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Best of LinkedIn: Private Equity Insights CW 50 - 01 · Best of LinkedIn: Strategy, M&A & Investments

• 0:00
  Speaker 0: Welcome to the deep dive.
• 0:01
  Speaker 0: Today, we're cutting straight to the core strategic shifts happening in private equity.
• 0:05
  Speaker 0: And this deep dive is based on the most relevant insights we've seen shared across LinkedIn in the final weeks of the year, CW-Fifty through O-one.
• 0:15
  Speaker 0: Just a quick note, this content is provided by Thomas Allgaier and Frenis, who specialize in B to B market research for private equity teams focused on driving portfolio performance and value creation.
• 0:27
  Speaker 0: And this edition is brought to you by our partner Informa.
• 0:29
  Speaker 0: Don't miss out on their upcoming conferences Super Return Saudi Arabia and Super Return Secondaries Europe.
• 0:35
  Speaker 0: You'll find the links for those in the description.
• 0:37
  Speaker 1: You know, it's a fascinating time.
• 0:39
  Speaker 1: We're seeing this huge transition in the market chatter.
• 0:41
  Speaker 0: How so?
• 0:41
  Speaker 0: Well,
• 0:42
  Speaker 1: for years, the focus was purely financial, right?
• 0:44
  Speaker 1: It was all about leverage and optimization.
• 0:48
  Speaker 1: Now, the overwhelming theme is the structural pivot toward disciplined operational execution.
• 0:54
  Speaker 0: And technology,
• 0:55
  Speaker 1: I imagine.
• 0:55
  Speaker 1: And technology and transparent governance.
• 0:57
  Speaker 1: So that's the mission today, to unpack what this pivot really means for you if you're in strategy, M&A, or investments.
• 1:03
  Speaker 0: Okay, let's get into it.
• 1:05
  Speaker 0: It feels like we're moving from the question of if the market will recover to how you actually execute when it does.
• 1:11
  Speaker 0: Exactly.
• 1:12
  Speaker 1: And to understand that execution mandate, you have to start with where the capital markets are heading.
• 1:16
  Speaker 1: The macro outlook for twenty twenty five and twenty twenty six is well, it's leaning toward cautious optimism.
• 1:23
  Speaker 0: Cautiously optimistic.
• 1:25
  Speaker 0: I think that's the right phrase.
• 1:26
  Speaker 0: And that optimism seems to be tied to two things.
• 1:29
  Speaker 0: The expectation of lower rates, which eases pressure and a shift to more selective competition.
• 1:35
  Speaker 1: Michael Brun highlighted that, didn't he?
• 1:37
  Speaker 0: He did.
• 1:38
  Speaker 0: He noted P.E.
• 1:39
  Speaker 0: is really positioned as a long term alpha source because it stabilizes portfolios and volatile markets.
• 1:44
  Speaker 0: So it's poised for growth.
• 1:46
  Speaker 0: as that cost of debt finally comes down.
• 1:48
  Speaker 0: And
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  Speaker 1: we're seeing regional factors that really support this, particularly in Europe and the DACH region.
• 1:54
  Speaker 1: Right.
• 1:54
  Speaker 0: Andreas Christel pointed out a key change in deal structures over there.
• 1:58
  Speaker 0: Mid-market transactions are seeing much higher equity contributions.
• 2:01
  Speaker 0: Which
• 2:01
  Speaker 1: is a huge signal.
• 2:02
  Speaker 1: It means there's less reliance on that traditional credit financing for buyouts.
• 2:07
  Speaker 0: It forces you to focus on the fundamentals of the asset, not just the financial leverage you can apply.
• 2:13
  Speaker 0: And, you know, that structural strength is complemented.
• 2:15
  Speaker 0: by the growth of private credit.
• 2:16
  Speaker 1: Bruce Richards framed that really well.
• 2:18
  Speaker 1: He said, it's not a competitor to PE.
• 2:20
  Speaker 0: But a structural compliment.
• 2:22
  Speaker 0: Yeah, it just reinforces the whole portfolio's resilience.
• 2:25
  Speaker 1: So if we shift to the fundraising side, this environment of, let's call it higher scrutiny, is driving some intense concentration.
• 2:32
  Speaker 1: It really
• 2:33
  Speaker 0: is.
• 2:33
  Speaker 0: Louis LaHoot observed that almost half, I think it was, forty-six percent of all capital raised as of October went to just the top ten largest firms.
• 2:41
  Speaker 1: Wow, that leaves a very slim slice for everyone else.
• 2:45
  Speaker 0: And it means LPs are getting highly specialized.
• 2:47
  Speaker 0: Nicola Ebbmeyer noted that of the biggest fund closes in twenty twenty five, five of the top nine were TMT specialists.
• 2:55
  Speaker 0: Tom Abravo, for instance, raised over thirty four billion.
• 2:58
  Speaker 1: Just dominating that tech space.
• 2:59
  Speaker 0: Completely.
• 3:00
  Speaker 0: And LPs are responding to this by.
• 3:02
  Speaker 0: Well, by stress-testing everything, Tunner's Gumpir said that guidance now goes way beyond celebrating past wins.
• 3:09
  Speaker 1: They're looking for future fragility.
• 3:10
  Speaker 0: Exactly.
• 3:11
  Speaker 0: They want proof of cultural fit and economic resilience before they'll commit capital long-term.
• 3:15
  Speaker 1: Future-proofing the capital.
• 3:17
  Speaker 1: That's the theme.
• 3:18
  Speaker 0: Definitely.
• 3:19
  Speaker 0: And at the same time, we're seeing private wealth become this rapidly expanding channel.
• 3:24
  Speaker 0: Frederick S. Dungway and Mark Benedetti were talking about the expansion of platforms like Ardian Access in Canada.
• 3:30
  Speaker 1: Right, creating that curated access for private investors into global private markets.
• 3:35
  Speaker 0: It gives the liquidity to the GPs and sort of democratizes access for the institutions that cater to high net worth clients.
• 3:44
  Speaker 1: Okay, so let's pivot to that liquidity picture.
• 3:46
  Speaker 1: After a few tight years, the exit market is... Well, it's showing a clear rebound.
• 3:51
  Speaker 1: Christoph Jost mentioned this.
• 3:52
  Speaker 1: Yeah,
• 3:52
  Speaker 0: that surge is finally restoring liquidity and improving distributions, which is what everyone's been waiting for.
• 3:57
  Speaker 1: And the numbers back it up.
• 3:58
  Speaker 1: We saw buyout exits surge past six hundred and twenty one billion dollars through October twenty twenty five.
• 4:06
  Speaker 1: The log jam is breaking.
• 4:07
  Speaker 0: But there's always a but.
• 4:09
  Speaker 1: There's always a but.
• 4:11
  Speaker 1: This rebound only intensifies the pressure cooker effect from these aging portfolios.
• 4:15
  Speaker 1: Nick Alvarez pointed out that median holding periods are stretching to almost four years.
• 4:20
  Speaker 0: And what's really striking is that nearly thirty percent of assets are now held for seven years or even more.
• 4:26
  Speaker 1: Seven years.
• 4:27
  Speaker 1: That creates immense pressure to return capital.
• 4:30
  Speaker 1: So exit readiness isn't a late-stage cleanup job anymore.
• 4:33
  Speaker 0: No, it's an elevated strategic priority now.
• 4:36
  Speaker 0: Jeff Harms really emphasized this.
• 4:38
  Speaker 0: The focus has to be on early planning, robust data, and professionalizing that entire sale process.
• 4:44
  Speaker 1: And Jacqueline M. Hein was really sharp on this point.
• 4:47
  Speaker 1: She said operational discipline things like governance, clear decision rights, it all has to be embedded from day one.
• 4:52
  Speaker 1: Because
• 4:53
  Speaker 0: if it's not.
• 4:53
  Speaker 1: If it's not, buyers won't trust the numbers and your valuation suffers.
• 4:57
  Speaker 1: You can't just patch it on at the end.
• 4:59
  Speaker 0: And that need for trust is also driving structural changes.
• 5:02
  Speaker 0: I'm thinking specifically about the growth of continuation vehicles or CVs.
• 5:06
  Speaker 1: Indeed.
• 5:07
  Speaker 1: Ian Glazer reported that CVs now account for roughly twenty percent of PE exits.
• 5:11
  Speaker 1: It's a huge mechanism to defer that external price discovery.
• 5:15
  Speaker 0: Which places enormous reliance on the GP's own internal valuation process.
• 5:19
  Speaker 1: But that's where the governance tension really sparks up.
• 5:23
  Speaker 1: Alexander Heel detailed a fascinating case with Triton's use of a CV.
• 5:27
  Speaker 0: Oh, this was one where the original fund backers missed out, right?
• 5:29
  Speaker 1: Exactly.
• 5:30
  Speaker 1: They missed out on subsequent games because the asset... sold for much more than the internal valuation had predicted when the CV was finalized.
• 5:38
  Speaker 1: It raises serious questions.
• 5:40
  Speaker 0: It really does, about accountability, transparency.
• 5:42
  Speaker 1: For sure.
• 5:43
  Speaker 1: And separately, we're seeing new structures like GP stakes that are addressing the GP's growth itself.
• 5:49
  Speaker 1: Hassan Kaiser noted they're moving from a niche thing to real strategic growth capital for the firms.
• 5:55
  Speaker 0: Let's shift now to the core of value creation, the operations, because that's where this execution mandate truly lives.
• 6:02
  Speaker 1: Orlando Bravo summed it up perfectly.
• 6:04
  Speaker 1: He said the next cycle rewards platform builders.
• 6:07
  Speaker 0: People who think in systems, not just one-off projects.
• 6:09
  Speaker 1: Exactly.
• 6:10
  Speaker 1: It's that systematic mindset that's the core philosophy shift.
• 6:14
  Speaker 1: It's moving PE away from the old financial engineering playbook.
• 6:18
  Speaker 0: And we can actually quantify that change.
• 6:21
  Speaker 0: Simone Viscotto cited PWC data showing operational improvements now account for forty-seven percent of value creation.
• 6:29
  Speaker 1: Which is a massive leak from the eighteen percent we saw back in the nineteen eighties.
• 6:32
  Speaker 1: It's a whole different ball game.
• 6:34
  Speaker 0: So if operations are the alpha, the discipline has to follow.
• 6:39
  Speaker 0: Romain Bagramian had some interesting advice for GPs on sales budgets.
• 6:42
  Speaker 0: He
• 6:43
  Speaker 1: was saying probe them right.
• 6:44
  Speaker 1: Don't just accept them.
• 6:45
  Speaker 0: Exactly.
• 6:46
  Speaker 0: You warn that conservative forecasts might make management look good, but they leave money on the table for the GP and the LPs.
• 6:54
  Speaker 0: You had to push on those assumptions.
• 6:55
  Speaker 1: And you can't get that operational alpha without the right people.
• 6:58
  Speaker 1: Talent is now a core value lever, not an afterthought.
• 7:02
  Speaker 0: We're seeing key roles evolve.
• 7:03
  Speaker 0: The CFO, for instance.
• 7:05
  Speaker 0: Caroline McAuliffe noted the role is becoming a transformation leader.
• 7:08
  Speaker 1: Managing financial discipline and major digital initiatives.
• 7:11
  Speaker 1: Bilal
• 7:11
  Speaker 0: W. Hashmi confirmed that.
• 7:13
  Speaker 0: The finance fundamentals are still the foundation, but the pace and the pressure have just fundamentally changed the job.
• 7:18
  Speaker 1: Which leads to a critical warning from Melanie Boone.
• 7:21
  Speaker 1: She said deals typically struggle after the close, not before.
• 7:25
  Speaker 0: So the financials get you in the door.
• 7:27
  Speaker 1: But leadership alignment and organizational health are what predict if you can actually scale.
• 7:32
  Speaker 1: If the team isn't healthy, that growth plan is at risk from day one.
• 7:37
  Speaker 0: So getting the right leaders aligned and incentivized upfront is just non-negotiable.
• 7:42
  Speaker 0: Donovan Parrish mapped out the critical talent levers for those first twelve to eighteen months.
• 7:47
  Speaker 1: Leadership do dilly, accelerated onboarding.
• 7:50
  Speaker 0: And tying incentives explicitly to liquidity milestones.
• 7:54
  Speaker 0: Making it real.
• 7:55
  Speaker 1: You know, we saw a fantastic, really actionable example of this from David Mackey.
• 8:00
  Speaker 0: This was the remote work policy case study, right?
• 8:02
  Speaker 0: That's
• 8:02
  Speaker 1: the one.
• 8:03
  Speaker 1: It shows how operational rigor has to speak the board's language.
• 8:07
  Speaker 1: A CTO was dealing with a PE-backed board that just insisted on a five-day in-office policy.
• 8:12
  Speaker 0: Based on preference, not data, I'm guessing?
• 8:15
  Speaker 0: Pretty
• 8:15
  Speaker 1: much.
• 8:15
  Speaker 1: So instead of debating it emotionally, the CTO built a strategic business case.
• 8:19
  Speaker 1: He calculated the retention risk and the replacement costs for top talent leaving over this policy.
• 8:24
  Speaker 0: And the number was?
• 8:25
  Speaker 1: Over eight hundred and eighty thousand pounds saved by being more flexible.
• 8:29
  Speaker 0: Wow.
• 8:30
  Speaker 0: So they translated a culture debate into a clear, board-level financial decision.
• 8:35
  Speaker 0: That's the move right there.
• 8:37
  Speaker 1: It proves that operational rigor isn't just about efficiency.
• 8:40
  Speaker 1: It's about making governance decisions based on quantifiable impact.
• 8:43
  Speaker 0: Which brings us perfectly to technology.
• 8:45
  Speaker 0: The tourism phase of AI is officially over.
• 8:48
  Speaker 0: That's from Alexander Turgeon.
• 8:50
  Speaker 1: We're past the hype cycle of just playing with generic
• 8:53
  Speaker 0: tools.
• 8:53
  Speaker 0: The focus is now on disciplined execution.
• 8:55
  Speaker 0: We're talking about a genetic AI.
• 8:58
  Speaker 0: These are autonomous systems designed to sense, decide, and then act.
• 9:02
  Speaker 1: To drive measurable EBITDA expansion.
• 9:04
  Speaker 1: That implementation gap, the so-called innovation theater, that's where a lot of firms are failing right now.
• 9:09
  Speaker 0: And that value only comes when you stop trying to bolt AI onto old processes.
• 9:14
  Speaker 0: Zorian Rotenberg and Jimmy Vigilani said you have to redesign workflows around
• 9:17
  Speaker 1: it.
• 9:18
  Speaker 1: Right, and the highest ROI is in the commercial levers pricing, sales productivity, demand, gen.
• 9:23
  Speaker 1: It has to hit the margin, not just create cool internal reports.
• 9:26
  Speaker 0: And to do that, the data has to be secure and specialized.
• 9:30
  Speaker 0: Dr.
• 9:30
  Speaker 0: Sacha Hage-Mueller observed that firms are shifting away from large general models
• 9:34
  Speaker 1: toward building secure, fully isolated AI systems that really understand PE data internally.
• 9:42
  Speaker 1: Systems that can scan data warehouses and propose analytical angles without leaking sensitive data.
• 9:47
  Speaker 0: But we have to talk about the strategic risk here too.
• 9:50
  Speaker 0: Elizabeth C issued a strong warning.
• 9:53
  Speaker 0: applying the Minsky-Kindleberger framework.
• 9:55
  Speaker 1: The classic bubble cycle.
• 9:56
  Speaker 1: Yep.
• 9:57
  Speaker 0: She warns we are potentially in the euphoria stage of an AI infrastructure bubble.
• 10:02
  Speaker 1: And her reasoning is that despite the billions being invested in the AI stack, ninety-five percent of firms report.
• 10:08
  Speaker 1: Well, zero immeasurable profit impact so far.
• 10:10
  Speaker 0: Zero.
• 10:11
  Speaker 0: That disconnect between spending and return is a huge structural risk.
• 10:15
  Speaker 1: Which means governance is becoming mission critical fast.
• 10:19
  Speaker 1: Steve Budd suggested that AI governance is the new cybersecurity hygiene.
• 10:23
  Speaker 0: You have to manage the uncapped legal, commercial, and concentration risks.
• 10:27
  Speaker 1: Karsten W. really reinforced this.
• 10:29
  Speaker 1: He said that data to value must be explicitly anchored to the investment committee thesis and the VCP.
• 10:34
  Speaker 0: So every dollar spent on AI has to trace back to a specific EBITDA lever, no more science projects.
• 10:40
  Speaker 1: Right.
• 10:40
  Speaker 1: But for mid-market funds, Avanash Hedyarachi pointed out there's a unique opportunity here.
• 10:45
  Speaker 0: In the software glue, as he called it.
• 10:47
  Speaker 1: Exactly.
• 10:48
  Speaker 1: And enabling technologies for infrastructure, data models, vector databases, things that support niche applications.
• 10:55
  Speaker 1: That's where the mid-market can be nimble and execute quickly.
• 10:58
  Speaker 0: Okay, let's close out with where PE is actually putting its money sector dynamics and some new deal themes.
• 11:04
  Speaker 0: TMT and software are still central.
• 11:07
  Speaker 1: Absolutely.
• 11:07
  Speaker 1: But the valuation criteria have sharpened significantly.
• 11:11
  Speaker 1: Herbert Timson emphasized that metrics like net revenue retention, CAC payback, and strong EBITDA margins are the crucial drivers now.
• 11:18
  Speaker 0: That's a huge shift from cycles that just rewarded growth at any cost.
• 11:23
  Speaker 0: Prioritizing NRR and CAC payback proves your capital efficiency.
• 11:27
  Speaker 0: Healthcare
• 11:28
  Speaker 1: is also getting sustained interest, especially through innovation-oriented strategies in Europe, something Alberto Bertani and Teril Carrasco noted.
• 11:35
  Speaker 0: And we're seeing strong PE interest in energy and oil field services.
• 11:39
  Speaker 0: Jim Terry said the focus has shifted from high leverage to hands-on execution.
• 11:43
  Speaker 0: Which
• 11:43
  Speaker 1: is creating massive demand for seasoned fractional execs to go in and stabilize those operations.
• 11:50
  Speaker 0: Beyond the traditional sectors, though, some fascinating new frontiers are opening up.
• 11:54
  Speaker 1: Like college athletics.
• 11:56
  Speaker 0: Right.
• 11:56
  Speaker 0: Parker Graham discussed the first major PE deal there, the University of Utah's roughly five hundred million dollar valuation deal.
• 12:04
  Speaker 0: It
• 12:04
  Speaker 1: signals a massive structural change.
• 12:06
  Speaker 1: He thinks most athletic departments will have an investment partner by the end of the decade.
• 12:11
  Speaker 1: It gives boosters a real seat at the table.
• 12:13
  Speaker 0: It's a huge previously untouchable market.
• 12:16
  Speaker 0: Right.
• 12:16
  Speaker 0: And we're also seeing microstructural innovation, like in the wellness industry.
• 12:20
  Speaker 1: Sebastian Esser analyzed this.
• 12:22
  Speaker 1: The move from volatile day ticket sales to recurring subscription models, like a mindful pass for thermal baths.
• 12:29
  Speaker 0: Paired with AI-controlled energy systems to manage those huge fixed costs.
• 12:33
  Speaker 0: It's really smart.
• 12:34
  Speaker 1: And finally, institutional roll-ups are still a dominant driver.
• 12:37
  Speaker 1: Nishant Sandhi highlighted the model in AI-resistant sectors like paving.
• 12:42
  Speaker 1: You integrate profitable, mid-sized operators and exit at a much higher multiple.
• 12:46
  Speaker 0: It just hammers home the message we started with.
• 12:49
  Speaker 0: Value isn't just extracted by financial engineering anymore.
• 12:53
  Speaker 0: It's built through relentless operational discipline.
• 12:55
  Speaker 1: If you synthesize all these insights, the message is unmistakable.
• 12:59
  Speaker 1: The market is rewarding radical preparation in liquidity, in governance, in AI deployment over just waiting for better macro conditions to save you.
• 13:07
  Speaker 0: This has been a really comprehensive deep dive.
• 13:09
  Speaker 0: If you enjoy this, new episodes drop every two weeks.
• 13:12
  Speaker 0: Also, check out our other editions covering venture capital, M&A, and strategy and consulting.
• 13:18
  Speaker 0: Thank you for tuning in, and don't forget to subscribe.
• 13:20
  Speaker 1: And here's a final thought to mull over, building on this idea of governance.
• 13:28
  Speaker 1: Public markets seem to be diluting shareholder oversight moving toward managerial capitalism, while private markets are intensifying accountability, acting more like shareholder capitalism.
• 13:38
  Speaker 1: So if that inversion is true, how does that fundamental difference change the way you define and manage long-term risk when you're allocating capital between those two worlds?