The outlook for private equity in 2021: Maitland/AMO’s take on the latest industry survey from IPEM

by James Isola | 15th February 2021

Maitland/AMO is proud to be partnering with IPEM ahead of the 2021 Private Equity conference in Cannes. It’s been a tumultuous yet transformative 12 months for the industry, as COVID has upended deal-making and fundraising. And yet through it all, the industry has demonstrated its incredible resilience, ingenuity and sense of purpose.

Turning to 2021 and beyond, challenges abound: PE needs to ensure it stands ready to support government and investor priorities including ‘building back better’, boosting diversity and embracing sustainability… all the while sustaining strong investment returns. Here we look at the results from IPEM’s latest private equity survey, at the main challenges for GPs, and how effective communications can help to overcome them:

1. Sky-high valuations are set to increase further as hot money crowds into COVID ‘winner’ sectors including IT, healthcare and cleantech. Funds that already specialise in these areas are at an advantage. At same time, there’s a growing wall of money to deploy, raising concerns that GPs may pay too much, threatening future returns. Funds need to focus on effectively communicating their strong deal origination to reassure investors. They also need to communicate to management teams what else they bring to the table beyond capital.

2. ESG will only grow in importance. At a time of rising inequality and as Britain prepares to host COP 26, it is reassuring that an overwhelming 82% of GPs expect the industry will raise its ESG game this year. We’re seeing exciting initiatives to boost diversity such as the 10,000 Black Interns programme. And over a third of GPs have launched or plan to launch an impact investment strategy. Private equity has an opportunity to demonstrate how long-term, patient capital can drive environmental, social and governance improvements, helping companies to become better corporate citizens whilst at the same time growing in value.

3. LPs are scrutinizing returns, as research suggests public markets are drawing even on a net-fee basis. Top-quartile funds with a strong track record in value creation need to learn to better tell their story: through traditional metrics such as IRR, but also by using ‘softer’ ways to shape their narrative, from portfolio company case studies and testimonials, to thought leadership, to highlighting CSR initiatives. This will help grab investors’ attention in a year when most GPs expect it will become harder to fundraise.

4. Contributing to the recovery. Over half of GPs believe private equity has an important role to play in supporting the post-pandemic recovery. Whether that’s working hand in hand with government programmes, such as the EU’s €750 billion green recovery fund, or deploying their own funds. The industry’s war chests have been replenished with record raises (many executed on Zoom!) by the likes of Waterland, CVC and Hg, so there’s plenty of money to deploy to support jobs and wealth creation. Private equity already sustains millions of jobs across Europe: an industry that has struggled in the past on optics now has an opportunity to demonstrate how it will help drive the economic recovery.

Maitland has over 20 years’ experience providing strategic advice to private equity firms and their portfolio companies. Learn more how we could help you at https://www.maitland.co.uk/expertise/sectors/private-equity/.

For more on IPEM’s latest industry survey visit https://www.ipem-market.com/survey/

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About the Author

Private: James Isola

jisola@maitland.co.uk

A former financial journalist with Bloomberg News, James focuses on advising financial services clients in sectors including asset management, private equity, hedge funds and activists. He also specialises in providing media and presentation training for clients

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