Private Equity Today: Hot or Overheating?

By Margarida Veloso

The PE industry has grown continuously over the past 5 years, making it one of the major topics of discussion in the marketplace. Is the PE industry able to maintain its current growth or is it approaching maturity? How will key PE players adjust to new market conditions? If you are interested in these topics, please join our panel “Private Equity Today: Hot or Overheating?” on May the 6th.

Snapshot of the PE Industry

The PE industry has now experienced uninterrupted expansion for 5 years running. In 2018, total deal value grew to its second highest level since the financial crisis.

Dry powder has grown in tandem with the broader industry since 2012. Levels summited in 2018 to $2 trillion, and continue to apply significant pressure on financial sponsors to deploy capital. This apparent oversupply of funding seems to be inflating deal multiples to historically high levels. In 2018, almost three quarters of large-cap LBOs in the US were levered at 6x EBITDA or more and over a third were levered at 7x or higher.

The increased level of competition in the PE industry has also reduced average returns relative to those in previous years. However, top-performing funds are still able to outperform the industry mean by relatively large margins.

The Future of PE

The general sentiment across the industry may be changing. The geopolitical and economic uncertainties experienced this year, coupled with substantial volatility in equity and debt markets, led to approx. half of PE professionals in Europe expecting an adjustment to the number of transactions this year. However, this may also represent an opportunity for financial sponsors to source new and innovative investment opportunities.

The future of the PE industry is both exciting and uncertain with some substantive issues to be addressed, namely:

  • Is capital overhang a problem?
  • What is the penetration of PE in the broader economy?
  • Are there sufficient potential targets for PE funds?
  • Can private equity as an asset class outperform public markets?
  • Is there still margin for growth in the industry or is it reaching its peak?

Panel – “Private Equity Today: Hot or Overheating?”

In order to address all these questions and many more, BSPEC has the pleasure of hosting a panel discussion moderated by Professor Stefano Caselli, Vice Rector for International Affairs at Bocconi University. The panel consists of high-profile professionals working within the PE industry and related fields:

  • Roberto Nicastro, European Senior Advisor at Cerberus. Cerberus was founded in 1992 and is a trusted partner to many investors in credit, private equity, and real estate. The company provides capital solutions and operating expertise to help companies create value.
  • Elisa Crotti, Associate Director at the Boston Consulting Group. Ms. Elisa Crotti leads the Principal Investors & Private Equity (PIPE) task force in Italy, Greece and Turkey. The PIPE task force focused on principal investors and private equity works alongside with leading companies to enhance fund strategy and operations.
  • Edoardo Andreoli, Partner at Chiomenti was founded in 1948 and is one of the most prominent law firms in Italy with an international outlook and with a major presence in the service of businesses and institutions.
  • Stefano Caspani, Investment Director at DeA Capital. DeA Capital is one of the largest independent Italian management company of private equity funds and a reference partner for private equity investments in Italy with € 2.4 billion of assets under management.

If you would like to hear more about this topic and are interested in the future of PE join us on May the 6th!

Editor: Eric Peghini

Author: Margarida Veloso

Sources:

https://corpgov.law.harvard.edu/2019/01/17/2018-private-equity-year-in-review/

https://www.bain.com/contentassets/f7daf9c1ab3f4dde850672597e82277f/bain_report_private_equity_report_2019.pdf

https://www.rolandberger.com/en/Publications/European-Private-Equity-Outlook-2019-PE-industry-less-optimistic-now.html

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