Best of LinkedIn: Private Equity Insights CW 34/ 35

00:00:00: provided by Thomas Allgaier and Frennis, based on the most relevant posts on LinkedIn about private equity in CW- Thirty-Four Thirty-Five.

00:00:08: Frennis is a B-to-B market research company working with enterprises to optimize their campaigns with account and executive insights far beyond AI.

00:00:18: Welcome and thank you for joining us for another deep dive.

00:00:20: Thanks.

00:00:20: Yeah today we're Cutting through the noise really sifting through all that LinkedIn chatter from calendar weeks thirty four and thirty five to get to the core private equity trends.

00:00:29: That's right.

00:00:30: We want to pull out the insights that matter most for you whether you're an M&A PE itself VC or consulting.

00:00:36: We've

00:00:37: gone through a ton of posts to find those nuggets that are actually actionable.

00:00:41: So let's unpack this.

00:00:42: OK, first up, a really big theme, AI and data.

00:00:45: It feels like they're just rapidly changing how value creation works in PE.

00:00:49: Definitely.

00:00:50: The conversations clearly moved past if and landed squarely on how.

00:00:53: We saw a lot less hype.

00:00:55: more focus on actual execution.

00:00:57: Martin Unger, for instance, he talked about building a regional PE fund, small cap, but really focusing on people first, AI second.

00:01:04: Interesting approach.

00:01:05: Yeah, turning succession challenges into growth opportunities, but with a very pragmatic human centric view on the tech.

00:01:15: That makes sense.

00:01:15: It's not just tech for tech's sake.

00:01:18: And building on that, Dan Crimmons offered some pretty structured guidance like a top-down approach for actually implementing AI in portfolio companies.

00:01:27: And Tom Bradbury from Broadgauge echoed this.

00:01:30: He stressed how crucial it is for PE firms to guide their mid-market companies through this AI transformation.

00:01:37: It's

00:01:38: a journey, not a flip of a switch.

00:01:39: Exactly.

00:01:40: He talked about developing a shared field of vision, then incremental planning, and really building a culture of adaptability.

00:01:46: It sounds like a real process.

00:01:48: It is.

00:01:48: And what's really fascinating is just how broadly AI is being applied now.

00:01:53: Joshua Bergen, for example, highlighted software that can take a five-day due diligence process and condense it down to five minutes.

00:01:59: Just using AI to categorize and format financial data.

00:02:03: Five minutes?

00:02:03: Seriously?

00:02:04: Yes.

00:02:04: Well, that's a massive shift.

00:02:06: It means firms could potentially evaluate ten times more deals.

00:02:09: Wow.

00:02:09: That really changes the landscape for sourcing.

00:02:12: Yeah.

00:02:12: And it's not just internal stuff.

00:02:13: No,

00:02:14: exactly.

00:02:15: Walter G pointed out family offices using AI-driven sourcing, even predictive analytics, to find proprietary deals.

00:02:22: Moving from network to data-driven.

00:02:24: Pretty much.

00:02:25: And Rahul Garg noted that in healthcare PE, they're kind of ditching traditional roll-ups for AI-powered platforms, specifically targeting the billions wasted in billing and paperwork.

00:02:38: That's a huge target.

00:02:39: It is and it raises this this crucial point from Karsten W. He put it really well AI won't replace investors, but investors using AI will replace those who don't

00:02:50: mm-hmm That means true.

00:02:51: He sees the future in that human AI partnership.

00:02:54: AI brings the speed the insights humans bring.

00:02:57: context judgment,

00:02:58: right.

00:02:58: and Anthony JS added another layer didn't he saying Jenny I makes everyone faster Yeah, but understanding causality.

00:03:05: Yes causality.

00:03:06: That's what makes you smarter.

00:03:07: That becomes the real competitor for PE firms.

00:03:09: It makes

00:03:09: perfect sense.

00:03:10: So the underlying message here seems to be AI integration isn't just about being more efficient.

00:03:17: It's about gaining a real competitive advantage, getting deeper intelligence.

00:03:21: Fundamentally changing the game.

00:03:23: Okay so moving on from AI itself but obviously related is our next theme.

00:03:28: the tools and the operating infrastructure that PE needs in this demanding climate.

00:03:34: Yeah, that's critical.

00:03:35: One big area Jeffrey Katanzaro from QSTMG flagged was side-letter management.

00:03:40: Ah, the complexity's there.

00:03:41: Exactly.

00:03:42: You've got hundreds of these confidential, often inconsistent agreements.

00:03:46: Managing them, ensuring compliance, it's tough.

00:03:50: So KPMG's digital gateway, using tools like Lea by Contract Podye, it basically streamlines all that, creates a central digital repository, uses AI to extract key info.

00:04:00: Makes it more transparent, more efficient.

00:04:02: Right.

00:04:03: And that kind of operational discipline ties into what Chris Barber, an interim transformation director, was talking about.

00:04:08: A cost-out playbook.

00:04:09: Yeah,

00:04:09: exactly.

00:04:10: For PE-backed businesses, focusing on levers like procurement optimization, rationalizing supply chains, simplifying IT systems.

00:04:17: Practical

00:04:17: stuff.

00:04:18: Very.

00:04:19: And he stressed it's not just a one-off project, it's a cultural shift.

00:04:23: You know, blending that discipline with a relentless focus on efficiency.

00:04:27: Did he share any results?

00:04:29: He did.

00:04:30: Mentioned things like, twelve-fifteen percent savings in procurement, just the renegotiation, and like a twenty percent productivity boost from using lean methods.

00:04:39: Those are significant numbers.

00:04:40: They really are.

00:04:41: And it connects to Scott Copsch's point about operational friction.

00:04:44: Hidden drag.

00:04:45: That's it.

00:04:46: Often overlooked compared to the big cost cutting or revenue drives.

00:04:50: But he gave examples like a medical device company where a slow approval process actually hurt the valuation.

00:04:56: Yeah.

00:04:57: Or another company implementing ERP systems in six months instead of the usual twenty four.

00:05:02: Fixing that friction that unlocks huge value leads to premium exits.

00:05:06: So it's really about having the right tools for specific problems often the overlooked ones and then embedding that efficiency mindset that operational rigor across the whole portfolio, optimizing the engine.

00:05:17: Okay, so let's zoom out now.

00:05:20: Look at the bigger picture.

00:05:21: Market structure, capital flows.

00:05:23: There seem to be some major shifts happening there, too.

00:05:26: Oh, definitely.

00:05:27: Walker Dible painted a really clear, maybe even stark picture.

00:05:31: He described the PE landscape splitting into two worlds.

00:05:34: Two worlds?

00:05:35: How so?

00:05:36: Well, you've got the giant's Blackstone TPG.

00:05:39: They're thriving, raising almost record amounts of capital.

00:05:42: OK.

00:05:42: But then smaller firms, they're apparently struggling just to get meetings with investors.

00:05:47: Wow.

00:05:48: Yeah, LPs are consolidating, putting more money with fewer bigger funds, seeking scale, global reach, and this concentration gives those mega funds huge advantages.

00:05:59: So the middle market is feeling the squeeze.

00:06:01: Big time.

00:06:02: Mid-market PE apparently raised its lowest amount of capital since two thousand nine in the first half of this year.

00:06:07: That's, yeah, that's a significant trend.

00:06:10: That really

00:06:10: speaks to what Robert Jay observed too.

00:06:12: Fundraising is tough for most managers.

00:06:13: Capital is concentrating at the top.

00:06:15: And he also mentioned dealmaking was pretty muted in the first half of twenty twenty five because of market uncertainty.

00:06:21: Yeah, things felt slower.

00:06:22: And holding periods have stretched out past five years, meaning there's like over a trillion dollars of net asset value stuck in older funds.

00:06:30: A trillion dollars just waiting for an exit path.

00:06:33: That's huge liquidity pressure.

00:06:34: It is.

00:06:36: But.

00:06:36: Interestingly, connecting this to maybe a more positive regional view, Dr.

00:06:41: Mark P. Bellitza argued that PE is actually supercharging Germany's economic comeback.

00:06:46: Oh, interesting counterpoint.

00:06:48: By

00:06:48: backing the middle stand, you know, the strong mid-sized German companies pouring capital into growth, transformation, strengthening jobs in areas like green energy, and helping scale SMEs into global players.

00:07:01: So, a pocket of real resilience and maybe strategic focus there, despite the broader consolidation.

00:07:06: Seems like it.

00:07:08: And while there are clearly challenges, Romain Bigramian had a thoughtful take.

00:07:12: He suggested this is all part of a needed phase of maturation for the industry.

00:07:16: A Darwinian selection, maybe?

00:07:18: Kind of.

00:07:18: He acknowledged all the downbeat posts about returns and tough exits, but thinks this pressure will ultimately force firms to adapt, improve, and lead to a stronger, more resilient PE industry overall.

00:07:29: Makes sense.

00:07:30: Adapt or fade away.

00:07:31: So speaking of that trapped capital and the need for exits, liquidity is obviously critical right now.

00:07:37: And the secondary market seems to be really stepping into the spotlight.

00:07:41: Oh, absolutely.

00:07:42: Hugh MacArthur and his private thoughts highlighted that the secondary market is seriously warming up.

00:07:48: how warm we're talking.

00:07:49: a hundred and ten billion dollars in volume just in the first half of twenty twenty five.

00:07:55: wow.

00:07:56: and what's really striking he said is that over half of the gp led deals priced at or above

00:08:02: par at or above.

00:08:03: that's on a fire sale.

00:08:04: not at all.

00:08:05: he called it a fundamental shift.

00:08:07: It signals these aren't just dumping grounds.

00:08:09: They're becoming the preferred path for some of the best performing assets.

00:08:13: That's a massive vote of confidence in the quality, isn't

00:08:15: it?

00:08:16: It really is.

00:08:16: And Stefan Paul's from Moonfair backed this up.

00:08:19: Record transaction levels, both GP-led and LP-led, and discounts are narrowing.

00:08:23: So it's becoming more mainstream.

00:08:24: Yeah.

00:08:25: He noted more investors are using secondaries programmatically now, like part of their regular strategy, not just opportunistically when something pops up, for diversification, risk management.

00:08:35: Interesting.

00:08:36: But is it all smooth sailing?

00:08:37: While Robert Jay, while confirming the surge, also pointed out that deal flow in the primary market is still outpacing the capital being raised.

00:08:46: Okay.

00:08:46: And he mentioned some larger LPs are concerned about being shut out of deals, especially when GPs move good assets into continuation vehicles earlier than expected.

00:08:55: Right, potentially cutting off some of that upside for the original investors.

00:08:58: Exactly.

00:08:58: So it's a dynamic space, lots of activity, but also some new tensions emerging.

00:09:03: Okay, shifting gears slightly, but still related to capital flows private credit.

00:09:09: It feels like it's gaining some serious momentum, almost rivaling PE for some big players.

00:09:14: It's more than rivaling in some cases.

00:09:16: Nicola Ebbmeyer's analysis actually showed a power shift.

00:09:20: A power shift.

00:09:20: Yeah, among big managers like Apollo, Blackstone, KKR, private credit assets under management are overtaking private equity.

00:09:28: Why

00:09:28: boom?

00:09:28: A lot of it goes back to post crisis banking regulations, which kind of created a void that private credit stepped into.

00:09:36: Plus, borrowers like the speed, the flexibility, the tailored structures credit offers, even if it costs a bit

00:09:43: more.

00:09:43: Phil's a real need.

00:09:45: It's interesting how different regions are adopting it, though.

00:09:48: Yeah, Nicola noted the U.S.

00:09:49: is way ahead.

00:09:50: Non-bank lending is like seventy-five percent of the market there.

00:09:53: In

00:09:53: Europe.

00:09:54: Only around twelve percent.

00:09:55: Big gap.

00:09:56: So, lots of room for growth, maybe consolidation in M&A.

00:10:00: in Europe then?

00:10:01: You'd

00:10:01: think so, as European asset managers try to catch up.

00:10:04: And what does this mean for entrepreneurs or portfolio companies?

00:10:07: Well,

00:10:07: Lesha Zarizanev really emphasized that understanding debt not just equity is crucial.

00:10:13: He broke down public credit like bonds versus private credit facilities.

00:10:17: Right.

00:10:17: His point was that using both wisely can massively improve liquidity and flexibility.

00:10:22: The smartest businesses, he argued, use both strategically to balance things like flexibility, complexity, scale, and transparency.

00:10:29: So PE firms need to be just as sophisticated about the debt side of the equation.

00:10:33: Absolutely.

00:10:34: It's part of the whole capital structure strategy.

00:10:37: Okay, let's pivot now to some more specific sector and regional signals we picked up from the LinkedIn discussions.

00:10:44: Get

00:10:44: a bit more granular.

00:10:45: Sounds

00:10:45: good.

00:10:46: We saw a pretty major milestone in GovTech.

00:10:48: EQT acquired NeoGov for three billion dollars.

00:10:52: Three billion.

00:10:53: That's a big exit for that space.

00:10:55: Yeah.

00:10:55: Dustin Hazeler reported on that, shows real scale and investor confidence growing there.

00:11:01: And Sebastian Esser noted Waterland Private Equity Investing in Chem Service Group.

00:11:07: Compliance and testing.

00:11:08: Exactly.

00:11:09: Focused on sustainable growth in that area.

00:11:11: Another trend, maybe a slightly more controversial, that Mark Philpot highlighted, was PE firms buying up utilities.

00:11:17: Ah, yes.

00:11:18: That always raises questions.

00:11:19: Right.

00:11:20: He mentioned Blackstone buying TXNM, BlackRock bidding for Elite, Brookfield investing in Duke Energy, Florida.

00:11:27: The firms argued they bring capital for modernization, which is needed.

00:11:30: But Philpot's point was the real test is regulatory oversight.

00:11:34: Making sure public good doesn't get sidelined by private interests.

00:11:37: Exactly.

00:11:38: It's a fine line, especially with essential services.

00:11:40: Definitely.

00:11:41: On a maybe more future-facing note, Nicholas Dimitri was exploring potential PE buyouts in crypto.

00:11:49: Really?

00:11:49: Crypto buyout?

00:11:50: Yeah, suggesting the sector is showing some signs that historically have preceded PE getting involved in other industries.

00:11:56: Sort of a maturation

00:11:57: signal, maybe?

00:11:58: Interesting.

00:11:58: And Hasan Awadah.

00:12:00: He showcased that list of the world's most valuable private companies, you know, SpaceX, ByteDance, OpenAI.

00:12:07: The big unicorns?

00:12:08: Exactly.

00:12:09: Really highlights how tech, especially fueled by AI, is dominating that top tier of private value creation.

00:12:16: And what about regionally?

00:12:17: Any specific hotspots or Quiet spots.

00:12:19: Well, Calvin Kreitz reported.

00:12:21: August was typically the quietest month for European PE deals.

00:12:24: France apparently was particularly inactive then.

00:12:27: Okay, seasonal lull.

00:12:28: But Yannick Elhag pointed out that German-speaking PE seemed pretty resilient, seeing diverse mid-market deals in areas like regulatory services, insurance, tech.

00:12:37: So

00:12:37: activity is still happening there.

00:12:39: Yeah.

00:12:39: And Mitch Voitz noted more global acquiring DNA-thirty-three backed by Waterland, which pushed more into Belgium's Big Five consulting firms.

00:12:47: or consolidation in professional services.

00:12:49: Seems to be a recurring theme.

00:12:51: So yeah, a bit of a mixed bag across sectors and regions, but you definitely see PE adapting, finding opportunities, and driving consolidation.

00:13:01: Okay, last theme, but certainly not least, the people and the structure.

00:13:07: The operating models, talent, governance.

00:13:09: basically, the human engine driving value.

00:13:11: Yeah,

00:13:12: absolutely crucial.

00:13:13: And the role of the operating partner seems to be really evolving.

00:13:16: How so?

00:13:16: Zorian Rotenberg, building on ideas from Alex Rawlings, stressed that top OPs aren't just advisors anymore.

00:13:23: They blend that with actively driving outcomes.

00:13:26: Can their hands dirty?

00:13:27: Pretty much.

00:13:28: Yeah.

00:13:28: Leading initiatives, acting as force multipliers for the management team, not just sitting on the sidelines.

00:13:33: That makes sense.

00:13:34: More active involvement.

00:13:35: And Jake Seymour highlighted something related, right?

00:13:38: Referencing the private equity podcast.

00:13:40: Yeah.

00:13:40: The growing importance and risks around interim CTOs and portfolio companies.

00:13:45: Yeah.

00:13:46: alignment there can be really damaging.

00:13:48: Especially

00:13:48: with tech being so central now.

00:13:50: Exactly.

00:13:51: Underscore is the need for that specialized talent and making sure leadership is pulling in the same direction.

00:13:55: And

00:13:55: thinking about talent more broadly.

00:13:57: Nilesh Thacker made a strong case for leading PE firms needing a dedicated global talent operating partner.

00:14:04: A specific role for talent.

00:14:06: Yeah.

00:14:06: He called it a performance multiplier.

00:14:09: Someone focused on accelerating scale, building strategic talent playbooks, even providing talent-focused insights during due diligence.

00:14:16: Especially for AI and product heavy businesses.

00:14:19: Right, where the right team is absolutely critical.

00:14:22: It's viewing human capital much more strategically.

00:14:24: And it's not just the operating teams, right?

00:14:27: AI is impacting boards too.

00:14:28: That was Charles Weiser's point.

00:14:30: AI is transforming governance across PE, public companies, nonprofits.

00:14:35: Each faces unique challenges, strategic pressures.

00:14:38: So

00:14:39: directors need to step

00:14:40: up.

00:14:40: Yeah, more introspection needed, adapting their governance lens to understand AI's implications, the opportunities and the risks.

00:14:47: Okay, so bringing all these human elements together.

00:14:49: Maxwell

00:14:49: Salazar, writing in HBR, put it bluntly.

00:14:52: Agility isn't optional for middle market PE leadership.

00:14:56: Agility is an optional.

00:14:57: Nope.

00:14:58: He cited data showing forty percent of execs in PE owned companies feel their teams aren't agile

00:15:03: enough.

00:15:03: Wow.

00:15:04: Forty percent.

00:15:05: Yeah.

00:15:05: Making agility, that ability to adapt and move quickly, the real difference between creating value and, well, eroding

00:15:13: it.

00:15:13: So pulling it all together, the picture seems to be a PE world demanding not just capital.

00:15:20: Right.

00:15:20: But really smart.

00:15:22: adaptable specialized people backed by strong governance to actually unlock that value.

00:15:28: It's about orchestrating all the pieces.

00:15:30: Couldn't have said it better myself.

00:15:32: Well, that brings us to the end of another, I think, really insightful deep dive into the world of private equity.

00:15:37: We've covered a lot of ground from AI's impact to market structures, liquidity, and that crucial human element.

00:15:43: Yeah, we hope these insights pulled from what people are actually talking about on LinkedIn help you stay ahead, maybe spark some new thinking for your own work.

00:15:50: The key takeaway feels like this isn't just about isolated trends.

00:15:53: It's about how AI, operational focus, capital shifts, talent strategy, how they all interact to reshape the landscape.

00:16:00: Agility and smart integration seem paramount.

00:16:03: Definitely.

00:16:04: It's about connecting the dots.

00:16:05: If you enjoyed this deep dive, new episodes drop every two weeks.

00:16:09: And please do check out our other editions covering venture capital, M&A, and strategy and consulting.

00:16:15: Thanks for listening.

00:16:16: And don't forget to subscribe so you don't miss out on your next shortcut to being well-informed.