Successful private equity investing is a collaborative undertaking. The same is true of the Debevoise Private Equity Report, which has been led since its founding by a group of editors and private equity leaders whose collective careers span the arc of the industry. To celebrate our twentieth anniversary, six of those leaders—Franci Blassberg, Paul Bird, Rebecca Silberstein, Kevin Schmidt, Jennifer Chu and Sally Bergmann—came together for a virtual roundtable to discuss where the industry has been and where it is going. We invite you to watch the conversation below (~30 minutes).

The Roundtable includes these key takeaways:

• Relationships are more important than ever. Private equity has always been a relationship-based business, but this is particularly true today when the quality and depth of a PE firm’s relationships, including with strategic partners, can be critical in getting access to investment opportunities that might otherwise be unavailable. The pandemic provides a further case in point: firms have had to rely on their deep investor relationships in order to make the shift to virtual fundraising and to obtain approvals from their investors to adapt to changing market conditions.
• Private equity’s growth enters a new phase. As core investor pools mature, sponsor firms are increasingly going further afield to continue to diversify their investor base. This requires sponsors to be able to nimbly respond to and comply with local regimes, including with respect to EU regulations and other local marketing requirements. Firms are making inroads into Latin America in the wake of the region’s more private equity-friendly regulations and eyeing yield-hungry high-net-worth individuals (which is likely to prompt a larger conversation about risk). There also remains untapped opportunity among sovereign wealth funds, many of which have yet to enter the private equity investing space.
• Financial sponsors are the new conglomerates. As financial sponsors differentiate themselves based on their ability to act as true partners with portfolio companies, the traditional ten-year fund time horizon is giving way to longer-term, and even indefinite, commitments. This shift in orientation, combined with a reach across regions and industries, is causing financial sponsors to resemble global conglomerates, with a professionalized infrastructure spanning continents and sophisticated capabilities to match rising transparency and compliance expectations.
• A complex PE ecosystem has emerged. The growth of private equity has been supported by not just a web of legal counsel and financial advisors, but also by consulting firms and other advisors that can enhance a sponsor’s knowledge base to put it on par with, or even beyond, that of the M&A/business development group at even a sophisticated strategic. With M&A being a seller’s market, that additional insight helps PE firms develop the complex and creative solutions that can close a deal.
• “Private capital,” is the new paradigm for “private equity.” Sponsors have become much more flexible in their investing structures. It’s not just about control LBOs anymore. Debt, preferred equity, growth equity, PIPEs and co-investment are all part of the toolbox. Private equity has thus evolved from being a niche investment strategy to being a multichannel source of capital for organizations across a wide swath of the corporate life cycle.
• ESG issues are no longer Increasingly, investors are taking a private equity sponsor’s approach to ESG into account in making their decision of whether to invest in a fund—and walking away when they don’t like what they find. Tellingly, investors are doing so not just because of investment guidelines or regulations, but because they see weak ESG follow-through as a warning sign of other problems. Private equity sponsors, for their part, are ramping up their commitment to diversity, equity and inclusion in light of this year’s events underscoring racial justice and gender equity concerns.

We are proud to be associated with the many private equity firms and investors we have been fortunate to work with over these many years. We look forward to continuing our commitment to the industry, as it continues to evolve and expand in the years ahead.

The Private Equity Report Fall 2020, Vol 20, No 3