more…

Understanding Alpha in Private Credit with Marcus Maier-Krug

Marcus Maier-Krug, Partner and Co-Head of Portfolio Management at Arcmont discusses the evolving landscape of private credit, emphasizing its resilience and adaptability in volatile markets. He outlines the distinctive attributes of private credit, the sector’s growth, and how it competes with traditional banking. He also touches on Arcmont’s strategies and the broader market dynamics.

Key Highlights:

  • Private Credit Overview:
    • Bespoke Financing: Private credit offers tailored financing, often handled by a few funds, unlike syndicated bank loans.
    • Range of Products: Includes senior secured deals, unitranche, subordinated debt, and equity co-investments.
  • Market Dynamics:
    • Volatility and Adaptation: The last 10-12 months saw significant market volatility, impacting portfolios and origination.
    • New Opportunities: Liquid market substitution deals have emerged, offering new avenues for private credit.
  • Deal Size and Structure:
    • Upper Limits: Typically, private credit deals range up to €1.5 billion. Larger deals may require a combination of private credit and syndicated loans.
    • Global vs. Regional Differences: The US market sees more clubbed deals compared to Europe’s preference for smaller clubs or sole deals.
  • Deal Flow and Quality:
    • Declining Volumes, Higher Quality: Despite overall deal volumes dropping, the quality of deals has improved.
    • Less Competition: Struggles in fundraising and portfolio management for smaller players have reduced competition for larger funds like Arcmont.
  • Process and Terms:
    • Extended Timelines: Deal processes are longer, with more involvement from sponsors and management teams.
    • Due Diligence: Combines vendor information, buyer analysis, and independent verification to ensure deal legitimacy.
  • Current Market Environment:
    • Improved Terms: Higher interest rates and economic pressures have led to better pricing and more conservative financial structures.
    • Portfolio Management: Active management and restructuring are crucial to handle economic stresses.
  • Alpha in Private Credit:
    • Investment Mindset: Focus on managing downside risks and building strong relationships with borrowers.
    • Cultural Approach: Arcmont emphasizes a deep investment culture, involving the entire team in decision-making processes.
  • Attractiveness of Private Credit:
    • Inflation-Hedged: Floating rate investments provide protection against inflation.
    • Better Control: Private credit offers better documentation, covenants, and control over outcomes compared to liquid markets.
  • Future of Private Credit:
    • Growth Potential: The sector is expected to grow, with new opportunities arising from market dynamics.
    • Consolidation: Larger funds will likely continue to dominate, benefiting from economies of scale and deeper resources.

Marcus Maier-Krug highlights the strategic advantages of private credit, emphasizing its flexibility, better terms, and deeper market penetration. He underscores the importance of relationship-building and active portfolio management in achieving alpha.

#PrivateCredit #InvestmentStrategies #Arcmont #Alpha #MarketDynamics

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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