Cover story 20 Private Equity 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 New York 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 The Carlyle Group 61,719 Washington DC 3 vw 3 KKR 54,760 New York 4 p 12 TPG 38,682 Fort Worth 5 vw 5 Warburg Pincus 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 Advent International 33,491 Boston 10 p 14 Vista Equity Partners 32,095 San Francisco 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. ■ 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 buyouts, growth equity, venture capital 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 (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) bn bn bn bn bn bn bn bn bn bn 9.1 259.7 226.9 4 339.5 328.6 320.0 4 4 44 $19 $ $ $ $ $ $ $ $ 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