The record buyout deal values and exits of 2021 appear a distant memory amid continuing inflation, geopolitical uncertainty, and rising interest rates. But some local private equity firms say there’s still money to be made — as long as you know where to look.
“If you’re an investor, it’s going to be about finding those companies and strategies that can grow faster than the market, can grow faster than their industries, can take share and generate growth in a world where overall growth is going to be slowing,” said Matt Cwiertnia, partner at Ares Management Corp.’s Private Equity Group, which manages $35.3 billion in assets. “(Fund investors) will be looking for alpha generative strategies and managers in 2023, which is going to be very different than beta and cheap leverage strategies that many (investors) benefited from over the past decade.”
Andrew Howard, partner at Westwood-based Shamrock Capital Advisors, which has $4.3 billion in assets under management, shares Cwiertnia’s sentiment.
“In 2023, the investing climate is going to be quite intriguing,” he said. “When I hear people say they’re sitting on the sidelines, that’s fine, but I think this is a time to lean in to opportunities that come from disruption, and that’s where great investments can be made, when people are not looking at that risk the same way.”
Market shift
David Grinberg, a mergers and acquisitions attorney at Sidley Austin in Century City, had a recent run-in with the “sitting on the sidelines” group.
“We had a deal that closed in the fourth quarter where there were no private equity funds in the final stage, and they all gave the same reason: they couldn’t get acceptable or attractive financing,” Grinberg said.
“That had been the first time in a long time where there was, with respect for a company that would otherwise be a private equity target, no private equity showed up. And all of them reported that it was due to financing. Luckily we…
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