Private equity is ready to make moves as the economy sours, but its approach to dealmaking might be different than in years past
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Dan DeFrancesco
Nov 17, 2022, 17:44 IST
Samantha Lee/Business Insider
Hiya! Surprise, surprise, it's Dan DeFrancesco again. I'd stop introducing myself by now, but then I couldn't keep shamelessly plugging my Twitter account.
But first, one person's trash is another's distressed investment.
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1. When the going gets tough, PE gets going.
Financial markets, like ecosystems, are all about balance. Pain for one player means opportunity for another.
Insider's Casey Sullivan and Rebecca Ungarino examined one segment of Wall Street that is primed to take off despite an economy that has left almost everyone hurting.
"We excel in this kind of market," Apollo CEO Marc Rowan told analysts on a recent earnings call. "We are leaning in."
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In short: the sharks smell blood in the water.
But, as Casey and Rebecca point out, it's not as straightforward as PE firms simply rolling out an old-school playbook on distressed companies (cut costs, lever up, and sell for a profit).
PE strategies have gotten more nuanced, and there are plenty of recent outside factors forcing them to rethink their approach.
To be clear, these firms are able to change or adjust.
Insider's Bianca Chan wrote a story early this week about how PE shops are starting to lean on the public cloud. The shift isn't just about helping them better manage and assess data for deals. The tech can also help their portfolio companies cut costs as well. And in classic PE fashion, firms are trying to do it in the most cost-effective way (more on that here).
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The big question is where will PE firms look to deploy capital. There are plenty of potential avenues — as covered here — but perhaps an easier way to think about it is where firms won't invest.
Many of the largest PE firms are now public companies, meaning they need to consider how their actions might be perceived by the outside world, as Casey pointed out to me.
Companies that might be bad for the environment, for instance, might be a tough sell for these public-facing PE firms to make, despite how good the financials look.
How long PE firms resist those types of deals still remains to be seen, though. The industry has come a long way from the leveraged buyout days of "Barbarians at the Gate," but this is still Wall Street
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