Private Equity
Private equity (“PE”) is an established industry sector within financial services, pursuing its own strategic objectives while also playing a key role in the development of other financial sub-sectors, as well as non-financial industries. Private market managers have enjoyed robust growth fueled by different factors, including reduced risk appetite amongst banks and investors’ search for yield in a prolonged cycle of low interest rates in the public / liquid markets. M&A is central to the business model of PE, as investment portfolios are built and realized over time, and PE-owned portfolio companies themselves often pursue buy & build strategies of their own. Consolidation is ongoing both at the parent level among PE firms, and at the level of their respective portfolio companies:
- Consolidation amongst GPs / PE firms as they seek to gain AuM scale or broaden geographical footprint, and / or seek operational efficiencies
- Diversification into other asset classes, expanding the product range either organically or by acquisition (e.g., into private credit, real estate, and/or infrastructure), thereby evolving from dedicated PE firms into more broadly based alternative asset managers
- PE traditionally plays a key role in the development of early-stage financial innovators (e.g., FinTech / InsurTech), as well as distressed or turnaround situations amongst established financial institutions (e.g., bailouts / restructurings during market crises)
- Whether within or outside the financial sector, the quest for attractive returns as expected by their investor base tends to direct the engagement of PE toward either the high-growth (e.g., Tech-enabled) segments of any industry, and / or restructuring opportunities with commensurate operational and financial upside