Cover story

20 International • June 2020 Cover story

Better capitalised than ever Page 22

The Top 10 over the decade Page 24

A decade that changed PE Page 27

LPs share dealmaking burden Page 28

Testing the value creation story Page 30

Investing responsibly Page 32

The state of private credit Page 34

Industry sweet spots Page 36

A liquid asset class Page 38

The PEI 300 by the numbers Page 40

June 2020 • Private Equity International 21 Cover story An industry better capitalised than ever

With almost $2trn raised between them in the last five years, this year’s PEI 300 are armed and ready for the post-coronavirus rebuild, writes Isobel Markham

nnual fundraising mega-funds ahead of the competition. crisis it’s better to be backed by a pri- figures go some way And Blackstone isn’t the only firm to vate equity firm, particularly and to towards painting a up the ante. The top 10 is around $30 the extent that it is able and prepared picture of just how billion larger than last year’s, the top to support these companies, which of much capital is in the 50 has broken the $1 trillion mark for course we are,” he says. hands of private equi- the first time, and the entire PEI 300 “The businesses that we own at Aty managers, but the ebbs and flows of has amassed $1.988 trillion. That’s the Blackstone that are directly affected the fundraising cycle often leave that same as Italy’s GDP. Firms now need by the pandemic, [such as] Merlin, picture incomplete. at least $1.4 billion to make it into the which is the second largest visitor at- Lest there be any doubt as to how ranking. traction company in the world next much of a boom period fundraising has Private equity, then, is well-capital- to Disney, we’ll be very supportive of. been through over the last few years, ised as we move into and through the We’re helping it raise capital where it this year’s PEI 300 lays it out for you. economic and social trauma caused by can, we’re continuing to invest in long- On top once again is Blackstone, the covid-19 pandemic. At such a time term capital projects like the Legoland with a five-year fundraising total of $96 as this, being private equity owned is theme parks that will be opened hope- billion, 16 percent higher than its total a blessing, Blackstone’s global head of fully next year in and in last year and almost $35 billion more private equity Joe Baratta tells us. Korea the following year. We’re con- than second-place Carlyle Group. It is “I do believe, 100 percent, that in a tinuing to support investment in these

The top 10 2020 2019 Firm Five-year fundraising total ($m) Headquarters 1 vw 1 Blackstone 95,951 New York 2 vw 2 61,719 Washington DC 3 vw 3 KKR 54,760 New York 4 p 12 TPG 38,682 Fort Worth 5 vw 5 37,587 New York 6 p 10 NB Alternatives 36,505 New York 7 q 4 CVC Capital Partners 35,877 Luxembourg 8 q 7 EQT 34,461 Stockholm 9 p 19 33,491 Boston 10 p 14 Vista Equity Partners 32,095

22 Private Equity International • June 2020 Cover story

companies that we believe have good on business building rather than cost long-term prospects.” “To fix balance sheets cutting. Private equity has an opportunity “It’s not all super high growth tech- here to play a major role in rebuilding and to allow them to nology but it’s businesses that can grow economies as governments and indus- at or above GDP that will be more tries grapple with the fallout from the continue to operate valuable after our investment in them pandemic. How it responds to that op- than before we found them. That re- portunity will have a major impact on and grow, private quires investing for growth,” Baratta the industry in years to come. As Emi- says. ly Brown, partner at law firm Schulte equity has filled an It also means being slower than oth- Roth & Zabel and an entrant on this ers to pull the trigger on employment year’s Private Equity International Future important need in the reductions and furloughs. 40, put it back in April: “Ten years from capital market” “We’ve been very careful about how now I would like to be looking back and we manage employment levels and saying that private equity was not only the benefits that we provide,” he adds. part of the solution to the crisis we are JOE BARATTA “We’re seeking to make sure that we’re Blackstone entering at the moment, but that it was on the generous side and not lead- seen to be a vital part of the solution.” ing sectors in employment reductions Baratta says the private equity compared to public company peers. ownership model was proven in the We want to preserve the ability of these post-global financial crisis period, and capital to companies that have short- businesses to rebound and to operate it will be again through this period. term dislocations in their businesses, when the economy reopens.” “[The capital] which is in the hands either because of a direct effect from Private equity is already a significant of private equity fund managers I think covid-19 or because they’ve expanded part of global economies – in the US will be beneficial to the economy be- too quickly. To fix balance sheets and private equity firms hold investments cause we will provide capital for busi- to allow them to continue to operate in around 35,000 American businesses nesses to make long-term investments and grow, private equity has filled an that employ 8.8 million people, accord- in their growth, in their ability to op- important need in the capital market.” ing to the American Investment Coun- erate and employ more people, and The vast majority of private equity cil. This year’s ranking shows it’s ready to expand their productive capacity,” fund managers want to own businesses to take an even larger share – and if it Baratta says. that will be around for the long haul, is indeed a superior ownership model, “In the short run, private equity has and invest in companies that can grow, employees and society should be the shown to be an important provider of he says. This means a greater emphasis better for it. n

Methodology

even if no official announcement has How the ranking is determined Legend been made. We also count capital raised New company for 2020 through co-investment vehicles. The 2020 PEI 300 ranking is based on the p Up from 2019 amount of private equity direct investment q Down from 2019 capital raised by firms between 1 January vw Unchanged from 2019 What does NOT count as 2015 and 1 April 2020. private equity?

Definitions Capital raised Funds of funds, secondaries, real estate, Private equity This means capital definitively infrastructure, hedge funds, debt, For purposes of the PEI 300, the definition committed to a private equity direct mezzanine and PIPEs. of private equity is capital raised for investment programme. In the case of a The PEI 300 is not a performance a dedicated programme of investing fundraising, it means the fund has had ranking, nor does it constitute directly into businesses. This includes a final or official interim close after 1 investment recommendations. equity capital for diversified private equity, January 2015. We count the full amount For a full methodology, email PEI’s head , growth equity, of a fund if it has a close after this date, of fund manager research, and turnaround or control-oriented and we count the full amount of an Daniel Humphrey Rodriguez distressed investment capital. interim close that has occurred recently, ([email protected]).

June 2020 • Private Equity International 23 Cover story

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Rank Top 10: The ebbs 100%

and flows $.bn $4.bn $.bn $1.bn $1.bn $.bn $.bn $.bn $.bn $.bn 90 1 The nature of the PEI 300 – based on a five-year fundraising total – means 80 $4.bn $.bn $.bn it takes a while for tough $4.bn $.bn $.bn fundraising periods, such $41.bn as the one immediately $.bn $.bn $1.bn 2 following the global financial 70 crisis, to show up in the $.bn $.1bn rankings. Here’s how the Top $4.bn $4.bn $4.bn $1.bn 10 have fared since 2010. $4.bn $.bn $4.bn 60 $4.bn $4.bn 3 Blackstone $.4bn $.bn The Carlyle Group $4.1bn $4.bn $.bn 50 $.1bn $4.4bn KKR $.bn 4 TPG $.bn $1.bn Warburg Pincus $.4bn $.bn $4.4bn 40 $.bn $4.4bn $.bn 5 NB Alternatives $.bn CVC Capital Partners $4.bn $1.1bn $1.bn $.bn $.bn 6 EQT 30 $.bn $.1bn Advent International $.1bn $.bn Vista Equity Partners $1.1bn $.bn $.1bn $.bn 7 Others (, 20 , $1.bn $.bn , , $4.bn 8 Clayton Dubilier & Rice, $.1bn EnCap Investments, First Reserve, 10 $1.bn $.bn , $.bn $.4bn $.bn Principle Investment Area, 9 Hellman & Friedman, $1.bn $1.bn Oaktree Capital Management, $1.bn $1.bn $.bn $.bn $.1bn 10 Silver Lake, Thoma Bravo) 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Capital raised: Column width represents total capital raised by top 10 firms for the five years up to that year ($bn) 4 4 4 44 4 0 100 200 300 400 500

24 Private Equity International • June 2020 Cover story

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 100% Rank

$.bn $4.bn $.bn $1.bn $1.bn $.bn $.bn $.bn $.bn $.bn 90 1

80 $4.bn $.bn $.bn $4.bn $.bn $.bn $41.bn $.bn $.bn $1.bn 2 70 $.bn $.1bn $4.bn $4.bn $4.bn $1.bn $4.bn $.bn $4.bn 60 $4.bn $4.bn 3 Blackstone $.4bn $.bn The Carlyle Group $4.1bn $4.bn $.bn 50 $.1bn $4.4bn KKR $.bn 4 TPG $.bn $1.bn Warburg Pincus $.4bn $.bn $4.4bn 40 $.bn $4.4bn $.bn 5 NB Alternatives $.bn CVC Capital Partners $4.bn $1.1bn $1.bn $.bn $.bn 6 EQT 30 $.bn $.1bn Advent International $.1bn $.bn Vista Equity Partners $1.1bn $.bn $.1bn $.bn 7 Others (Apax Partners, 20 Apollo Global Management, $1.bn $.bn Ares Management, Bain Capital, $4.bn 8 Clayton Dubilier & Rice, $.1bn EnCap Investments, First Reserve, 10 $1.bn $.bn General Atlantic, Goldman Sachs $.bn $.4bn $.bn Principle Investment Area, 9 Hellman & Friedman, $1.bn $1.bn Oaktree Capital Management, $1.bn $1.bn $.bn $.bn $.1bn 10 Silver Lake, Thoma Bravo) 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Capital raised: Column width represents total capital raised by top 10 firms for the five years up to that year ($bn) 4 4 4 44 4 0 100 200 300 400 500

June 2020 • Private Equity International 25 3-4 November | Royal Lancaster Hotel

Creating growth through diversity

Who will you meet at the forum?

700+ 100+Institutional 300+Fund and Asset Attendees Investors Management Firms

An incredibly inspirational day that would be a real benefit to any woman or man, in the industry to attend. Many thanks!

Julie Dunne Investment Operations Manager The Church of England Pensions Board

Book now to save £650 privateequityinternational.com/womenforum Cover story

The decade that changed private equity

Over the last 10 years the industry has transformed from the pre-GFC leveraged model to one based on building stronger business. What are the elements that went into that transformation?

n its first quarter earnings call Over the next 12 pages, along with “aggressive”, including for new invest- in April, Scott Nuttall, the the rest of the PEI 300 ranking, we lay ments, strategic acquisitions and for Oco-president and co-chief op- out six of the biggest industry-wide buying back its own stock. erating officer at KKR (3) told the sto- changes that have taken place over the The balance sheet strength of the ry of how the firm built itself up over last decade to bring the private equity largest firms in the private equity busi- the last decade from a private equity industry to where it is today: the up- ness – particularly the listed ones – is firm with a young US-centric credit tick in co-investments; the shift from well known, and certainly positions business to an asset manager with 24 financial engineering to operational them well for the sort of explosive business lines to allow it to have a more value creation; the growing importance growth Nuttall was talking about. powerful offensive strategy when the of ESG; the rise of private credit funds; But thanks to the rise in GP stakes next crisis hit. the move from generalist investment investments there are firms further “The last crisis was critical develop- strategies to specialist focuses; and the down the PEI 300 with balance sheet mentally for us. We made some great maturation of the secondaries market. firepower. Michael Rees, head of Dyal investments, we made large and impor- Capital Partners – a unit of Neuberger tant moves for the firm strategically, Lessons from the GFC Berman (6) – told sister title Buyouts in and it was an inflection point that drove As world economies plunge deeper into May that minority capital helps posi- us to meaningfully expand our business negative territory brought about by the tion firms for upside opportunities in a in the years post-crisis.” coronavirus pandemic, it’s worth think- pandemic-spurred slowdown. KKR isn’t the only firm that’s ing about what the industry learned “Raising a sizeable amount of per- evolved during this time. In the last from the last crisis. manent capital eliminates liquidity decade the private equity industry has Nuttall said KKR is “viewing this issues for private equity firms,” Rees transformed from a pure financial en- crisis as providing similar opportuni- said. gineering play to a model focused on ties” to the last one in terms of firm If the next decade is anything like building better businesses that provides growth, and during times like this, the last, in 2030 we could be looking at tailored capital. KKR can use its balance sheet to be a very different industry.■

June 2020 • Private Equity International 27 Cover story

Through co-investment, LPs share the dealmaking burden

More investors are progressing from syndicated co-investing to co-underwriting as they seek greater control over their private equity portfolios, writes Alex Lynn

o-underwriting deals was his- co-underwriting. Part of that is want- co-sponsored by 12 unique investors. torically the preserve of the ing to have more understanding earlier “Over the past decade we’ve witnessed C most sophisticated investors, of transaction dynamics and wanting a palpable change in the risk appetite of but over the past decade more have re- to be more involved with the portfolio many LPs, who are now more willing alised the mutual benefits of becoming companies.” to share the burden with the manag- a more hands-on partner to their GPs. Teacher Retirement System of Tex- er,” says partner Nikos Stathopoulos, Appetites for co-investments have as said last year it would begin to pur- adding investors now have a greater soared as LPs look to increase their al- sue co-underwriting opportunities in understanding of the skillset and in- location to exciting sectors, deepen re- lieu of syndicated deals as the latter had frastructure required to be a successful lationships with GPs and secure more become commoditised. co-underwriter. appealing economics. Doing so has also “Co-underwriters eat till they are Those with the means and read- given LPs greater control over their full, and syndicators eat the leftovers,” iness to do so can be well-rewarded. portfolios as the industry shifts from managing director for private equity Alaska Permanent Fund Corporation’s the one-size-fits-all model of old. Neil Randall said at the time, noting $1.8 billion co-investment portfolio The true scale is hard to gauge, but the process is more labour-intensive had delivered a 61.5 percent five-year Triago puts “shadow capital” – includ- and comes with inherent uncertainty. net return as of 30 June 2019, versus ing co-investment, separate accounts 18.4 percent for PE funds. and directs – at $206 billion in 2019, Head start “As we’ve seasoned our co-invest- of which approximately $66 billion was Co-underwriting can benefit LP and ment programme, we’ve naturally for co-investing. GP alike. The former gets a head start found different thematic areas we want “It’s a marked difference from 10 on attractive dealflow, a deeper under- to get a little bit smarter on, so if a GP years ago,” Sweta Chattopadhyay, standing of a GP’s deal process and ex- can help us with that effort and direct head of Bfinance’s private equity advi- pertise in a preferred sector; the latter relevant dealflow in that area, they be- sory and an alum of Universities Su- can share the burden of due diligence come very important,” Yup Kim, sen- perannuation Scheme, RPMI Railpen and potential broken deal costs. ior portfolio manager at the $62 billion and Adveq, tells Private Equity Interna- London-headquartered BC Part- institution, notes. tional. ners has provided approximately €9 “These GPs aren’t always top-de- “Over the past five years, there’s still billion of co-investments across 31 cile or oversubscribed, but they’re very been a pool of investors that are reliant portfolio companies for 89 different committed to a partnership approach on GPs for syndicated co-investments, LPs since 1994, per its website. Of this, and these have become some of our but more and more it’s moving towards €3.8 billion was co-underwritten or most rewarding relationships.” n

28 Private Equity International • June 2020 Five year 2020 2019 fundraising Rank Rank Firm total ($m) Headquarters

11 p 30 Leonard Green & Partners 26,305 Los Angeles BlackRock 12 p 34 26,150 London 17 p 13 q 6 Bain Capital 25,735 Boston 14 q 9 Apollo Global Management 25,422 New York New York 15 q 8 Thoma Bravo 25,289

The world’s largest asset 16 p 31 Insight Partners 22,735 New York manager shot up the ranking, 17 p 148 BlackRock 22,458 New York indicative of its push to 18 q 16 General Atlantic 22,415 New York becoming a force in the world of alternatives. 19 q 18 Advisers 22,211 London 20 p 24 Brookfield Asset Management 21,690 Toronto In Q1 2020 alone BlackRock saw 21 q 13 EnCap Investments 21,326 Houston $7 billion of net inflows and capital commitments for alternatives, PEI 22 p 58 Francisco Partners 19,129 San Francisco reported. Between Q1 2019 and Q1 23 p 54 Platinum Equity 18,000 Beverly Hills 2020, alternatives grew from 2.5 per- 24 p 29 Hillhouse Capital Group 17,894 cent to 3.1 percent of the firm’s total . 25 q 21 Partners Group 17,865 Zug “In our illiquid alternatives space, 26 p 36 Ardian 17,610 Paris we are actually having deeper, longer, 27 p 28 PAI Partners 16,543 Paris broader dialogues [with investors] than ever before,” said chairman and 28 q 11 Hellman & Friedman 16,000 San Francisco chief executive Larry Fink on the 29 p 49 Ares Management 15,603 Los Angeles firm’s first-quarter results call. 30 p 68 Clearlake Capital Group 15,561 Santa Monica In the past five years BlackRock has also held final closes on two 31 q 22 Stone Point Capital 15,470 Greenwich Private Opportunities Funds for di- 32 q 23 Bridgepoint 15,222 London rect co-investment deals on a global 33 q 20 Silver Lake 15,000 Menlo Park basis, per PEI data. The firm is also known to run several big customised 34 p 91 TA Associates 14,800 Boston accounts. In March BlackRock hit 35 q 26 BC Partners 13,275 London the two-thirds mark on fundraising 36 p 99 MBK Partners 13,224 for its debut secondaries fund, col- lecting around $1 billion to invest in 37 q 33 Baring Private Equity Asia 13,203 Hong Kong LP stakes and GP-led deals. 38 q 27 Genstar Capital 13,050 San Francisco As of January, BlackRock’s Long 39 p 73 BDT Capital Partners 12,500 Chicago Term Private Capital Vehicle had raised $3.85 billion, with the aim of 40 q 32 American Securities 12,035 New York raising $12 billion overall. The fund 41 p 43 L Catterton 11,826 Greenwich takes long-duration positions in pri- 42 q 15 Apax Partners 11,648 London vate companies with less leverage and a lower-than-average fee base. Speak- 43 q 35 NGP Energy Capital Management 11,157 Dallas ing to PEI in March Dag Skattum, 44 p 48 Eurazeo 11,057 Paris who leads the fund’s Europe business, 45 q 40 Quantum Energy Partners 10,735 Houston said: “Long-term and lower-lever- age might not be differentiators to 46 q 17 Clayton, Dubilier & Rice 10,530 New York Goldman Sachs Merchant Banking everyone; but among family- and pri- 47 p 38 10,500 New York vate-owned companies, we find the Division proposition to be particularly com- 48 p 55 HIG Capital 10,475 Miami pelling, helping deliver unique sourc- 49 q 42 Riverstone Holdings 10,257 New York ing opportunities for our investors.” 50 q 41 PAG 10,055 Hong Kong

June 2020 • Private Equity International 29 Cover story

This crisis will test PE’s value creation story

The global financial meltdown was a major catalyst in private equity’s move away from financial engineering. The covid-19 pandemic will show how real this move has been, writes Rod James

inancial engineering will ever The Riverside Company (137). “[This] the virus makes it harder for GPs to be integral to the private equity as opposed to being brought in to ad- provide strategic guidance to their Fmodel; it’s called leveraged buy- dress a certain issue on an episodic basis businesses, the paper’s co-author Josh out for a reason. Still, the shift in gen- – often after the horse as left the barn.” Lerner, a Harvard University profes- eral partners’ focus towards creating sor, tells Private Equity International. value through operational improve- Don’t waste a good crisis The growth in operational resourc- ment has been one of the most striking It’s prescient that a key driver of this es has also been matched by an expan- trends of the past 10 years. trend was the global financial crisis, sion in the number of deals that firms Every one of the 25 largest private when it became clear GPs would have are doing, notes Daniel Winther, head equity firms in the world has an operat- to intervene, financially and operation- of private equity and infrastructure at ing group focused on supporting value ally, to save businesses under stress. Skandia Asset Management, which has creation in their portfolios, according With hindsight, it seems that not around €4 billion in PE assets and fa- to McKinsey. only did this intervention save com- vours GPs with a focus on operational These teams are also getting more panies but helped them thrive. McK- improvement. hands on. In 2015, the consultancy insey found that GPs with operating “What I worry is that they have found operating teams spent almost groups achieved internal rates of return maxed out,” he says. “When a crisis hits a third of their time “monitoring and roughly 500 basis points higher than like this one, where every company is reporting” company performance. In those without on their 2009-13-vin- getting hurt, these resources will help 2018 this dropped to 19 percent, with tage funds, a phenomenon unapparent but it might not be enough.” “driving measurable performance im- in relation to other vintages. A Northern European provement” coming to represent more A 2018 paper entitled Private Equity manager says he takes comfort in how than 50 percent of time spent. and Financial Fragility During the Crisis embedded operating partners are in “Operating teams are much more found sponsors’ willingness to get stuck their portfolio companies. They un- integrated into the investment team in not only helped companies survive derstand the business intimately and even pre-acquisition, and in charge of but also allowed them to increase mar- their compensation is closely aligned the execution of the investment strategy ket share versus non-PE-backed peers. with that of management. Most were as well as monitoring of the day-to-day Today is different in several ways. hired, however, during a decade-long operations at their portfolio compa- Though extensive investment means bull run. They clearly understand nies,” says Stewart Kohl, co-CEO of GPs are better resourced to help than growth but what about distress? mid-market buy-and-build specialists a decade ago, the unpredictability of “We’ll soon find out,” he says.n

30 Private Equity International • June 2020 Five year 2020 2019 fundraising Rank Rank Firm total ($m) Headquarters

51 p 90 Veritas Capital 10,050 New York 52 q 39 Tiger Global Management 10,000 New York KPS Capital Partners 53 p 98 Summit Partners 9,752 Boston 69 54 p 87 Madison Dearborn Partners 9,553 Chicago 55 q 50 Adams Street Partners 9,542 Chicago New York 56 p 120 AEA Investors 9,307 New York 57 q 25 Onex 9,301 Toronto The manufacturing and 58 p 94 Sequoia Capital 9,290 Menlo Park industrial specialist is back 59 p 82 Oaktree Capital Management 9,142 Los Angeles in the ranking with a bang 60 q 45 HarbourVest Partners 9,077 Boston having dropped out of q contention last year. 61 47 Roark Capital Group 9,000 Atlanta p 62 78 Investindustrial 8,739 London It took KPS less than four weeks to 63 p 67 Partners 8,685 Providence pull in $7 billion across two funds 64 q 56 Astorg Capital Partners 8,636 Paris last year. In fact, throughout the 65 q 59 Welsh, Carson, Anderson & Stowe 8,326 New York firm’s history it has turned down 66 q 60 CPE 7,470 more capital than it has closed on, 67 p 70 New Enterprise Associates 7,464 Chevy Chase despite having carry set at 30 percent 68 q 62 Audax Group 7,162 Boston – a testament to its impressive per- 69 – KPS Capital Partners 7,142 New York formance record. 70 – Energy Capital Partners 6,930 Summit, NJ Founder Mike Psaros describes 71 q 66 Triton 6,919 London the firm’s strategy as “based on see- Investment 72 q 61 6,698 New York ing value where others do not”. Management “That is key: buying right and 73 p 115 Lindsay Goldberg 6,660 New York then making businesses better. Our 74 q 37 New Mountain Capital 6,592 New York investment strategy fundamentally 75 p 130 IK Investment Partners 6,506 London transforms companies, not balance 76 q 69 TSG Consumer Partners 6,490 San Francisco sheets.” 77 vw 77 Oak Hill Capital Partners 6,452 New York As the world grapples with the 78 p 111 Andreessen Horowitz 6,387 Menlo Park pandemic, a strong focus on oper- 79 q 44 6,374 Hong Kong ational improvements – and KPS’s 80 q 79 Kelso & Company 6,353 New York ability to make all-equity deals, as it 81 p 88 Harvest Partners 6,330 New York did successfully following the GFC – 82 p 118 CDH Investments 6,329 Hong Kong puts the firm in a good position when 83 q 63 Castlelake 6,311 Minneapolis it comes to deploying the $6 billion 84 p 95 Everbright Limited 6,306 Hong Kong KPS Special Situations Fund V. Psaros says even though the firm’s 85 q 72 6,250 Boston strategy and focus will remain the 86 q 74 Thomas H Lee Partners 6,180 Boston same, it will likely benefit from lower 87 q 52 TDR Capital 6,174 London valuations brought about by market 88 q 71 6,166 London uncertainty, the general lack of avail- 89 q 85 Cerberus Capital Management 6,060 New York able financing for new acquisitions, 90 q 51 Sycamore Partners 5,968 New York and the first opportunities in a long 91 p 102 GCM Grosvenor 5,824 Chicago time to acquire assets through bank- 92 q 76 Accel 5,794 Palo Alto ruptcies and financial restructurings. 93 q 80 Montagu Private Equity 5,771 London “I would fully expect during the 94 q 46 GTCR 5,770 Chicago course of this downturn that we 95 p 145 CITIC Capital 5,769 Hong Kong will acquire companies that would 96 p 141 Great Hill Partners 5,672 Boston have otherwise gone out of business, 97 q 84 Equistone Partners Europe 5,633 London thereby preserving them as a going 98 p 101 Hamilton Lane 5,632 Bala Cynwyd concern, as well as employers of 99 q 57 TCV 5,555 Palo Alto large groups of people.” 100 p 137 KSL Capital Partners 5,411 Denver

June 2020 • Private Equity International 31 Cover story

PE learns the value of investing responsibly

The rise of ESG screening and the growth of impact investment managers has paved the way for a new breed of investors, writes Carmela Mendoza

rivate equity investors increasing- investing. The average 19 percent How PE firms incorporate ESG is ly want to show they are a force portfolio share dedicated to sustainable still highly variable, according to a re- Pfor good. Before the 2008 global investing is expected to increase to 32 port from Bain & Co. Some firms are financial crisis there was little focus in percent within the next five years. taking the “cover your backside” ap- the industry on environmental, social The launch of the UN-supported proach by ensuring their holdings com- and governance issues, but the require- Principles for Responsible Investment ply with existing regulations, while oth- ments for transparency and accounta- in 2006 allowed many efforts to coalesce ers embrace ESG principles across the bility across investment programmes under a comprehensive framework, says investment value chain. At the far end have proliferated in the aftermath. Suzanne Tavill, global head of responsi- of the spectrum are impact investors, In 2009, the American Investment ble investing at StepStone. As a result, who invest with a “double bottom line” Council (then the Private Equity the promulgation of guidelines and best of both financial and social returns. Council) issued its first guidelines for practices has been streamlined, which Once considered a niche area, the responsible investment, covering issues has made it easier for GPs and LPs to arrival of blue-chip managers TPG, such as health, safety and labour. Invest adopt ESG principles. KKR and Bain Capital has brought Europe (then the European Private Signatories to the PRI have grown impact investing into the mainstream, Equity and Venture Capital Associa- to over 3,000, with asset owners mak- attracting a new segment of the LP tion) also introduced ESG language ing up nearly 20 percent. universe. Since 2015, capital raised by into its handbook for the first time. impact funds has grown 154 percent to The pressure from LPs to invest ‘Cover your backside’ $28 billion, says Bain & Co. responsibly is the primary driver. First Today, LPs and GPs alike are increas- Given the nature of today’s more came demands from large European ingly recognising ESG issues as mate- challenged investment environment, institutions, and over the last decade rial factors in the investment process, ESG considerations are set to become others have followed suit. Tavill says. “Having LPs that are fo- more important than ever. A UBS re- Demographic change is another. cused on these issues is a helpful driver search paper published in May predicts Next-generation investors are con- to this adoption but, even so, GPs are increased investor focus on ESG con- tributing to a more rapid adoption of recognising that climate change will siderations after covid-19, with “par- sustainable investing, according to the affect assets during the hold period; ticular demand for greater corporate UBS/Campden Wealth Global Family that diverse management teams lead to transparency and stakeholder account- Office Report 2019. One in three fami- better outcomes; and that supply chains ability”, and points out that “sustaina- ly offices surveyed engages in sustain- need to be clean and certified to max- bility is at the heart of the recovery plan able investing and a quarter in impact imise exit value.” for many governments”. n

32 Private Equity International • June 2020 Five year 2020 2019 fundraising Rank Rank Firm total ($m) Headquarters

101 p 162 Primavera Capital Group 5,300 Beijing 102 q 93 5,277 Stockholm Primavera 103 q 83 Inflexion Private Equity 5,230 London 101 p 104 p 131 Crestview Partners 5,140 New York 105 p 170 Partners 4,939 New York Beijing 106 q 96 Siris Capital Group 4,900 New York 107 p 203 American Industrial Partners 4,850 New York A bumper haul last year has 108 q 64 Lightspeed Venture Partners 4,838 Menlo Park made the 109 q 104 RRJ Capital 4,735 Hong Kong specialist one of China’s 110 p 179 Kohlberg & Company 4,700 Mount Kisco largest firms. 111 p 113 4,700 Palo Alto 112 p 250 China Renaissance Group 4,591 Beijing Primavera Capital Group’s ascent in 113 p 126 Hahn & Co 4,572 Seoul the rankings comes as little surprise 114 p 275 Arsenal Capital Partners 4,485 New York given its recent success on the fund- raising trail. 115 p 190 SSG Capital Management 4,381 Hong Kong The Beijing-headquartered firm 116 q 92 TowerBrook Capital Partners 4,250 New York closed its third fund on $3.4 billion 117 p 180 Battery Ventures 4,200 Boston in November, which, at $600 mil- 118 q 53 Pamplona Capital Management 4,200 London Waterland Private Equity lion north of its target, was the sec- 119 q 108 4,150 Bussum, Neth. Investments ond-largest ever raised by a domes- 120 p 187 4,110 tic private equity manager. Fund III 121 q 110 Kayne Anderson Capital Advisors 4,085 Los Angeles helped propel Primavera up 61 places in this year’s PEI 300 to also become 122 – Altas Partners 4,030 Toronto the second-highest China-headquar- 123 q 97 Littlejohn & Co 3,933 Greenwich Trilantic Capital Partners North tered firm, behind only CITICPE. 124 p 272 3,924 New York America Primavera was launched in 2010 125 – The Energy & Minerals Group 3,847 Houston by a cadre of former Goldman Sachs 126 q 114 IDG Capital 3,824 Beijing executives. Founder Fred Hu was 127 q 107 GGV Capital 3,779 Menlo Park previously chairman of Greater Chi- 128 q 117 Hermes GPE 3,718 London na for the investment bank and three 129 q 81 Marlin Equity Partners 3,687 Hermosa Beach of his partners at Primavera were former managing directors there. 130 q 65 The Jordan Company 3,630 New York The firm targets control-orient- 131 p 241 Boyu Capital 3,600 Hong Kong ed and growth investments in the 132 q 122 Bessemer Venture Partners 3,500 Redwood City consumer, TMT, financial services, 133 q 128 Lime Rock Partners 3,485 Westport education and healthcare sectors, 134 p 219 IMM Private Equity 3,452 Seoul either in China or cross border with 135 p 229 Valor Equity Partners 3,403 Chicago a China angle. The firm had already 136 p 224 3,400 New York begun putting the vehicle to work at 137 q 119 The Riverside Company 3,386 New York the time of final close, having backed 138 p 157 Charterhouse Capital Partners 3,264 London logistics affiliate Cainiao Smart 139 p 197 Odyssey Investment Partners 3,250 New York Logistics Network, online residen- 140 q 132 Ridgemont Equity Partners 3,205 Charlotte tial marketplace Danke Apartments 141 q 134 Gryphon Investors 3,200 San Francisco and e-commerce platform Xing- 142 – Cortec Group 3,200 New York sheng Youxuan, among others. 143 q 133 HGGC 3,180 Palo Alto Notable deals over the past five 144 q 124 Accel-KKR 3,151 Menlo Park years include backing the spin-off 145 q 135 Lenovo Group 3,100 Hong Kong of Yum China – which owns the 146 p 240 Rothschild Merchant Banking 3,094 Paris country’s KFC and Pizza Hut chains 147 q 127 Hony Capital 3,073 Beijing – from its parent in 2016 and partic- 148 – SK Capital Partners 3,042 New York ipating in a $14 billion Series C fund- q ing round for Ant Financial in 2018. 149 136 Olympus Partners 3,042 Stamford 150 – Parthenon Capital Partners 3,030 Boston

June 2020 • Private Equity International 33 Cover story

If private credit goes down, it won’t be for long

The rise of private credit has changed the shape of private equity investing and necessity suggests it is here to stay, writes Rod James

efore the financial crisis, the pri- more leverage, can you price it up just sponsors in preventing “unnecessary vate debt market consisted of a a little bit?’ They would say, ‘We have balance sheet restructurings”. Bsmattering of direct lenders. As a credit standard and we do things the A period of poor performance of the end of 2018, the market had ac- way we do them,’” says Romain Cattet, should not necessarily have negative cumulated nearly $800 billion in assets a partner with debt advisor Marlbor- repercussions, he suggests. The Euro- and had enjoyed four consecutive years ough Partners. pean head of a $40 billion private pen- of $100 billion-plus fundraising, ac- Buy and build, minority deals, deals sion fund expressed confidence in his cording to consultancy McKinsey. in which cashflows are automatically credit investments, saying lenders are Basel III, introduced in the wake of reinvested: all are innovations enabled “far more sophisticated” risk managers the crisis, placed stringent capital re- by the flexible, private debt financing, than their reputations bely. quirements on banks, restricting their he adds. One London-based private equity ability to lend. In 2013, the Final Joint In the past that flexibility came at a partner says sponsors shouldn’t bank Guidance on Leveraged Lending was premium to bank financing, but fierce too much on the flexibility of their published by US regulators, limiting competition between debt funds has lenders. In the second half, once it banks from issuing loans of more than dramatically narrowed the spread. becomes clearer how businesses have 6x a company’s EBITDA. Debt funds, Competition also triggered the rise of been hurt, debt funds will seek cures to which were exempt, jumped right in. covenant-lite loans, with few restric- whatever ails them. Direct lending makes up around tions on the borrower and less protec- “I think it’s going to be a bit of a 40 percent of today’s market, accord- tion for the lender. bloodbath,” the partner says. “Lenders ing to estimates by sister publication As of August, cov-lite loans ac- have a duty of care to investors. Why Private Debt Investor. The majority is counted for 79 percent of outstanding would they not do things to enforce or made up of funds covering everything loans in the US leveraged loan market, accelerate the [repayment] of debt?” from distress to subordinated debt, and according to S&P Global Market In- Even if things do blow up, private special situations to asset-backed lend- telligence. debt is unlikely to be down for long. ing, spanning the risk-return spectrum. Private credit firms have raised capi- That’s not to mention the post-crisis Covid, cov-lite tal they need to deploy, while private rebound of collateralised loan obliga- The covid-19 crisis is the first seri- equity dry powder continues to pile tions, securities backed by a pool of ous test of these loans. Robin Dou- up. The crisis is already producing at- loans. mar, managing partner of $10 billion tractive distressed opportunities. If the “It was very difficult to go to a bank lender Park Square Capital, says cov- banks can’t help get these deals done, 10 years ago and say, ‘I’d like a little bit lite structures should prove helpful to who else will? n

34 Private Equity International • June 2020 Five year 2020 2019 fundraising Rank Rank Firm total ($m) Headquarters

151 p 169 Vivo Capital 2,995 Palo Alto 152 p 278 Aquiline Capital Partners 2,990 New York Deutsche 153 – Flexpoint Ford 2,950 Chicago Beteiligungs AG 154 q 143 Rhône Group 2,913 New York 172 p 155 p 168 Founders Fund 2,909 San Francisco 156 q 138 Tailwind Capital Partners 2,900 New York 157 q 140 IVP 2,900 Menlo Park 158 q 123 Index Ventures 2,900 Geneva DBAG gathered €2.7bn 159 q 142 ACON Investments 2,872 Washington DC across its flagship and co- investment funds as well its 160 q 89 Altor Equity Partners 2,859 Stockholm expansion capital fund in the 161 p 165 FountainVest Partners 2,846 Hong Kong five years to March. 162 p 286 Apax Partners SAS 2,832 Paris 163 q 144 Vitruvian Partners 2,819 London German mid-market firm Deutsche 164 – Sapphire Ventures 2,815 Palo Alto Beteiligungs jumped 98 places in 165 q 154 Cornell Capital 2,800 New York the ranking, from 270th in 2019. 166 q 150 ICONIQ Capital 2,770 San Francisco Key to that is the more than €2 bil- 167 q 100 GI Partners 2,760 San Francisco lion of capital the firm has raised 168 q 105 Charlesbank Capital Partners 2,750 Boston across its 2016-vintage Fund VII and 169 q 106 Patria Investments 2,723 2019-vintage Fund VIII. Both vehi- 170 – Court Square Capital Partners 2,700 New York cles have a more than 85 percent re- 171 p 296 Aurora Capital Partners 2,700 Los Angeles up rate among repeat investors such 172 p 270 Deutsche Beteiligungs AG 2,699 Frankfurt as BMO Private Equity Trust and 173 – Ridgewood Energy 2,626 Montvale, NJ ATP Private Equity Partners. The German-listed manager has 174 q 155 ABRY Partners 2,625 Boston longstanding experience investing in 175 p 186 Sentinel Capital Partners 2,610 New York industrials companies in the DACH 176 p 226 Oakley Capital 2,609 London region but has in recent years ex- 177 p 199 Frazier Healthcare Partners 2,603 Seattle panded its investment strategy to in- 178 q 103 Pantheon 2,594 London clude automotive and mechanical en- 179 p 184 Lovell Minnick Partners 2,589 Radnor, PA gineering, IT services and software, 180 – Vertex Holdings 2,587 healthcare and telecommunications. 181 – DCP Capital 2,500 Beijing With its latest offering, the firm 182 p 121 YunFeng Capital 2,500 expects to back more IT services/ 183 p 294 Five Point Energy 2,455 Houston software and healthcare companies, 184 – Trustbridge Partners 2,445 Shanghai Torsten Grede, the spokesman of the 185 q 158 Alvarez & Marsal Capital Partners 2,443 Greenwich of DBAG, tells 186 p 273 Thrivent Financial 2,410 Minneapolis PEI. The German Mittelstand – small and medium-sized companies – and 187 – Arlington Capital Partners 2,400 Chevy Chase family succession situations are also 188 p 256 Nautic Partners 2,400 Providence speciality areas for the firm. 189 q 146 IFC Asset Management Company 2,391 Washington DC When it comes to increasing its 190 q 109 2,383 Boca Raton fund size, DBAG has been quite 191 p 243 Vistria Group 2,382 Chicago conservative over the years com- 192 q 176 AE Industrial Partners 2,382 Boca Raton pared with most of its peers. Grede 193 p 264 Spark Capital 2,366 Boston notes fund size discipline is necessary 194 vw 194 EMR Capital 2,341 Hong Kong to successfully execute and deliv- 195 – 2,325 Charlotte er returns on the firm’s investment 196 – Birch Hill Equity Partners 2,323 Toronto strategy. “If we find a lot of attractive 197 p 198 Tailwater Capital 2,316 Dallas investment opportunities, we would 198 p 244 Flagship Pioneering 2,314 Cambridge rather go into the next fundraise ear- 199 p 279 Wynnchurch Capital 2,314 Rosemont, IL lier than expected.” 200 q 139 Qiming Venture Partners 2,311 Shanghai

June 2020 • Private Equity International 35 Cover story

Narrowing the focus to industry sweet spots

Outperformance, better alignment with LPs and high-quality dealflow have driven some fund managers to narrow their strategies, writes Carmela Mendoza

rom European healthcare and taxes, paying employees, running hos- specialisation is also a function of in- tech services funds, to clean tech pitals – is tech-enabled,” he says. creased competition. With the amount Fand Chinese consumer-focused Hg’s around $10 billion of software of new capital coming into the indus- funds, private equity firms have ze- and services proceeds have delivered try, the ability to extract alpha just from roed-in on specialised investment strat- gross returns of 2.6x and 34 percent value arbitrage has to a large degree egies in the last decade. IRR as at end-December 2019, accord- disappeared. GPs wanting to stand out Specialisation is certainly not new; ing to its website. need to show their ability to transform PE firms have taken on several forms Research shows sector specialists companies through operational exper- of it over the years, says Janet Brooks, generate better returns. Per data from tise. a London-based partner at placement Cambridge Associates, sector-focused Sector specialists have deep domain firm Monument Group. funds with an initial investment date knowledge, industry contacts and a Early specialisation tended to be between 2001 and 2010 have returned high number of repetitions in a sector, around deal size, often with new groups an aggregate 2.2x multiple on invested leading to increased high-quality deal- starting out in the gaps created by suc- capital and a 23.2 percent gross IRR, flow, according to Cambridge’s study. cessful firms moving up scale, she notes. compared with a 1.9x multiple and 17.5 Post-acquisition, specialists are also As the industry evolved, firms differen- percent gross IRR returned by general- better at knowing what to do beyond tiated themselves based on where they ist funds in that period. financial engineering and often employ invest in the or the industry-specific operating and strate- types of businesses they acquired. Getting in line gic skills to drive value in the business. For Hg, it was about getting in ear- Aside from outperformance, LPs are Big buyout shops have also adopted ly on a long-term trend. The Europe- also keen to back specialists for better specialisation, either by hiring those an manager shifted from a generalist alignment. Sector-focused GPs are with industry expertise or by adding mid-market buyout firm into a soft- often teams that have spun out from new and smaller sector-focused vehi- ware and services specialist in the last bigger managers, says a former global cles. In 2008, Carlyle Group launched decade. Managing partner Matthew head of private equity at a European its first global financial services fund. Brockman says Hg identified software investment firm. The strategy is now on its third vehicle. and tech services as a long-term trend. “In a way these smaller GPs are bet- Permira entered the growth-oriented “Software, for example, is a very sig- ter aligned with LPs because they are tech market last year with a $1.7 billion nificant part of the economy, it’s grow- focused on outperformance [rather] debut growth vehicle, while Blackstone ing and adds significant value. Every than on fee generation,” he says. set up a dedicated life sciences vehicle day-to-day business activity – filing The proliferation of sector in early 2019. n

36 Private Equity International • June 2020 Five year 2020 2019 fundraising Rank Rank Firm total ($m) Headquarters

201 p 287 NovaQuest Capital Management 2,310 Raleigh 202 q 177 General Catalyst Partners 2,295 Cambridge GHO Capital Partners 203 p 210 Denham Capital Management 2,286 Boston 206 204 – CMC Capital Partners 2,279 Shanghai 205 q 167 JPMorgan Asset Management 2,263 New York London 206 – GHO Capital Partners 2,255 London 207 q 175 Linden Capital Partners 2,250 Chicago The healthcare specialist 208 p 235 Eagletree Capital 2,214 New York raised the largest-ever 209 q 193 Gaorong Capital 2,213 Beijing Europe-dedicated healthcare fund in November. 210 q 129 The Abraaj Group 2,201 Dubai 211 q 185 LLR Partners 2,175 Philadelphia London-based Global Healthcare 212 – Coatue Management 2,168 New York Opportunities or GHO Capital 213 p 220 Shunwei Capital Partners 2,159 Beijing Partners is one of this year’s new 214 q 160 Matrix Partners 2,099 San Francisco entrants, having raised over $2.2 215 q 192 BGH Capital 2,085 Melbourne billion in the last five years to end 216 – Incline Equity Partners 2,081 Pittsburgh March 2020. 217 – Roundshield Partners 2,075 London The less-than-six-year-old firm 218 q 195 FFL Partners 2,038 San Francisco has made its mark as one of the top 219 – Kimmeridge 2,023 New York GPs to watch in Europe, through its 220 – Centurium Capital 2,000 Beijing mantra of enabling better, faster and 221 q 196 Hopu Investment Management 2,000 Beijing more accessible healthcare. 222 – Russian Direct Investment Fund 2,000 Moscow GHO raised the largest Eu- 223 p 234 Andera Partners 1,996 Paris rope-dedicated healthcare fund in 224 p 238 CBC Group 1,986 Singapore November, gathering more than 225 – Georgian Partners 1,975 Toronto €990 million from LPs for its soph- q omore vehicle. 226 152 Bernhard Capital Partners 1,950 Baton Rouge The fund was oversubscribed and 227 p 230 FTV Capital 1,939 San Francisco is almost 50 percent larger than its 228 – Novacap 1,932 Longueuil, Quebec 2014-vintage, €660 million prede- 229 q 125 Yorktown Partners 1,931 New York cessor. Capital raised from the vehi- 230 q 163 Quadrant Private Equity 1,914 Sydney cle will back healthcare sub-sectors 231 q 156 Cathay Capital Private Equity 1,904 Paris such as outsourced services, pharma 232 q 173 Kinderhook Industries 1,861 New York and medtech through growth buy- 233 q 166 Freeman Spogli & Co 1,857 Los Angeles outs. 234 q 183 OrbiMed Advisors 1,853 New York While the firm has a pan-Euro- 235 q 202 Old Ironsides Energy 1,853 Boston pean focus, its transatlantic strategy 236 p 288 BV Investment Partners 1,850 Boston is a key differentiator. The firm has 237 – Vestar Capital Partners 1,846 New York had success in taking European busi- 238 q 206 The Edgewater Funds 1,840 Chicago nesses into North America, the big- 239 q 227 The Raine Group 1,812 New York gest healthcare market in the world, China Life Investment Holding 240 – 1,802 Beijing and vice-versa. In fact, GHO’s exits Company last year from Montreal-headquar- 241 q 212 Menlo Ventures 1,800 Menlo Park tered Caprion Biosciences and UK- 242 – BlackFin Capital Partners 1,800 Paris based Quotient Sciences exceeded 243 – Gridiron Capital 1,795 New Canaan return targets. 244 q 214 Thompson Street Capital Partners 1,790 St. Louis The specialist manager is also 245 q 239 Exponent Private Equity 1,789 London underpinned by a team with opera- 246 q 216 Redpoint China Ventures 1,780 Menlo Park tional and healthcare expertise, in- 247 q 217 Marunouchi Capital 1,776 Tokyo cluding execs from American health 248 – Carnelian Energy Capital 1,775 Houston company Quintiles, as well as PE firms Group and TPG. 249 q 233 GSR Ventures 1,775 Beijing 250 p 255 JAFCO Co 1,761 Tokyo

June 2020 • Private Equity International 37 Cover story

Private equity is now a liquid asset class

The evolution of the secondaries market over the past decade has brought material changes to how LPs and GPs engage with the asset class, writes Adam Le

t’s arguable the evolution of the sec- officer wants a change in strategy, or a bulk of the market, GP-led secondaries ondaries market has been the biggest foundation that wants to reduce expo- have allowed fund managers to create Igame changer for both LPs and GPs sure to a particular region or strategy liquidity for their LPs while holding over the past decade. In 2010, the idea can now do so with high transparency, onto prized assets. This has been a of a limited partner selling a stake in a efficiency and in as little as one month. “huge change” for GPs over the last 10 GP’s fund still carried the stigma that “There are opportunities to get years, says David Atterbury, managing the sponsor was a failed manager or off the merry-go-round earlier in an director at HarbourVest Partners. there were problems in its portfolio. investment fund’s life cycle now that “It has become good fund manage- Today, trading are positively impacting the primary ment practice for general partners to interests has become commonplace fundraising market in terms of how offer liquidity at the end of a fund’s life and has gained in scale, with multi-bil- LPs think about their commitments to – and there’s now a way of doing that,” lion-dollar portfolio sales hardly raising funds,” says Michael Belsley, who leads Atterbury says. By transferring assets an eyebrow from the GP community. Kirkland & Ellis’s secondaries practice. into a continuation vehicle, LPs can ei- “It has made private equity actually a CPP Investment Board, Canada’s ther cash out or roll their exposure into relatively liquid asset class,” says Rich- largest pension, made its last commit- the new vehicle, and the GP remains ard Lichter, who co-founded second- ment to a secondaries fund as an LP in aligned by rolling their incentives into aries giant Lexington Partners in the 2008 and has evolved to become one of the new structure, he adds. 1990s and is now managing director at the largest buyers in its own right. Sec- Over the next 10 years, private eq- Stamford-based Newbury Partners. ondaries has been a “unique” way for uity will become an asset class that With this increased liquidity has it to scale its private equity exposure, provides multiple options for both in- come an about-turn in how investors says Louis Choy, a senior principal who vestors and sponsors, says Holcombe approach the asset class. An LP com- helps lead the pension’s European sec- Green, global head of private capital mitting to a fund at the beginning of ondaries team. advisory at . the previous decade could assume its “With primaries, you make com- “We’ll start to see more financial capital was locked up for at least 10 mitments, and that is deployed over instruments crop up that make the sec- years. The proliferation of secondaries the next couple of years with returns ondaries market look more like a finan- buyers and advisory firms, coupled with coming through in the subsequent cial market,” Green says. “Derivatives high levels of dry powder, have meant years, whereas with secondaries, you’re on secondary trades, trading platforms a pension fund that wants to consoli- buying into existing assets – assets that for LP interests. If the market gets date its GP relationships, an endow- your partners are managing already.” enough scale, you’ll start to see it act ment whose incoming chief investment While LP trades still comprise the more like a securities market.” n

38 Private Equity International • June 2020 Five year 2020 2019 fundraising Rank Rank Firm total ($m) Headquarters

251 q 222 Livingbridge 1,759 London 252 – Torquest Partners 1,753 Toronto Arcline Investment 253 p 293 ARC Financial Corp 1,750 Calgary Management 254 – Värde Partners 1,749 Minneapolis 285 255 – JF Lehman & Company 1,734 New York 256 – Advantage Partners 1,722 Tokyo San Francisco 257 – Stirling Square Capital Partners 1,715 London 258 q 151 Digital Sky Technologies 1,700 Moscow A huge debut fundraise has 259 – Reverence Capital Partners 1,700 New York propelled this emerging 260 q 188 Thrive Capital 1,700 New York manager into the PEI 300. Peppertree Capital 261 – 1,697 Chagrin Falls, OH Management Less than a year after setting up 262 q 247 Fondo FSI 1,694 Milan shop, San Francisco-based Arcline 263 p 295 JLL Partners 1,686 New York Investment Management smashed 264 q 215 STIC Investments 1,684 Seoul through its $1.25 billion target to 265 – Revelstoke Capital Partners 1,681 Denver close its debut fund on $1.5 billion 266 – Rocket 1,679 Berlin after just four months in market, 267 q 221 Atlas Holdings 1,675 Greenwich landing it squarely in PEI 300 ter- 268 q 223 HTC Corp 1,660 ritory. 269 – Main Post Partners 1,655 San Francisco The firm was set up by former executive Ra- 270 q 189 Morningside Venture Capital 1,636 Shanghai jeev Amara, who was joined by fellow 271 q 266 VMG Partners 1,612 San Francisco Golden Gate alums Shyam Ravin- 272 q 228 Norwest Equity Partners 1,600 Minneapolis dran and Alex Iannaccone and Senti- 273 – Ping An Capital 1,568 Shanghai nel Capital Partners’ Luke Johnson. 274 q 147 Palladium Equity Partners 1,557 New York The firm will “continue to execute 275 – Paine Schwartz Partners 1,550 San Mateo the same strategy developed and em- 276 – DCM Ventures 1,533 Menlo Park ployed during the founders’ tenure 277 – Alpine Investors 1,532 San Francisco at Golden Gate Capital”, according 278 q 237 Trive Capital 1,525 Dallas to documents from Texas Municipal 279 q 236 GoldPoint Partners 1,525 New York Retirement System, which commit- 280 – MSouth Equity Partners 1,524 Atlanta ted $50 million to the fund. 281 q 258 Foresite Capital Management 1,524 San Francisco Arcline invests in control buyouts 282 – AnaCap Financial Partners 1,505 London of niche mid-market businesses, tar- 283 q 242 Foundry Group 1,505 Boulder geting companies valued at up to $1 284 – Bregal Investments 1,503 New York billion. A generalist, the firm’s pri- 285 – Arcline Investment Management 1,500 San Francisco mary areas of interest include indus- trials, technology, life sciences, spe- 286 – Altaris Capital Partners 1,490 New York ciality chemicals and personal care. 287 q 245 ChrysCapital 1,477 Mumbai Arcline has wasted no time on 288 q 246 MidOcean Partners 1,475 New York Multiples Alternate Asset the dealmaking front. The firm has 289 q 265 1,460 Mumbai Management already made seven platform invest- 290 – Data Collective 1,459 San Francisco ments and six add-ons, including 291 q 164 AG 1,443 Baar, Switz investing in Dark Horse Consulting Group, acquiring a majority stake in 292 q 205 Trident Capital 1,442 San Mateo cell and gene therapy materials sup- 293 q 201 Portobello Capital 1,441 Madrid plier Akron Biotechnology, acquir- 294 q 262 Mayfair Equity Partners 1,423 London ing engines and power generation 295 q 253 VIG Partners 1,420 Seoul systems manufacturer Fairbanks 296 q 257 Wellspring Capital Management 1,420 New York Morse and acquiring Unitec Ele- 297 – Atlas Merchant Capital 1,415 New York vator from Pacific Avenue Capital 298 – Wind Point Partners 1,414 Chicago Partners. 299 q 259 Vector Capital 1,410 San Francisco 300 q 280 Summa Equity 1,403 Stockholm

June 2020 • Private Equity International 39 Cover story

0 10 20 30 40 50 60 70 80 90 100 $bn 1 $1.12trn Five-year fundraising total of PEI 300’s Top 50

50 $359bn Five-year fundraising total of firms 51-100

100 $121bn Collective fundraising efforts of 54 new firms in the ranking

150 By the numbers How the PEI 300 firms stack up against each other

200 $309bn Five-year fundraising total of firms 151- 300, roughly equal to the amount raised by the top six firms ($325bn)

250 >$1.4bn Capital needed to get into the ranking 300 0 10 20 30 40 50 60 70 80 90 100 $bn

40 Private Equity International • June 2020 Cover story

A lot can change in a decade Bigger. More variety. The PEI 300 has grown and grown over the years. What might it look like in 2030?

Number of firms in the PEI 300 by region $354bn Total capital raised

EUROPE

NORTH AMERICA $185bn Total capital 50 raised

MENA ASIA 201 1 47

LATIN AMERICA $1,443bn $3bn $2bn Total capital Total capital Total capital raised raised 1 raised $3bn $1.99trn 9 Median amount raised in 2020, up Amount raised by PEI 300, up from Number of Asia-Pacific-based firms in from $2bn in 2010 $1.31trn in 2010 top 100 in 2020 up from 5 in 2010 $5.41bn $1.12trn $178bn Amount needed to break into top Amount raised by PEI 50, up from Amount raised by bottom 100, up 100, up from $3.23bn in 2010 $771.5bn in 2010 from $110bn in 2010

June 2020 • Private Equity International 41