May 30th

What is going on in the Private Equity world this week...

GTCR closes Fund XIV at $11.5bn

GTCR, a Private Equity firm focused on the technology, healthcare, financial, and consumer services sectors, has held the final closing of GTCR Fund XIV (Fund XIV) with aggregate commitments of $11.5 billion, exceeding its initial target of $9.25 billion.

The fund includes total limited partner commitments of $11.0 billion and a commitment from GTCR of approximately $500 million. The predecessor fund, GTCR Fund XIII, was raised and initiated in 2020 with aggregate commitments of approximately $7.9 billion.

That fund generated a net internal rate of return (IRR) of nearly 194% as of December last year, according to data from investors from the Alaska Retirement Management Board (ARMB).

The new fund received strong support from limited partners in prior GTCR funds, many of whom have invested with the firm for decades, as well as several new investors. The diverse Fund XIV investor base includes leading global endowments and foundations, public and corporate pension plans, sovereign wealth funds, financial institutions, and private wealth.?

?

Morgan Stanley holds first close of 1GT Climate PE strategy at $500m

Morgan Stanley Investment Management (MSIM) has held a first close for the 1GT climate private equity strategy (1GT) at $500 million of equity capital commitments. Investors include public and private pension funds and an insurance company in the Nordic region, Germany, and the UK.?

1GT is focused on investments in growth-stage companies that will seek to collectively avoid or remove one gigaton of carbon dioxide-equivalent (CO2e) emissions from the Earth’s atmosphere from the date of investment through 2050, the date by which the United Nations has mandated “Net Zero” must be achieved.

Part of MSIM’s $200 billion alternative investments business, 1GT targets investments in private companies across the mobility, power, sustainable food and agriculture, and circular economy themes. Under the Sustainable Finance Disclosure Regulation, 1GT is an Article 9 fund, which promotes environmental or social characteristics and integrates sustainability into the investment process in a binding manner. The team recently co-led a $50 million funding round for Everstream Analytics to accelerate global supply chain sustainability and aim to reduce emissions for leading global brands.

?

KKR to launch flexible private credit funds

KKR & Co is looking to launch a new euro-denominated direct lending fund that will give investors more flexibility in depositing and withdrawing their cash than typical closed-ended funds, according to a report by Bloomberg.

The report cites unnamed sources with direct knowledge of the Katter as revealing that the new fund, which will primarily provide unitranche loans to European private equity-owned businesses, has a permanent capital structure, meaning investors can put in and withdraw cash on an ongoing basis.

With more mainstream private debt funds, investors can have their capital locked up for as long as 10 years.?

?Why 2023 Still Holds Promise for Private Markets

Despite the challenges and market volatility experienced in recent years, 2023 presents fresh opportunities in private markets. Lower valuations and ongoing volatility have created a favorable environment for investors to enter the market and secure attractive deals. This article explores the reasons why 2023 may still be a good year for private markets.

1. Valuations: Market Volatility and Attractive Prices The current market volatility has pushed down valuations in private markets. This presents a unique opportunity for investors to acquire assets at more favorable prices and negotiate better deal terms. Historical data shows that funds launched during periods of economic stress and volatility tend to outperform.
2. Core Private Equity: Capitalizing on Public Market Volatility The gradual slowdown in the U.S. economy and the decrease in global initial public offerings (IPOs) create favorable conditions for core private equity investments. Private asset valuations typically lag behind public markets, allowing managers to invest in industry-leading private companies at more reasonable prices. Additionally, the lower availability of IPO financing means that companies may stay private for longer, providing ample opportunities for private equity managers.
3. Secondaries: Accessing High-Quality Institutional Funds The private equity secondaries market offers opportunities as institutional investors rebalance their portfolios. Institutions looking to meet their target allocations may sell off a portion of their private equity holdings, leading to discounted offerings of high-quality existing funds. Investing in secondaries provides diversification, increased visibility into a fund's underlying assets, and access to mature funds closer to returning capital.
4. Growth Equity and Venture Capital: Supporting Young Companies Market volatility in 2022 impacted growth equity investments, leading to a decline in asset prices. However, as many companies continue to require capital, growth equity, and venture capital managers are poised to provide the needed support. To maximize returns, investors should seek experienced managers with deep industry knowledge and networks, especially during challenging periods for growth investing.
5. Infrastructure: Capitalizing on Global Shifts Structural changes worldwide, such as digital enablement, reducing dependence on fossil fuels, and deglobalizing supply chains, are reshaping the infrastructure market. This creates opportunities for private infrastructure investment in non-traditional areas. The demand for fresh capital in infrastructure is significant, and experienced managers with specialized operating knowledge can navigate the complexities and ensure diversification.
6. Private Credit: Filling the Financing Gap With traditional credit sources, like public markets and banks, becoming less available, companies are turning to private credit. The uncertainty and lower bond issuance in public markets have increased the demand for private capital alternatives. Private credit managers can demand more favorable terms and higher premiums on loans, especially during economic and market stress. Distressed credit and special situation opportunities may also arise, differentiating the performance of credit funds launched in 2023.

Despite the challenges faced in recent years, 2023 holds promise for private markets. Lower valuations, ongoing market volatility, and attractive entry points across various strategies and asset classes make it an opportune time to invest. By diversifying their portfolios and working with experienced managers, investors can tap into emerging opportunities and potentially realize strong relative returns over time.

The Private Equity channel and Podcast?houses our podcast recordings, PE and Portfolio advice, plus recent case studies conducted on new talent and their firm

We keep you updated on our latest podcast stars and the hot topics of Private Equity.?You can watch our podcast recordings over on our YouTube channel or tune in?on Spotify, Apple Podcasts,?and Google podcasts.

Keep?informed about what we are doing?through our LinkedIn page or change your thinking and gain some knowledge by getting stuck into an advice episode on the Private Equity channel, hosted by Alex Rawlings.?

In this episode, we welcome Pari Natarajan who discusses falling behind without technology utilization and what you are missing on value creation.

What You Will Learn

??The Basics of Value Creation in PE Deals

??Ways PE Firms Can Successfully Transition a Business to a SaaS Model

??How AI is Revolutionizing the Private Equity Space

Catch up on the links below to tune in...

We are always looking for people in the Private Equity space who have great conversations, can provide an interesting perspective, and are on top of their game.

If this sounds like you, give Alex Rawlings our podcast host, a message either on?LinkedIn? or drop him an email at [email protected]

What Happens To Private Equity Add-On Deal Flow During A Downturn?During a downturn in the economy, private equity firms typically shift their focus to add-on deals. These add-on deals refer to tuck-in acquisitions made by Private Equity firms to expand their existing portfolio companies. They are typically smaller in size and are aimed at providing strategic benefits such as expanding the product line, increasing market share, and improving operational efficiency.

When economic uncertainty hits, firms tend to become more cautious with their investments and look for lower-risk opportunities. Add-on deals offer a way for firms to expand their existing portfolio companies without taking on excessive risks. In fact, studies have shown that add-on deals tend to perform better than standalone deals during downturns in the economy.

One of the reasons for this is that PE firms can buy add-on deals at lower multiples during a downturn. This means that they can acquire these companies for a lower price and benefit from increased synergies with their existing portfolio companies. In addition, Private Equity firms can use their existing infrastructure and management team to integrate these add-on companies more efficiently, leading to cost savings and improved operational efficiency.

The data supports this trend. According to Pitchbook, the number of add-on deals as a percentage of total private equity deals has been steadily increasing over the past few years. In 2020, add-on deals accounted for over 60% of total private equity deals. This trend is expected to continue as private equity firms become more cautious in the face of economic uncertainty.

In conclusion, add-on deals are becoming increasingly popular during downturns in the economy. These tuck-in acquisitions offer private equity firms a lower-risk way to expand their existing portfolio companies and benefit from increased synergies. With lower multiples and improved operational efficiency, add-on deals are a strategic move for Private Equity firms looking to weather the storm of economic uncertainty.

About Raw Selection:?Raw Selection favours a meticulous approach to candidate research. Our process for selecting the right candidate means we can boast a 100% success rate for all our retained clients, with 96% of placed candidates still in their roles after 12 months.

If your Private Equity firm is looking to hire, or if you are looking for a new role within the PE sector, please get in contact with Alex, at?[email protected]

Want more? Click here

The Private Equity Hub... Our new home for our Podcast, Channel, News, and Network?

We have recently launched the Operating Partner's network which has been a great success!?

We are now gearing up for the launch of our?Exclusive A&D Network.

It has been a delight to see some of the top PE executives across Europe and North America get together to discuss trending topics, share their advice, and ask questions. We are excited to see what our new community brings.

Each network will vet each new member to ensure an exclusive group is formed where you can share challenges, vet suppliers, discuss breaking news, and much more.

To join, or if you are a C-Suite Executive, Principal, or higher; then follow the link below to sign up for our other networking groups that will be launching very soon!

Interested?

sign up below to become an exclusive member.

We specialize in executive search, working exclusively with lower and middle-market Private Equity firms and their Portfolio Companies across Europe and North America.

We support Private Equity firms to secure talent for their investment and operations teams and to identify proven senior executives for their Portfolio Companies.

When it comes to recruiting senior executive talent for your business, our approach is one of meticulous search and due diligence.

So much so, we de-risk recruitment for all our retained clients. We are so confident in our approach that we are prepared to offer a money-back guarantee on our services.

Interested? Get in contact here.