By Edouard Barret
(This conversation was translated from French)
Permira Advisers is an international investment firm founded in 1985 which operates in Europe, North America, and Asia, with 14 offices employing over 250 people worldwide. Permira cumulates over 30 years of backing growth, and currently has AUM of $7.5bn. Since 1985, their funds have secured $33bn of committed capital, and have backed more than 250 businesses.
Firstly, I would like to thank you very much for taking the time for this conversation. I would like to start off by asking you what has been your academic and professional background which has led you to work at Permira’s London office?
I have a Master’s in management from HEC Paris, after which I did a first off-cycle internship at Crédit Suisse, in M&A. I then proceeded with my second off-cycle at an investment firm, however I didn’t feel that I was a good fit there, so I left and went to Permira. I would really like to stress the importance of finding a firm in which you are comfortable, and well integrated, when doing an internship. After these two internships, I completed a Master’s in Economics and Social Sciences from Bocconi, after which I started working at Permira.
What do you think the Private Equity industry, which some may consider as something relatively recent compared to other financial industries, will be like in the future in France, or in Europe more generally?
Firstly, Private Equity isn’t as recent as most people think it is. Private Equity, during the 90s existed, and was frankly very simple, as you simply needed some debt to generate 3x returns. However I believe that what will truly emerge are funds which are specialized. For instance Permira is becoming very specialized in technology, or Vista Equity Partners in software development. Another development that we start seeing today are the emergence of strategic teams in funds, who work to add value, or even specific industry playbooks. However, when considering a general normalization of Private Equity, I do not see this happening in the next 15 years at least.
What are the difficulties, or advantages if any, of Brexit for an investment firm such as Permira in London?
Well it actually depends. When considering investment opportunities in British businesses, well then Brexit does bring a negative impact. We have to take considerable precautions, due to the devaluation of the British pound, but we also need to consider whether a business is correlated or not with British macroeconomics. For instance, Dr Martens, which is a firm in which we have invested, is British, but is completely uncorrelated with British macroeconomics due to the nature of its products. When we consider on the other hand, the structure of funds, Brexit has had a very limited impact, as these funds do not have to comply with European regulations. As an indicator of this very limited effect, the recruitment of private equity professionals has not experienced much fluctuation.
Did the pro-business administration of Macron have a positive effect on the private equity industry in France?
No. Initially, his pro-business approach was interesting for us, however the “gilets jaunes” movement has caused France to have a negative image to foreign investors, this has however not stopped all investment in French businesses. His administration stays nevertheless “better” for private equity than the administration of Hollande, which established his “supertax” at 75% for high earning individuals.
Do you think that the possible election of Elizabeth Warren, or another far-left candidate, could drastically change the worldwide landscape of private equity?
I think it would be very unlikely. The difficulty with attacking private equity funds or increasing taxes on high earning GP is that such funds contribute to paying for pensions, so it would be a very bad scenario. So, I really don’t believe that she could end the practice of private equity in the US, or she would be facing a real problem. However, it is true that she seems willing to attack private equity.
Thanks a lot for your time!