Private Equity News - Private Credit News UK & International Guide
Private credit refers to loans made to companies by investors other than banks.
This type of lending has grown in popularity in recent years, as investors seek higher returns in a low-interest-rate environment. Private credit can be a good option for borrowers who are unable to secure financing through traditional means, as well as for investors looking to diversify their portfolios.
Private Equity News - Private Credit News UK & International Guide
Private credit news in the UK covers a range of topics, including the latest deals, analysis of market trends, and insights from industry experts.
Private equity firms are often involved in private credit transactions, and their activities can have a significant impact on the market. Investors and fund managers must stay up-to-date with the latest news and analysis to make informed decisions about their investments.
Key Takeaways
Private credit is a popular alternative to traditional bank lending for both borrowers and investors.
Private equity firms play a significant role in the private credit market.
Staying informed about the latest news and analysis is crucial for investors and fund managers in the private credit market.
Understanding Private Credit in the UK
Private credit is a rapidly growing asset class that has become an increasingly popular source of finance for small and medium-sized businesses in the UK.
It refers to any form of lending that is not provided by traditional banks or other financial institutions. Instead, private credit is provided by private investors, including hedge funds, private equity firms, and other institutional investors.
Direct lending is one of the most common forms of private credit in the UK. It involves lending directly to businesses, without the involvement of banks or other financial intermediaries.
Direct lending can offer higher yields and greater control over lending decisions, making it an attractive option for investors.
Private credit covers a wide range of strategies and borrower types.
These range from senior secured loans for blue-chip corporate borrowers to junior unsecured credit for financing new building construction. Private credit can also include loans against specialized assets, such as railcars and airplanes, or contractual revenue streams like royalties and subscription services.
The demand for private credit in the UK remains high, as demonstrated by the level of deal activity being observed across multiple sectors of the market.
This is due in part to the fact that traditional banks have become more cautious in their lending practices since the 2008 financial crisis. As a result, private credit has emerged as a valuable alternative source of finance for many businesses.
Private credit is also an attractive asset class for investors looking to diversify their portfolios from traditional fixed income investments.
Private credit strategies can offer higher yields and lower volatility than traditional fixed income investments, making them an attractive option for investors seeking to generate higher returns.
In summary, private credit has become a valuable source of finance for small and medium-sized businesses in the UK. Direct lending is one of the most common forms of private credit, and private credit covers a wide range of strategies and borrower types. The demand for private credit remains high, and it is an attractive asset class for investors seeking to diversify their portfolios.
Private Equity News - Private Credit News UK & International Guide
The Role of Private Equity in Private Credit
Private equity firms have played a significant role in the growth of private credit markets in recent years.
Private equity firms typically have a team of experienced professionals who are well-versed in identifying investment opportunities and managing risk. As such, they are well-positioned to invest in private credit markets, which are often characterized by complex and illiquid investments.
Private equity firms have been active in private credit markets in a number of ways. One of the most common ways is through buyout financing. Private equity firms often use debt financing to acquire companies, and they may use private credit funds to provide this financing. Private credit funds can offer attractive terms to private equity firms, including lower interest rates and more flexible repayment terms.
Apollo Global Management is one private equity firm that has been active in private credit markets. The firm has a dedicated private credit team that invests in a range of credit strategies, including direct lending, distressed debt, and structured credit.
Apollo's private credit team has been successful in generating attractive returns for investors, and the firm has raised billions of dollars for its private credit funds.
Private equity firms can also invest in private credit markets through direct lending. Direct lending involves providing loans to companies directly, rather than through a bank or other intermediary. Private equity firms can use their expertise to identify attractive lending opportunities and manage the associated risks.
In summary, private equity firms have played a significant role in the growth of private credit markets in recent years. Private equity firms have been active in private credit markets through buyout financing, direct lending, and other strategies.
Apollo Global Management is one private equity firm that has been particularly active in private credit markets, with a dedicated private credit team that invests in a range of credit strategies.
Private Equity News - Private Credit News UK & International Guide
News and Analysis on Private Credit
Private credit markets in the UK continue to thrive amid the current economic uncertainty.
According to a report by M&G Investments, the demand for private credit from borrowers remains high, as demonstrated by the level of deal activity across multiple sectors of the market.
Investors also continue to look to the potential benefits offered by short-dated private credit assets, given broad-based uncertainty about the macroeconomic backdrop.
However, the Bank of England has warned lenders to be "very careful" in the private equity and private credit markets amid a rise in interest rates. Nathanaël Benjamin, executive director at the Bank of England, cautioned that lenders should exercise caution when investing in private credit and private equity, stating, "Here I would say: be very careful."
In other news, Kreos Capital, a London-based firm that provides growth and venture debt financing to companies in the technology and healthcare industries, has been acquired by BlackRock in an effort to boost its private debt capabilities. This acquisition is part of BlackRock's broader strategy to strengthen its toehold in the private credit space.
Additionally, the Financial Times reports that competition watchdogs in the US are targeting private equity firms, while Brazil battles for chemicals. The FT also provides regular due diligence on private equity, with recent articles on Weinstein, Ackman, and Lasry making a play for Sculptor, and the rise of private credit.
For those looking to stay up-to-date on the latest news and analysis on private credit, there are a variety of resources available.
The FT's Private Equity section covers the latest news and trends in the private credit space, while M&G Investments offers a quarterly newsletter with insights into the private credit market. MyFT also provides a personalized news feed on private credit and related topics.
Private Equity News - Private Credit News UK & International Guide
The Impact of Interest Rates on Private Credit
Private credit is a type of investment that offers attractive yields to investors who are willing to take on the risk of lending to companies that may not be able to secure financing through traditional banks.
Private credit investments are typically illiquid, meaning they cannot be easily sold or traded, and they are often held to maturity. One of the key factors that can impact the performance of private credit investments is interest rates.
When interest rates rise, it can have a negative impact on private credit investments.
Higher interest rates can make it more expensive for companies to borrow money, which can lead to lower demand for private credit investments. This can result in lower yields for investors and can make it more difficult for private credit funds to raise capital.
Inflation can also impact private credit investments. When inflation is high, it can erode the value of fixed income investments, including private credit investments. This can result in lower yields for investors and can make it more difficult for private credit funds to raise capital.
Valuations are another important factor to consider when investing in private credit. When interest rates rise, it can lead to lower valuations for private credit investments. This can make it more difficult for private credit funds to exit their investments and can result in lower returns for investors.
Overall, the impact of interest rates on private credit investments is complex and can vary depending on a number of factors. However, it is important for investors to carefully consider the impact of interest rates on their private credit investments and to seek the advice of a qualified financial advisor before making any investment decisions.
Private Equity News - Private Credit News UK & International Guide
Investing in Private Credit
Private credit has emerged as an attractive investment opportunity for investors seeking higher returns than traditional fixed-income investments.
Private credit investments offer a range of benefits, including higher yields, lower volatility, and the ability to invest in a diversified portfolio of assets.
Investments in private credit can be made through various channels, including private credit funds, revolving credit facilities, and direct investments in portfolio companies.
Private credit funds are investment vehicles that pool capital from investors to invest in private credit assets. These funds typically focus on a specific sector or geography, such as real estate or infrastructure, and offer investors exposure to a diversified portfolio of assets.
Private credit funds have been successful in raising significant amounts of capital from investors in recent years. According to a report by Preqin, private credit funds raised a record $130 billion in 2021, up from $119 billion in 2020. This trend is expected to continue in 2022, with fundraising activity remaining robust.
Revolving credit facilities are another popular way to invest in private credit. These facilities provide companies with access to a line of credit that can be drawn upon as needed. Investors in revolving credit facilities earn interest on the funds that are drawn down, providing a steady stream of income.
Investing directly in portfolio companies is another way to gain exposure to private credit. This approach involves making loans directly to companies in need of financing. This can be done through a variety of structures, including senior secured loans, mezzanine debt, and equity co-investments.
Investing in private credit requires a thorough understanding of the risks and rewards associated with these investments. While private credit investments offer the potential for higher returns, they also carry higher risks than traditional fixed-income investments. Investors should carefully evaluate the creditworthiness of the underlying borrowers and the quality of the collateral securing the loans.
In conclusion, private credit investments offer investors an attractive opportunity to earn higher returns than traditional fixed-income investments. Investors can gain exposure to private credit through a variety of channels, including private credit funds, revolving credit facilities, and direct investments in portfolio companies. However, investors must carefully evaluate the risks and rewards associated with these investments and conduct thorough due diligence before making any investment decisions.
Private Equity News - Private Credit News UK & International Guide
Risks and Resilience in Private Credit
Private credit has become an increasingly popular asset class in recent years, with direct lenders replacing banks and public debt markets in financing some of the riskier investments.
However, with the possibility of continued volatility, economic uncertainty, and even a recession, the risks associated with private credit cannot be ignored.
One of the main risks associated with private credit is the potential for volatility in the market.
As we head into 2023, the downside mitigation characteristics of investment-grade private credit could be valuable, as the public market faces the possibility of continued volatility. Private credit has proven to be more resilient than public markets during times of economic uncertainty, and investors have turned to it as a way to diversify their portfolios.
Another risk associated with private credit is the potential for a recession.
While private credit has historically performed well during economic downturns, there is always the risk that a recession could lead to a decrease in demand for credit and a rise in defaults.
As a result, investors must be diligent in their due diligence and carefully assess the creditworthiness of potential borrowers.
Despite these risks, private credit has shown resilience in the face of economic uncertainty. Leveraged buyout groups, many of which now have big credit investment units, have been particularly active users of the industry, weaving private equity and debt financing together to create a more stable investment.
Overall, private credit remains an attractive asset class for investors looking to diversify their portfolios and mitigate risk. However, investors must be aware of the potential risks associated with private credit and perform their due diligence to ensure that they are investing in stable and creditworthy companies.
Private Equity News - Private Credit News UK & International Guide
Private Credit in Global Markets
Private credit and infrastructure investments across emerging and developing markets surged to record levels in 2022 as borrowers looked for alternative financing options.
According to a Reuters report, private credit investments in these markets increased by 89% in 2022, indicating the growing demand for such financing solutions.
Private credit markets are staying the course, despite the volatility and uncertainty that buffet publicly-traded markets amid headwinds. Long-term investors are safeguarding their returns by investing in private credit markets. Private credit markets offer a range of benefits, including higher yields, lower volatility, and lower correlation with other asset classes.
In 2023, global private markets fundraising declined by 11% to $1.2 trillion, according to the McKinsey Global Private Markets Review. Real estate and private equity declined most precipitously from 2021's record highs, while private credit proved more resilient.
The growth in private equity funds is arguably leading to opportunities for private lenders, with equity expansion into newer sectors also helping to expand the definition of real assets, such as infrastructure and real estate, in the debt markets. Looking ahead to the next five to ten years, the direction of travel seems clear as private credit markets continue to thrive amid the uncertainty.
Private credit markets in Asia, Latin America, Africa, and the Middle East are growing rapidly. These markets offer attractive opportunities for investors seeking higher yields and lower volatility. Capital markets are expanding, and new markets are emerging, providing a range of opportunities for private credit investors.
The Role of Credit Fund Managers
Credit fund managers play a crucial role in the private credit market by providing funding to businesses that are unable to access traditional bank loans. They are responsible for sourcing, underwriting, and managing loans to borrowers, and they typically invest in a range of credit instruments, including senior secured loans, mezzanine debt, and distressed debt.
Private credit managers are becoming increasingly popular among institutional investors, with pension funds and other large investors increasing their allocations to the asset class. According to a report by Intertrust Group, assets in private credit funds grew by 53% over the past five years to reach a total of $1.6tn.
Credit fund managers typically charge fees based on the assets they manage, as well as performance-based fees. They also often require a minimum investment from investors, which can range from $1m to $10m or more.
One of the advantages of investing in private credit funds is the ability to generate attractive returns while also providing diversification to a portfolio. Private credit managers typically target returns in the mid-to-high single digits, which can be particularly attractive in a low-interest-rate environment.
However, investing in private credit funds also carries risks, including the risk of default by borrowers and the risk of illiquidity. Private credit funds are typically less liquid than publicly traded bonds, and investors may have to wait several years before they can exit their investments.
Overall, credit fund managers play a critical role in the private credit market, providing funding to businesses that may not otherwise have access to capital. While investing in private credit funds can be attractive for investors seeking diversification and attractive returns, it is important to carefully consider the risks involved before making any investment decisions.
Subscription and Account Management
Private credit investors in the UK can manage their subscriptions and accounts through various online platforms. These platforms offer a range of features to help investors stay on top of their investments and manage their accounts with ease.
To access these platforms, investors must first register and create an account. During the registration process, investors will be required to provide personal information such as their name, email address, and phone number. They will also be asked to create a username and password to be used for future logins.
Once the account is created, investors can log in to access their account information and manage their subscriptions. From the account dashboard, investors can view their investment portfolio, track their performance, and make changes to their subscriptions.
Some platforms also offer subscription management tools and usage reporting to help investors stay informed about their investments. These tools can provide valuable insights into investment trends and help investors make informed decisions about their portfolios.
It is important for investors to review the terms and conditions of each platform before registering and subscribing to ensure that they understand the fees and other requirements associated with their investments. By staying informed and managing their subscriptions and accounts effectively, private credit investors in the UK can maximise their returns and achieve their investment goals.
Digital Integration and Private Credit
As digitalisation continues to transform the financial industry, private credit markets are also embracing technology. Digital integration is being used to streamline processes, increase efficiency, and enhance the investor experience.
One way in which digital integration is being utilised in private credit is through the use of online platforms. These platforms provide investors with access to a wide range of private credit opportunities, making it easier for them to find and invest in the deals that best suit their needs. They also enable investors to manage their investments online, providing them with real-time information and updates.
Another area where digital integration is having an impact is in the underwriting process. By using data analytics and artificial intelligence, private credit firms are able to more accurately assess the creditworthiness of potential borrowers. This not only speeds up the underwriting process but also reduces the risk of defaults.
Digital integration is also being used to improve communication between investors and borrowers. Online portals allow borrowers to provide updates on their projects, while investors can track the progress of their investments in real-time. This level of transparency and communication is helping to build stronger relationships between investors and borrowers, which can lead to more successful deals in the future.
Overall, digital integration is playing an increasingly important role in the private credit market. By embracing technology, private credit firms are able to offer investors a more streamlined and efficient experience, while also reducing risk and increasing transparency. As the industry continues to evolve, it is likely that digital integration will become even more important in the years to come.
Private Credit and Social Considerations
Private credit has become a popular investment option in recent years, with investors seeking higher returns than those offered by traditional fixed-income securities. However, private credit investments also have social considerations that investors need to keep in mind.
One of the main social considerations of private credit is its impact on the wider society. Private credit can be a lifeline for small and medium-sized enterprises (SMEs) that may struggle to secure funding from traditional banks. By investing in private credit, investors can help these businesses grow and create jobs, which can have a positive impact on the wider economy.
However, private credit investments can also have negative social impacts, particularly if they are made in companies that engage in unethical practices. Investors need to carefully consider the social impact of the companies they are investing in and ensure that they align with their values.
Another social consideration of private credit is its impact on private companies. Private credit can be a useful source of funding for private companies that may not have access to public markets. However, private credit investments can also come with restrictive covenants and high-interest rates, which can put a strain on the finances of private companies.
Investors need to carefully consider the terms of private credit investments and ensure that they are fair and reasonable for the companies they are investing in. They should also consider the long-term impact of their investments on the companies and the wider society.
Overall, private credit investments can have both positive and negative social impacts. Investors need to carefully consider the social considerations of their investments and ensure that they align with their values. By doing so, they can help support the growth of SMEs and private companies while also promoting ethical and sustainable business practices.
The War in Ukraine and its Impact on Private Credit
The ongoing conflict in Ukraine has had a significant impact on global markets, including the private credit market. According to an article by Fidelity International, less than a third of the companies covered by their analysts have any direct or indirect exposure to Russia or Ukraine. However, the situation is evolving rapidly, and investors must remain vigilant to the potential risks.
Oliver Wyman has identified ten watchpoints for financial services on the war in Ukraine, including the risks of managing a fast-moving and complex sanctions environment, tough decisions on onshore Russian footprint, challenges in liquidating or managing existing holdings of Russian securities, credit exposure to the Russian economy, and heightened cyber threats requiring elevated defences.
Santander highlights that Russia accounts for a much larger share of global commodity supply, and Ukraine is also a major supplier of agricultural commodities. Global oil prices have increased by 11%, and UK wholesale gas prices have increased by 40% since the invasion. In March, UK consumer confidence fell to its lowest level.
The Financial Times reports that the credit cycle is turning as the Ukraine war adds to inflation concerns. The conflict has disrupted supply chains, leading to shortages of goods and rising prices. This, in turn, has led to concerns about inflation and its impact on the wider economy.
In conclusion, the war in Ukraine has had a significant impact on private credit markets, with potential risks including exposure to the Russian economy, supply chain disruption, and inflation concerns. Investors must remain vigilant and stay up-to-date with the evolving situation to manage these risks effectively.
Fund Management and Pensions in Private Credit
Private credit has become an increasingly popular asset class for institutional investors such as pension funds. As banks continue to retreat from lending, private credit funds have stepped in to fill the gap, offering attractive yields and diversification benefits.
Fund management firms have been quick to respond to the growing demand for private credit. Many have launched new funds focused on the sector, while others have expanded their existing offerings. According to a recent report by Private Equity Wire, target allocations to private credit among pension funds are now in double figures, with direct lending remaining the standout strategy as interest rates rise.
Pension funds have been attracted to private credit due to its potential to generate higher returns than traditional fixed income investments, while also providing diversification benefits. Private credit investments can include direct lending, mezzanine debt, distressed debt, and other forms of credit.
However, investing in private credit does come with risks. Private credit investments are illiquid and can be difficult to value, making it essential for investors to conduct thorough due diligence before committing capital. In addition, the lack of transparency in private credit markets can make it challenging for investors to assess the risk of their investments.
Despite these challenges, private credit remains an attractive option for pension funds looking to generate higher returns in today's low-yield environment. As the sector continues to grow, fund managers are likely to launch new products to meet the increasing demand from institutional investors.
Tax Implications in Private Credit
Private credit funds have become an attractive source of financing for businesses in the UK, but they come with their own set of tax implications. Understanding these implications is essential for investors and borrowers alike.
Taxation of Interest Income
One of the main tax implications of private credit is the taxation of interest income. In the UK, interest income is subject to income tax, and private credit funds are no exception. Investors in private credit funds will need to pay income tax on the interest income they receive from these funds.
Withholding Tax
Another important tax implication of private credit is withholding tax. Withholding tax is a tax levied on income (interest, dividends, royalties, etc.) earned by non-residents of a country. In the context of private credit, withholding tax may be levied on interest income earned by non-UK residents.
VAT Implications
Value-added tax (VAT) is another tax that may have implications for private credit. VAT is a tax on the value added to goods and services at each stage of production and distribution. In the context of private credit, VAT may be levied on fees charged by private credit funds to borrowers.
Taxation of Capital Gains
Private credit funds may also generate capital gains, which are subject to capital gains tax in the UK. Capital gains tax is levied on the profit made from the sale of an asset. In the context of private credit, capital gains tax may be levied on the profit made from the sale of loans or other debt instruments.
Conclusion
Private credit funds have become an important source of financing for businesses in the UK, but they come with their own set of tax implications. Investors and borrowers alike need to be aware of these implications and take them into account when investing in or borrowing from private credit funds.
Private Credit in Your Inbox
Stay up-to-date with the latest news and developments in the private credit market with a subscription to industry newsletters and publications delivered straight to your inbox. Here are some of the top options:
Private Debt Investor: This publication covers the global private credit market, providing news, analysis, and data on fundraising, deals, and trends. Subscribers can choose from a range of newsletters, including daily news briefings and weekly roundups of industry news and analysis.
Alternative Credit Intelligence: This publication focuses on the alternative credit market, including private debt, direct lending, and distressed debt. Subscribers receive daily news updates, as well as in-depth analysis of market trends and interviews with industry leaders.
Creditflux: This publication covers the credit markets, including private credit, structured credit, and credit derivatives. Subscribers receive daily news briefings, as well as weekly and monthly publications with analysis of market trends and data on fundraising and deal activity.
PEI: This publication covers the private equity industry, including the private credit market. Subscribers receive daily news updates, as well as in-depth analysis of fundraising, deal activity, and market trends.
In addition to these publications, many industry associations and conferences offer newsletters and email updates to keep members informed of the latest developments in the private credit market. Subscribing to these resources can help investors and industry professionals stay informed and make informed investment decisions.
Conclusion
Private credit markets in the UK have been thriving despite the uncertain economic outlook and the COVID-19 pandemic. The demand for private credit from borrowers remains high, and investors continue to look to the potential benefits offered by short-dated private credit assets.
The changing landscape for private credit investing has led to a multi-faceted role for private credit in helping to finance the post-pandemic recovery and supporting changes to drive a greener, more sustainable, and fair recovery for current and future generations.
Rising rates may increase private credit's appeal, as investors seek higher yields in a low-interest-rate environment. However, investors should be aware of the potential risks associated with private credit investments, such as liquidity risk, credit risk, and operational risk.
Overall, private credit markets are likely to continue to thrive in the UK, with high demand from borrowers and investors, as well as a changing economic landscape that presents opportunities for private credit to play a critical role in the post-pandemic recovery.
Frequently Asked Questions
What are the top private credit firms in the UK?
There are several top private credit firms in the UK, including Alcentra, Ares Management, BlueBay Asset Management, and Pemberton. These firms provide funding to UK businesses through private credit, which is also known as private debt, direct lending, or private lending. Private credit has become more vital to UK businesses in recent years.
What events does Private Debt Investor host in the UK?
Private Debt Investor hosts several events in the UK, including the Private Debt Investor Forum Europe and the Private Debt Investor Breakfast Briefing. These events bring together private credit professionals to discuss the latest trends and developments in the industry.
What are the benefits of investing in private credit?
Investing in private credit can provide several benefits, including higher yields than traditional fixed income investments, diversification from public markets, and the potential for lower volatility. Private credit also allows investors to support UK businesses by providing them with much-needed funding.
How has the private credit industry performed in the UK?
The private credit industry in the UK has performed well in recent years, with strong demand from borrowers and investors alike. According to a report by the Alternative Credit Council (ACC) and the British Business Bank, private credit managers provided £6.4bn in funding to UK businesses in 2019.
What is the outlook for private credit in the UK?
The outlook for private credit in the UK is positive, with continued demand from borrowers and investors. The ACC and British Business Bank report also noted that private credit managers are optimistic about the future, with 88% expecting to maintain or increase their lending to UK businesses in the next 12 months.
What are the criteria for winning a Private Debt Investor Award in the UK?
The criteria for winning a Private Debt Investor Award in the UK include demonstrating excellence in private credit, innovation, and impact on the industry. The awards are judged by a panel of industry experts and recognize the top performers in the private credit industry.
Private Equity News UK & International
Private equity firms play a crucial role in the economy by providing capital to businesses for expansion, innovation, and operational improvements.
This increased flow of capital has a direct impact on job creation, industry advancements, and overall economic development.
As a dynamic and constantly evolving sector, it is essential for professionals and investors to stay informed about the latest news, trends, and developments in the realm of private equity.
Regular updates and in-depth analyses help these stakeholders make better-informed decisions and efficiently manage their portfolios. From major acquisitions and fundraising activities to regulatory changes and industry milestones, private equity news serves as a valuable source of information for all participants in the market.
Private Equity News UK & International Guide
Within the US, various private equity firms, such as Blackstone and Thoma Bravo, have been making headlines with notable investments and deals.
Staying aware of these key players' activities enables investors and industry professionals to identify potential opportunities and evaluate potential risks.
By consistently engaging with private equity news, individuals can build a comprehensive understanding of the market landscape and maintain their competitive edge in this fast-paced and ever-changing sector.
Understanding Private Equity News
Key Concepts
Private equity (PE) is a form of alternative investment that involves providing capital to companies in exchange for ownership stakes. The primary goal of private equity firms is to generate returns for their investors, also known as limited partners (LPs).
In many cases, PE firms focus on acquiring controlling interests in companies, so they can actively participate in the management and decision-making process to drive growth and profitability.
Investments in private equity typically follow a few strategies, such as leveraged buyouts, growth capital, and venture capital.
Private Equity News UK & International Guide
These strategies cater to different stages in the life cycle of a company and target varying risk and return profiles.
Leveraged buyouts: Acquiring a controlling stake in an established company, primarily backed by debt financing.
Growth capital: Providing capital to fast-growing businesses for expansion, acquisitions, or development of new products and services.
Venture capital: Investing in early-stage companies with high-growth potential, but also higher risk.
Growth and Opportunities
Over the past few years, the private equity landscape has seen significant growth, with increased interest from institutional investors seeking higher returns and diversification from traditional assets. This has led to a surge in private equity fundraising, driving competition and transforming the sector.
One of the key growth drivers is the increasing demand for investment opportunities in technology, media, and telecommunications (TMT) as well as business services sectors. Due to their innovative nature and potential for scalability, these sectors often present attractive avenues for private equity firms to deploy capital.
In addition to direct investments, co-investment opportunities have become more popular among LPs. Co-investment is a strategy that allows investors to invest alongside private equity firms in specific deals, providing them with increased control over their investments and potentially reducing fees and carried interest paid to the general partners.
To maintain competitiveness and stay ahead in the industry, private equity firms need to adapt to the evolving landscape by exploring new investment opportunities, capitalising on market dislocations and working closely with portfolio companies to create value.
Major Players in Recent Private Equity News
Blackstone
Blackstone is a leading global investment firm that specialises in private equity, real estate and other alternative investment strategies. Founded in 1985 by Stephen Schwarzman and Peter Peterson, the company has significantly grown its presence across various sectors to become a dominant force in the private equity industry. With a strong track record and an experienced team, Blackstone continues to make strategic investments and create value for its partners, shareholders, and portfolio companies.
Apollo
Apollo Global Management is another major player in the private equity space, founded in 1990 by Leon Black, Joshua Harris, and Marc Rowan. The firm is known for its diversified approach to investing, including a focus on distressed assets, corporate carve-outs and special situations. Apollo has a reputation for delivering strong returns for its investors, and its expertise spans across various industries, from financial services to chemicals and manufacturing.
Oak Hill Advisors
Oak Hill Advisors is a prominent private equity firm with a focus on high-quality investments in middle-market companies. Established in 1987 by Robert M. Bass, the firm has a long history of partnering with talented management teams to achieve growth and operational excellence. Oak Hill Advisors focuses on sectors such as consumer, industrial, healthcare, and technology, with a team that combines deep industry knowledge, operational expertise and a disciplined investment process.
Blue Owl Capital
Blue Owl Capital is a relatively new player in the private equity arena, formed in 2021 through the combination of Owl Rock Capital and Dyal Capital Partners. The firm specialises in alternative asset management, with a primary focus on direct lending and GP capital solutions. Blue Owl Capital's expertise extends across a range of industries, offering flexible financing solutions to help businesses grow and succeed in the increasingly competitive global market.
HPS Investment Partners
Founded in 2007, HPS Investment Partners is a leading global investment firm that manages strategies in various alternative asset classes, including private equity, credit, and real assets. The firm has built a strong track record of generating attractive risk-adjusted returns through its disciplined investment approach and focus on long-term value creation. With its team of experienced professionals, HPS Investment Partners has become a preferred partner for companies and investors looking for tailored solutions and growth opportunities.
Regulatory Landscape
The private equity industry is witnessing notable changes in the regulatory landscape, driven by factors such as the post-Brexit scenario and the introduction of new regulations. Private equity firms in the UK and Europe must prepare themselves for these shifts, as they will need to understand how to continue marketing their funds across the EU and adapt to the fresh regulations being implemented source.
The UK's regulatory framework is transforming, with the government taking forward reforms in various sectors. The prudential regimes for banks, insurers, and investment firms are experiencing changes, following the recommendations of the Hill and Kalifa reviews. The focus has shifted towards topics like digitalisation, operational resilience, customer outcomes, and diversity source.
Moreover, private equity is about to become less private due to the increase in regulations since the financial crisis. This shift has been driven by the need for more transparency and better governance, which has directly impacted the industry source.
The role of regulatory bodies, such as the Securities and Exchange Commission (SEC), is also essential in shaping the regulatory landscape in the private equity sector. The SEC actively monitors private equity firms to ensure compliance with regulations and maintain market integrity.
In conclusion, the regulatory landscape for private equity is evolving, with a shift towards increased scrutiny and transparency. Firms need to adapt swiftly and stay informed about these developments to ensure compliance and success in the industry.
Private Equity News UK & International Guide
Private Equity in Different Regions
Europe
In Europe, private equity activity has experienced significant momentum coming off the industry's record-breaking performance in 2021, although high inflation and rising interest rates are impacting the industry in 2023, according to Bain & Company.
The senior European executives on the Fifty Most Influential in Private Equity 2022 list have continued to adapt to these challenges and navigate through changing market conditions. Deal pipeline in European private equity deals remains robust despite recent economic headwinds, as seen in a report by Private Equity News.
Australia
Australian private equity has shown resilience in the face of economic challenges and is exploring new opportunities.
As part of the Asia-Pacific region, Australia can take advantage of emerging market growth and increasing integration with its neighbouring countries. However, Australian private equity firms may face challenges posed by higher valuations, increasing competition, and regulatory complexities.
Asia Pacific
Asia Pacific private equity has continued to grow, driven by increasing deal flows and an abundance of dry powder ready to be deployed, as stated in McKinsey's report on the top trends in global private markets. Key markets, including China, India, and Southeast Asia, are experiencing surging deal activity, with private equity firms exploring sectors such as technology, healthcare, and consumer goods.
However, political uncertainties, regulatory complexities, and currency risks continue to pose challenges for private equity in the region.
Sector-Focused Investments
Health
The health sector has seen an increase in private equity investments in recent years.
This is due to growing demand for medical services, healthcare innovation and an ageing population.
Private equity firms are capitalizing on this trend, investing in areas like healthcare providers, pharmaceuticals, biotechnology and medical devices. For example, UK mid-market private equity investors have been active in the healthcare industry, with a total deal value of £20.7 billion in H1 2021 KPMG UK.
Food
Private equity investments in the food sector have proven profitable as firms look to capitalize on growing consumer demands for healthier, organic, and sustainable products.
Opportunities in this industry have arisen in areas such as food processing, distribution, and retail. Sector-specific funds focused on food have demonstrated stronger return rates than generalist strategies, with an average internal rate of return (IRR) of 22.6% Private Equity news.
Energy
The energy sector is another area of interest for private equity investors, particularly in the renewable energy and clean technology fields.
With increasing concerns about climate change, the demand for sustainable energy solutions has grown.
This has led to investment opportunities in solar, wind, hydroelectric and other alternative energy sources. Additionally, private equity investments in this sector can benefit from regulatory incentives and government support for renewable energy projects.
Retail
While the retail sector has faced challenges in recent years, private equity firms are still investing in businesses with strong growth potential. Areas of interest include e-commerce platforms, direct-to-consumer brands, and innovative retail concepts.
By targeting companies that are adept at leveraging technology and adapting to changing market conditions, private equity investors can achieve profitable returns in the retail sector.
Media
The media industry continues to evolve rapidly, offering unique investment opportunities for private equity firms. Traditional media assets, such as television and print, are being transformed by digital advancements and shifted consumer behaviours.
Sector-focused investments in media can encompass areas such as content production, streaming services, digital advertising, and gaming. Firms that specialize in the media sector are well-positioned to capitalize on the growth and innovation taking place in this industry.
Sport
The sports sector offers a variety of investment opportunities for private equity, spanning from professional sports teams and leagues to fitness centres and related businesses.
Increased interest in health and wellness, coupled with the growth of live sports content and technology-driven fan experiences, has led to strong investment potential. Private equity firms with sector expertise are well-suited to navigate the ongoing changes and opportunities present in the world of sport.
Buyout Funds and Loan Packages
Buyout funds play a crucial role in the private equity landscape, as they provide a platform for investors to acquire controlling stakes in established businesses.
A key strategy involved in buyout funds is to utilise borrowed capital, or loans, to finance acquisitions and support portfolio companies. The proper use of loan packages can significantly impact the sustainability and success of a buyout fund's investments.
One of the primary sources of finance for buyout funds is senior private loans. These loans often carry high interest rates, such as the record-sized $4.8bn loan with an interest rate above 12 per cent. High interest rates reflect the risk that lenders assume when supporting buyout transactions, which typically involve large amounts of debt.
While buyout funds, such as Blackstone with its latest $20bn fund, continue to attract significant capital from investors, the current market environment presents challenges.
A recent shortage of debt financing has led to a decline in global buyout activity, with private equity firms having to adapt their financing strategies.
One innovation in the financial landscape is the emergence of NAV (net asset value) loans. NAV loans allow buyout funds to tap into their portfolio's inherent value by lending against the net asset value of their holdings.
This can provide buyout funds with much-needed liquidity during times of limited credit availability, enabling them to support existing investments or pursue new opportunities.
Despite market challenges, there are signs of optimism for the private equity industry. UK mid-market private equity investment remained strong in 2022, with a focus on technology, media and telecoms (TMT), and business services sectors. This resilience showcases the adaptability and potential of buyout funds.
In summary, buyout funds and their use of loan packages are essential components of the private equity landscape. Although market conditions can create hurdles, buyout funds continue to adapt and innovate to maintain a strong presence in the financial markets.
Private Equity News UK & International Guide
Evaluation and Analysis
In the realm of private equity, comprehensive evaluation and analysis of investment opportunities are crucial for generating robust returns. Industry professionals rely on accurate data and insightful analysis to make informed decisions about potential deals in the marketplace.
One mainstay of private equity evaluation is financial data, which encompasses historical financials, projected revenues, and operational statistics.
This information enables investors to gauge the historical performance of a target company, as well as to gain an understanding of its competitive landscape and the potential for future growth.
Another essential aspect of private equity analysis is to examine the management team.
A strong management team with a proven track record of success is a significant component in determining the likelihood of a successful acquisition or investment. In addition to the management team's experience, their ability to create value and achieve strategic goals contributes to the overall viability of the deal.
In terms of deal structures, private equity firms must carefully consider factors such as leverage, risk, and return on investment. A thorough analysis of these factors helps to establish a clear framework for the potential investment, ensuring that the deal aligns with the firm's overarching investment strategy.
One of the key responsibilities of private equity professionals is to perform due diligence on prospective investments.
This includes a deep dive into the target company's industry, regulatory environment, competitive position, and growth prospects. Additionally, firms must assess the target company's financial stability, legal structure, and any potential legal liabilities that may arise during the acquisition process.
In summary, evaluation and analysis play a central role in the private equity sector. Diligent examination and interpretation of relevant data help private equity firms make well-informed investment decisions, ultimately leading to the financial success of their portfolio companies.
Private Equity News UK & International Guide
Exits and Returns
In recent years, the private equity (PE) landscape has experienced a decline in exit activity. UK mid-market PE firms, for instance, invested £46 billion in 2022, representing a 12% decrease from 2021, but still up by 13% compared to pre-pandemic levels1.
Exit volumes experienced a more significant decline, with the total number of reported exits falling by nearly a quarter in 2022 compared to the previous year1.
In some cases, private equity firms have encountered challenges in exit strategies due to a lack of attention given to creating an effective exit story2.
An effective exit story is important because it allows investors to understand the value created by the transformation of acquired assets, making them more likely to invest in the future.
The decline in exits can have long-lasting consequences for limited partner (LP) returns.
The downturn that began in late 2022 and continued into 2023 is said to have had a negative impact on the US PE exit value, amounting to an estimated $60 billion shortfall in deal value3. This has potentially affected the distribution of invested capital back to LPs, which could impact future investments.
Despite these challenges, there have been notable successful exits in the market. ECI Partners, a growth-focused mid-market private equity firm, completed seven exits in 2021, with a combined value of £2.5 billion4. These exits had an average return of 3.5x and included business such as CPOMS, Content+Cloud, and the initial public offering (IPO) of Auction Technology Group4.
Moving forward, it is important for private equity firms to focus on both the acquisition and exit process to ensure they can deliver optimal returns to their investors. By planning exit strategies and developing persuasive exit narratives, PE firms may be better positioned to maintain a strong exit landscape in the future.
Private Equity News UK & International Guide