Good morning and Happy St. Patrick’s Day, Hubsters!
MK Flynn here in New York with the US edition of the Wire.
It was great to spend time with many of you last week at PEI Group’s NEXUS 2025 summit in Orlando!
NEXUS came at a particularly interesting moment this year. The economy – and its impact on the PE industry – was front and center, underscored by the stock market plunge last Monday.
Two and a half months into the year, the M&A environment is far from what many had hoped. To cite just one recent data point, there were zero M&A deals with transaction values of more than $10 billion announced worldwide in February, according to S&P Global.
One of the themes we discussed at NEXUS is how PE pros are managing the current deal slowdown.
“The enemy of transactional activity and the enemy of capital flows is uncertainty and lack of confidence,” Jon Winkelried, CEO of manager TPG, said in a fireside chat at NEXUS with Philip Borel, group editorial director of PEI Group.
Dealmakers pointed out that it takes six to nine months to close a deal and the pipeline now is low, suggesting the downturn may last longer than originally expected.
Nevertheless, many dealmakers see silver linings among the clouds.
“This is going to create an environment where there are going to be some very interesting opportunities,” Winkelried said. “Sometimes, one of the things that happens in this environment is that buyers adjust much more quickly than sellers.”
Buyers may benefit.
“The one good thing about volatility… is that valuations probably come down a little bit,” Milwood Hobbs Jr, head of sourcing and origination at Oaktree, told Private Debt Investor’s Americas Editor, Robin Blumenthal, in a video interview at NEXUS. “Not only does it stimulate M&A, but it brings a little bit of what I call rational behavior in the market.”
Another theme of the conference was the rise in employee ownership at PE companies. Longtime advocate KKR’s Pete Stavros discussed the next step in the process: developing more empathy in CEOs.
Let’s take a dive deeper into those conversations.
Level of confusion
“The enemy of transactional activity and the enemy of capital flows is uncertainty and lack of confidence,” Jon Winkelried, CEO of manager TPG, said in a Fireside Chat with Philip Borel, group editorial director of PEI Group. PE Hub reporter Rafael Canton reported on the talk.
The conversation about how “tectonic shifts” are reshaping the private markets took place on stage at PEI Group’s NEXUS 2025 summit earlier in March.
Premium subscribers to the Wire may read more of Winkelried’s insights and watch a video of the Fireside Chat.
Rational behavior
A potential bright spot for private markets around the pounding that public equity markets have been taking: it could stimulate the long hoped for return of M&A. That’s according to Oaktree’s head of sourcing and origination, Milwood Hobbs Jr, who spoke with Private Debt Investor’s Americas Editor, Robin Blumenthal, at PEI Group’s NEXUS 2025 summit.
Upgrade to the premium version of the Wire to learn more.
Empathy gyms
KKR has identified a decisive success factor when rolling out employee ownership and employee engagement programs at portfolio companies, according to Pete Stavros, global co-head of private equity.
Stavros, a long-time advocate of employee ownership who co-founded Ownership Works in 2022, spoke at NEXUS 2025, sharing some of the lessons learned across 65 implementations of such programs in KKR’s portfolio. Toby Mitchenall, senior editor, ESG and sustainability, at PEI Group, reported on the talk.
“It comes down to that singular person at the top who’s setting the tone: setting the agenda to drive this cultural shift,” Stavros said.
Premium subscribers to the Wire may learn all about Stavros’ latest findings and innovations, including what he calls “empathy gyms” for CEOs.
Coming up
Next week, I look forward to seeing many of you at PEI Group’s Investor Relations Network’s New York Forum, March 26-27. It’s the 20th anniversary of the event!
I’ll be conducting Fireside Chats with Kristin Custar, partner, head of the global investor capital group, TJC; and Tom Eckersley, head of marketing and external affairs, Hg.
In the meantime … tomorrow, Craig McGlashan will bring you tomorrow’s Europe Wire, and Michael Schoeck will bring you the US edition.
Sláinte,
MK
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