Private Equity Consulting

We spent the last 2 months researching the TMT private equity market. The result? The first edition of our TMT report, packed with insights on the largest investors, their portfolios, deal trends, holding periods, growth rates, and much more. Full report link: https://lnkd.in/gAw4-5fv Here are the top-ranked Investors (by managed EV in the TMT sector): → Thoma Bravo ($132.4bn)  → Vista Equity ($83.5bn) → KKR ($76.5bn) → Hg ($69.2bn) → EQT ($65.3bn) → Blackstone ($57.5bn) → Silver Lake ($57.4bn) → TPG Capital ($48.1bn) → TA Associates ($46.7bn) → Bain Capital ($46.5bn) Overall, the top 100 investors collectively manage an estimated EV of $1.6tn across 2,104 assets. The top 10 alone account for 42%. Hg stands out for it’s particularly strong focus on Europe (90% of its EV). 4 other takeaways from our analysis: 1️⃣ US-headquartered investors dominate the TMT 100 ranking, managing 74% of aggregate EV. Sponsors headquartered outside the US represent only 26% of total TMT 100 EV — with European sponsors at 20%, Canadian at 2%, and other international investors at 4%. 2️⃣ TMT overall sees significantly higher strategic exit activity than other sectors. This is particularly true for smaller deals. 3️⃣ TMT assets are being held longer than ever, with a median holding period of 5.4 years. Interestingly, the gap between TMT and other sectors has also narrowed over the years. We expect next year to be a challenging one. 4️⃣ TMT revenue growth has consistently outpaced other sectors by 5-6 percentage points Margins are 3–5 percentage points higher as well. 𝗦𝗼𝗺𝗲 𝗼𝗳 𝘁𝗵𝗲 𝗹𝗮𝗿𝗴𝗲𝘀𝘁 𝗣𝗘-𝗯𝗮𝗰𝗸𝗲𝗱 𝗮𝘀𝘀𝗲𝘁𝘀 𝗶𝗻 𝘁𝗵𝗲 𝘀𝗽𝗮𝗰𝗲 𝗶𝗻𝗰𝗹𝘂𝗱𝗲: Access Group, Anaplan, athenahealth, BMC Software, Cloud Software Group, Cotiviti, Coupa Software, Electronic Arts, Genesys, IFS, Internet Brands, McAfee, Nielsen, Peraton, Qualtrics, UKG, Visma, WME Group, Zayo Group, Zelis, and many more. Overall, PE-backed TMT assets employ over 2.5 million people, with 63% in Software. Bain Capital stands out as the leading PE job creator within TMT. Lots more data + 49 charts in the full report. It’s our first sector-focused report. Do share some love 🫶 #TMT #PrivateEquity #Investors #Report

In the past 10 months at EY SaT, I have worked on numerous deals and dealt with around 3 Private Equity Firms. Across all the deals, one thing became clear - PE investors look at businesses through a very specific lens. In this post, let’s discuss the key factors they analyze, with real-world examples: 1] Sustainable & Scalable Business Model PE funds are not just looking for revenue growth - they want businesses with a model that can scale efficiently. Example: A D2C brand with ₹500 Cr revenue may seem attractive, but if its customer acquisition cost is high and repeat purchases are low, investors will think twice. Compare this to a SaaS company with predictable recurring revenue—investors would lean towards the latter. 2] Unit Economics & Profitability Cash burn is fine, but only if backed by strong unit economics. Example: A food delivery startup with ₹100 per order revenue but ₹150 cost per order (even after discounts) is a red flag. On the other hand, a logistics company with a clear path to breakeven per delivery is much more attractive. 3] Industry Tailwinds & Competitive Advantage PE investors assess whether the industry itself has strong growth potential and if the company has a sustainable edge over competitors. Example: Fintech lending is booming, but does the company have a unique underwriting model, regulatory approvals, or a sticky customer base? Without these, it’s just another player in a crowded space. 4] Governance & Compliance Risks A company with strong growth but weak compliance is a ticking time bomb for investors. Example: Many startups in the past have faced issues due to financial misreporting or governance lapses, leading to massive devaluations (WeWork being a classic case). A PE fund will conduct rigorous due diligence to avoid such risks. 5] Exit Potential & Value Creation PE investors don’t just invest—they need a clear plan for exiting with strong returns. Example: If a company has a strong IPO pipeline, potential M&A interest, or clear secondary sale opportunities, it becomes a far more attractive bet. CRUX At its core, PE investing is about value creation—identifying businesses that are fundamentally strong and helping them scale further. If you were a PE investor, what factors would matter the most to you? Let’s discuss in the comments!

Private equity firms have emerged as the newest distribution channel for AI startups. While public companies have decreased from 6,639 in 2000 to 3,550 in 2024, PE-owned companies in the US have grown from 1,950 to 14,300. The rate of growth continues to accelerate. The crossover happened in 2009, when PE inventory overtook public company counts for the first time. By 2024, PE-backed companies outnumber public firms by roughly 4:1. The shift is driven by the massive expansion of PE ownership across corporate America. That’s not to say the sizes of PE-owned companies are the same as publics. In fact, they are smaller. The point isn’t that startups previously focused on public companies. Rather, the data reveals the immense scale of private equity portfolios. (second image) Data Sources : CRSP, Wilshire 5000, PitchBook, American Investment Council, Citizens Bank. The mid-market profile of these PE-owned companies suits AI startups’ desires for faster sales cycles. Plus, the profit motive of private equity aligns perfectly with AI startups’ capacity to cut costs & drive efficiency. PE firms acquire companies to improve margins & operational performance before exit. AI tools that reduce headcount, automate processes, or accelerate workflows deliver exactly what PE operating partners need. A private equity firm owning 25 companies proves value in one or two before rolling out to the entire portfolio. Control enables rapid deployment. This creates an efficient channel for AI startups to demonstrate value & cross-sell. PE firms gain operational leverage while AI startups access more than 14,000 motivated buyers. This new go-to-market motion redefines how AI software reaches the market, bypassing the traditional enterprise sales grind in favor of networks that can deploy at scale.

Can you guess a fund's final performance based on interim quarterly reports?   Yes - according to a recent paper by Stanford and Chicago academics.   3 highlights - background, key findings, and applications for LPs:   ________________________   1️⃣ Background:   ‣ Interim fund NAVs are based on discretionary, "fair market value" valuations by GPs   ‣ Past studied have found that NAVs often deviate from fair value as they tend to: (i) be conservative on average (ii) get inflated around fundraising by low quality GPs (iii) held at cost when investments are underperforming   ‣ Can these patterns be exploited by LPs trying to predict final performance based on interim NAVs? ________________________   2️⃣ Key findings:   ‣ The paper builds three valuation metrics to predict future returns: (i) "interim multiple": fund TVPI at the time the forecast is made (ii) "past staleness": fraction of previous quarters with 0 changes in fair value (iii) "markdown frequency": fraction of previous quarters with negative changes in fair value   ‣ Overall, past staleness and markdown frequency predict future changes in multiples, but the results differ for buyouts vs venture capital   ‣ For buyouts: markdown frequency and past staleness (even in the first few years) predict negative future performance   ‣ For venture: higher interim multiples predict future negative returns, but past staleness and markdown frequency do not   ‣ "…the combination of interim multiple, past staleness, and past markdown frequency helps predict whether an investment will end up among the best or worst performing investments at exit. These predictions are informative as early as the first year of the investment."   ________________________   3️⃣ Applications for LPs:   ‣ Due diligence on primary commitments: analysing track record and projecting performance of currently active funds   ‣ Due diligence on secondary investments: modelling residual upside on funds   ‣ Portfolio monitoring: sense-checking valuations and projecting future performance ________________________   Source: "Interim Valuations, Predictability, and Outcomes in PE" - by Ege Ercan, Steven Kaplan, and Ilya Strebulaev - 2024   #privateEquity #ventureCapital #valuations

Most people see M&A as a straight line: LOI → Diligence → Close → Integrate. That’s not how deals actually work. Deal success comes from managing three interconnected levers. A concept I learned from Carlos Cesta,  and they’re in a constant feedback loop: 1️⃣ Deal Structure: How you pay and align incentives (cash, equity, earnouts, escrows). Defines who holds risk, how much control you have, and post-close alignment. 2️⃣ Due Diligence: What you uncover and your ability to validate it. Findings shift your comfort level with price, structure, and integration speed. 3️⃣ Integration Strategy: Your blueprint for combining people, go-to-market, and systems. The speed, depth, and sequencing directly impact value capture. Here’s the kicker: Change one lever and the other two have to adjust. Example – shaky revenue forecast?  ➡ Move to a contingent earnout (structure)  ➡ Slow down or phase integration (strategy) Buyer-led M&A™ is about running this loop intentionally: testing assumptions, making trade-offs, and keeping all three levers in sync to engineer success. Don’t manage M&A like a checklist. Manage it like a system.

Private equity has to work harder 😰 to make returns ➡️less financial engineering, more hands-on operational improvements⬅️ "Financial engineering just isn’t working as well as it once did for private equity shops. Some of the biggest, including Goldman Sachs and Blackstone, have added veterans with operations experience from industry giants like Walmart and Honeywell. Others like Brookfield Asset Management and Partners Group are leaning even more into their roots as operators. They’re looking for tangible results such as wider margins and higher cash flow instead of gauzy 'multiple expansion.' It’s a more hands-on approach that includes building five- and 10-year strategic growth plans for the companies they own, and sometimes helping them market and sell their products. 'Helping companies operate well should always be an important initiative,' said Lou D’Ambrosio, the former CEO of Sears Holdings who leads Goldman’s unit devoted to boosting growth at the firm’s private holdings. 'But if several years ago it was a ‘nice to have,’ now it’s a ‘need to have.’' They need it because private equity firms are contending with a drought in the deals market and holding periods as much as three years longer than historical averages. 'That’s created a lot of challenges for that cohort of investments made in 2021, and you can’t assume multiples expansion,' said Andrea Auerbach, head of global private investments at Cambridge Associates, whose team allocates nearly $15 billion to private market managers every year on behalf of pension funds, endowments and other investors. Multiples expansion, in private equity parlance, is when a firm’s value rises far more than the underlying fundamentals. Investors can’t count on that to continue — a McKinsey & Company study found multiples were shrinking as of last year. CAIS Group, which consults on alternative investments, sorted through figures on deals from the Institute for Private Capital and found that boosting revenue growth and margins added almost twice as much value than multiple expansion during the decade following the 2008 financial crisis. It’s a playbook that Partners Group and Toronto-based Brookfield started out with, and others are now seeing the merits. 'The prior era was a bit more transactional and about finding investment opportunities,' said Partners Group’s CEO Dave Layton. 'Our industry is changing. You don’t have the same tailwinds.' Sensing the turn, Partners Group brought on Wolf-Henning Scheider a year ago as its private equity head. He’s an unusual choice — 'our head of private equity has never done a private equity transaction,' Layton said. But Scheider has 'the mindset of an operator, not the mindset of a deal-doer.'" (Bloomberg 25/9/24) (+++Opinions are my own. Not investment advice. Do your own research.+++) #markets #investing #money #wealthmanagement #privateequity Tap the bell 🔔 to subscribe to my profile & you'll be notified when I post. 💸

Software Susceptibility: Software multiples have compressed amid uncertainty around whether incumbents can defend pricing power and sustain growth in an AI-first workflow environment. The equity market has grown increasingly skeptical, with leading names like Salesforce and Adobe (both down ~32% y-o-y), driven primarily by AI-related headline risk. AI agents are disrupting the traditional SaaS model by autonomously handling tasks, reducing reliance on human “seats,” and shifting pricing toward outcome- or usage-based structures. This dynamic commoditizes core software, materially lowers development and “code” costs through AI-assisted creation, and enables agile, vertical AI-native players to capture share from incumbents constrained by legacy subscription workflows. Copilots and agents are now deeply embedded across engineering, IT, operations, finance, and go-to-market functions, pushing companies from AI experimentation toward tangible execution. Leading organizations are translating these investments into measurable productivity gains and durable competitive advantages. Incumbents must rapidly integrate agents and pivot toward results-driven services or risk margin compression, as agents expand TAMs while pressuring multiples in maturing segments. Regretfully, private equity deployed enormous amounts of capital during the software bubble years (2020–2022), with private credit managers (direct lending) providing roughly 50% of the purchase price. Financing was extended at 6x–9x debt-to-EBITDA as PE firms paid up to 18x to acquire these businesses. These investments were underwritten on assumptions of recurring revenue, sustained growth, and low customer churn. Since then, multiples have contracted meaningfully, growth projections have flattened, and the looming risk is that AI-first software companies begin to take market share. Only a small percentage of the 2020–2022 cohort has refinanced to date, with a wave of maturities approaching over the next few years. Lenders that extended loans at 9x debt-to-EBITDA may find that borrowers can now only refinance at 3x–4x, creating a substantial equity gap that must be filled. The chart below shows the EV/NTM Sales multiple for software companies (excluding new additions) from 2013 to 2025. Data from Morgan Stanley indicate that valuations rose steadily from ~4x to a 2021 peak of 18.3x amid market exuberance, before contracting sharply. The current ~6.0x level sits below the trailing five-year average of 9.4x, suggesting either (1) undervaluation relative to recent history and potential buying opportunities, or (2) a structural re-rating driven by AI disruption. Marathon Asset Management has been very cautious with respect to software, but I am curious to know what you think: is this a buy, or buyer beware?

There is a reason the India–GCC–Singapore corridor is becoming more strategically important. And it is not just because India is growing. It is because capital is no longer looking for growth in isolation. It is looking for growth with structure. That changes everything. For sophisticated investors and family offices, the question is not simply: “Where is the opportunity?” It is: “How do I access that opportunity through a platform I can actually trust?” That is where most cross-border stories fall apart. They have access without governance. Or governance without reach. Or ambition without architecture. Real platforms are harder to build because they require more than relationships. They require: - credible jurisdictions - aligned capital routing - disciplined governance - operational control - and the ability to connect multiple markets without creating unnecessary friction or noise That is why I believe the real opportunity in this corridor is not just in individual deals. It is in building the infrastructure for capital around them. India offers depth of opportunity. The GCC offers serious pools of capital and increasing strategic intent. Singapore offers governance, trust and global connectivity. Mauritius, when used properly, offers fund architecture that can support cross-border execution. Individually, each matters. Together, they become something much more powerful. That is the thinking behind what we are building at Desertbridge. Not noise. Not optics. A serious platform for serious capital. I suspect the next decade will belong, in part, to the firms that understand this corridor early, and build with enough discipline to deserve it. #Desertbridge #CrossBorderInvesting #FamilyOffice #PrivateMarkets #InstitutionalCapital

𝐓𝐡𝐞 𝐐𝐮𝐚𝐧𝐭𝐢𝐭𝐚𝐭𝐢𝐯𝐞 𝐀𝐩𝐩𝐫𝐨𝐚𝐜𝐡 𝐭𝐨 𝐏𝐫𝐢𝐯𝐚𝐭𝐞 𝐄𝐪𝐮𝐢𝐭𝐲: From Theory To Practice (And Performance) 🚀 Academia has been tackling the question of PE’s long-term performance and risk, and two research papers stand out. The first paper was published by investment firm AQR, in which they converted PE returns into cash- and time-weighted figures and compared them to its public counterparts. They show that from 1986 to 2017, the Cambridge US PE benchmark posted a 9.9% p.a. return. During the same time period, the S&P 500 averaged 7.5% p.a. It’s an impressive difference, especially if assuming a 30-year compounding. However, the S&P 500 does not reflect PE’s bias for small, value stocks: AQR used the standard academic factors to construct a small-cap value strategy in public equities, which would’ve yielded 11.4% p.a., ahead of private equity. The second paper comes from Harvard University. They went to great lengths to analyze the almost 700 public-to-private transactions by PE firms from 1984 to 2017 in order to understand PE firms’ selection criteria and create a mimicking public equities portfolio. This way, they arrived at probably the most adequate risk estimates of PE yet: Using 2x portfolio leverage comparable to the analyzed PE transactions, their replicating public equity portfolio sees a volatility of around 27% and a maximum drawdown in this time period of -78% (2x the S&P). There's two take-aways from those two papers: 1️⃣ First, that PE success, on average, is less driven by operational efforts (i.e. the often-mentioned “value-add”) but rather by a focus on the aforementioned factors, such as cheap valuations. 2️⃣ Second, that PE is much more volatile than many GPs say. Markus and I have seen more than one “chart crime” (like the one below) where GPs show PE as an asset class outperforming public equity with lower volatility, because they compare public equities with mark-to-market pricing with PE’s quarterly NAVs. The paper shows a more realistic figure, with volatility figures for PE that are approximately twice as high as public equities. So now have two sets of numbers that we can work with: AQR’s 2.4% PE outperformance p.a. for a time- and money-weighted return, and Harvard’s 1.8% PE outperformance p.a. on an IRR basis versus the S&P 500. Or in other words: 𝐓𝐡𝐞 𝐚𝐯𝐞𝐫𝐚𝐠𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐢𝐧𝐭𝐨 𝐩𝐫𝐢𝐯𝐚𝐭𝐞 𝐞𝐪𝐮𝐢𝐭𝐲, 𝐡𝐢𝐬𝐭𝐨𝐫𝐢𝐜𝐚𝐥𝐥𝐲, 𝐡𝐚𝐬 𝐦𝐚𝐧𝐚𝐠𝐞𝐝 𝐭𝐨 𝐨𝐮𝐭𝐩𝐞𝐫𝐟𝐨𝐫𝐦 𝐢𝐭𝐬 𝐩𝐮𝐛𝐥𝐢𝐜 𝐜𝐨𝐮𝐧𝐭𝐞𝐫𝐩𝐚𝐫𝐭𝐬. But as always, things are not that easy. We’ve already outlined that PE is considerably riskier than public equities. So let us rephrase that question: 𝐖𝐡𝐚𝐭 (𝐞𝐱𝐜𝐞𝐬𝐬) 𝐫𝐞𝐭𝐮𝐫𝐧 𝐬𝐡𝐨𝐮𝐥𝐝 𝐚𝐧 𝐢𝐧𝐯𝐞𝐬𝐭𝐨𝐫 𝐞𝐱𝐩𝐞𝐜𝐭 𝐟𝐫𝐨𝐦 𝐭𝐡𝐞𝐢𝐫 𝐩𝐫𝐢𝐯𝐚𝐭𝐞 𝐞𝐪𝐮𝐢𝐭𝐲 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐭𝐨 𝐛𝐞 𝐩𝐫𝐨𝐩𝐞𝐫𝐥𝐲 𝐜𝐨𝐦𝐩𝐞𝐧𝐬𝐚𝐭𝐞𝐝 𝐟𝐨𝐫 𝐭𝐡𝐞 𝐫𝐢𝐬𝐤 𝐭𝐡𝐚𝐭 𝐭𝐡𝐞𝐲 𝐭𝐚𝐤𝐞? More on that in next week's newsletter. 🙂

Buyouts in Japan used to be rare. Now they’re leading the region. In 2020, Japan made up 36% of all APAC buyout deals. Last year? That jumped to 56.5%. That’s not a blip. That’s a shift. What’s behind it? Cross-border deals are a big piece — many involving U.S. firms taking advantage of the yen slide. But the real engine is local. Japanese corporates are restructuring. Conglomerates are selling off non-core assets. The kind that PE firms love — underperforming, undervalued, and ready to scale. And Japan’s not flooded with leverage. Its low-rate environment gives firms room to structure these deals with real upside. You’re not betting on policy swings or unstable growth. You’re buying cash-generating businesses in a stable economy. But here’s the catch: fund closings are falling. Fewer managers are locking capital. That means there’s more competition for the good deals — and more pressure to execute fast. If you’re sitting on dry powder, this is the window. Japan’s buyout market is open — but not forever. Source: Preqin’s Alternatives in APAC 2025. Buyout volume in Japan rose from 36.4% (2020) to 56.5% (2024) of total APAC PE buyouts. Cross-border transactions and corporate carve-outs are key drivers. Chart: Fig. 2.3 – APAC PE buyout volume by type; Fig. 1.4 – Japan deal value and volume. For more see our Nomura CIO Corner: https://lnkd.in/e4TCax_g #PrivateEquity #Buyouts #JapanMarkets #CIOInsights #Nomura #Alternatives