The fact that we are currently residing in the pinnacle of private equity is not likely to be met with much resistance. Names such as BlackRock, KKR, and Apollo are now equally recognized as their blue chip investing banking rivals, and in some areas, they find themselves in direct conflict with one another.
What exactly does “private equity” mean?
Private equity is an umbrella word that describes businesses that combine the capital of their investors in order to make investments in undervalued businesses and assets. In the context of private equity, the goal is to give investors with a high return on the assets they have invested in by delegating knowledgeable management teams to oversee the firms and assets in question away from the scrutiny of public markets.
The companies that are targeted for investment may or may not be publicly traded; nevertheless, if they are publicly traded, the private equity firm that is managing the investment will take them private.
What is the Process Behind Private Equity?
The Working Method
The following steps are commonly involved in the process of investing in private equity funds:
1. The Fundraising Efforts
The time during which a private equity team will attempt to persuade potential investors to put their money into either their investment fund or (on occasion) their own company.
2. The Sourcing of Deals
The time during which the private equity firm searches for appropriate prospects that meet the criteria outlined in its investment thesis.
3. Post-acquisition Operation Improvement
The time during which the team of private equity investors works to increase the value of the acquired firm by reorganizing the business.
The private equity firm and its investors are able to liquidate their stakes during the time period in which the newly acquired business is either put up for sale or prepared for an initial public offering.
The purpose of this procedure is to ultimately produce a higher multiple of earnings, also known as value addition, than the price at which the firm or asset was originally purchased.
Characteristics of Businesses That Are Considered for Investment by Private Equity If there is a single factor that is common to all of the private equity expenditures, it is the belief that the businesses or assets that are the target of these investments have been undervalued in some way.
The current owners of the company may not have recognized the potential of the business, may have mismanaged it, or may not have been able to gain access to the financing necessary to bring the company to scale. For one of these reasons or another, the private equity company tries to create value that will ultimately generate returns for investors.
In addition to this, private equity firms focus their attention on topics such as the following:
Dynamics of the industry and the market
The potential for the company to generate cash.
Positioning in relation to competitors
requirements in terms of technology and capital (insert link to article on investments in capital)
Possibility of causing major changes in a sector
What are some of the most typical PE tactics to use?
In a recent post published on DealRoom, the six most frequent techniques utilized in private equity were explored. These include:
Venture capital Growth capital
Funds of funds that specialize in leveraged buyouts (also known as LBOs).
What are the key differences between venture capital and private equity?
Check out our in-depth analysis of the distinctions between private equity versus venture capital for more information on this issue, or have a look at the list of the most successful venture capital firms.
Despite this, the primary distinctions can be broken down into the following categories:
The 8 Private Equity Firms That Are the Largest According to This List
Apollo Global Management
CVC Capital Partners
The Carlyle Group
1. BlackRock Assets Under Management: $7.5 Trillion
The year 2022 was a difficult one for BlackRock. Investors have begun to attack the unrivaled leader of the private equity industry’s impact investment strategy, which has already resulted in the loss of around 25 percent of the firm’s AUM since the beginning of the year.
Even after such a terrible year, the private equity investment giant still begins 2023 with a huge $7.5 trillion under management, which is a tremendous accomplishment in and of itself. Expect a revamped Environmental, Social, and Governance plan at some point in 2023.
2. Blackstone’s Assets Under Management (AUM) are worth $951 billion
A number of investors withdrew their funds from Blackstone towards the end of 2022, which resulted in a decrease in the amount of assets under management (AUM) at the firm’s end-of-year total. More crucially, the withdrawal may compel the business to finally launch the highly anticipated fund that is aimed at HNWIs, which have been leaving the company’s real estate and credit lines in droves.
Because of the ongoing changes in the market, several of the companies on this list, including Blackstone, may need to reconsider their approach in the year 2023.
3. Apollo Global Management - AUM: $523 billion
The fact that Apollo Global Management places a strong emphasis on credit appears to position the company favorably for the year 2023. It was recently stated by the company’s CEO, Marc Rowan, that the business concluded the second half of 2022 by profiting off of mispriced risk, which is a pattern that is expected to continue into the following year.
The most recent plan put up by the company appears to be a sound one. It involves increasing lending in order to capitalize on rising interest rates, geopolitical unrest, and a developing liquidity shortage.
4. KKR - AUM: $471 billion
It is widely believed that KKR will be one of the primary companies to profit from BlackRock’s short-term slump. It was able to generate a staggering $126 billion in funds over the course of a year, which represented more than a third of the company’s AUM at the beginning of the time.
Assuming that it will be able to keep this rate up in 2023, or at the very least maintain something similar to it, KKR will soon be able to go past Apollo Global Management and into the top three private equity organizations in the world.
5. Assets Under Management (AUM) for The Carlyle Group: $369 billion
Surprisingly, the year 2022 was the period in which the Carlyle Group’s private debt business surpassed its private equity operation for its first occasion in 35 years, making it a watershed moment for the company. It also formed a clean energy developer, as it seeks to build solar as well as additional renewable assets directly. However, it did not reveal the amount of money that it expects to invest in this endeavor, which is another noteworthy development. The year 2023 is shaping up to be a very intriguing one for the Carlyle Group.
6. CVC Capital Partners - AUM: $146 billion
CVC Capital Partners, which is the largest private equity company in Europe in terms of AUM, was going to list at the Paris Stock Exchange in 2022; however, the company subsequently withdrew preparations for the offering and stated that it currently had ‘no plans’ to list.
Plans to go public in the first half of 2023 might have to be scrapped if interest rates in Europe follow the same path of increase as those in the US. This is the assumption made in the previous sentence.
7. TPG - AUM: $135 billion
TPG, in contrast to CVC Capital Partners, pressed forward with its intentions for an initial public offering (IPO) in 2022, listing on the Nasdaq index, which is heavily weighted toward technology. This was an intriguing option, considering that the majority of its rivals had listed on the NYSE almost ten years earlier.
The first public offering of ten billion dollars was regarded as a success; however, the true litmus test will be whether the market responds to the company’s recently declared concentration on debt and construction.
8. Thoma Bravo: Assets Under Management (AUM): $114 Billion thoma bravo logo
Technology-focused In 2023, it is possible that Thoma Bravo may perceive the gathering clouds over the technology industry as a chance to acquire some assets at lower prices. Already in 2022, it attempted to oust Elon Musk from his position as bidder for Twitter, and he may come to regret that they were unsuccessful.
At the end of the year 2022, Thomas Bravo made the announcement that it had successfully funded $32.4 billion for fresh acquisitions, with the intention of spending it all on technological companies in 2023.
It is often possible to get a decent idea of the direction in which the wind will be blowing for the coming year by looking at the investment strategies that private equity organizations propose for markets as the new year begins.