The dark clouds in the econo­mic sky are caus­ing a medio­cre mood among private equity inves­tors who are used to success. – This is because the poor econo­mic outlook and past inte­rest hikes are having an impact on their port­fo­lios and also poten­tial target compa­nies. After more than 15 years of low inte­rest rates, access to cheap capi­tal and steadily rising valua­tions, the signs in the markets have chan­ged. The inves­tor baro­me­ter for the German market has also fallen signi­fi­cantly in the third quar­ter of 2023, and the busi­ness climate has again cooled (source: Prequin). Reces­sion fears and diffi­cult finan­cing are weight­ing on deal-makers. Nevert­hel­ess insti­tu­tio­nal inves­tors are still posi­tive for private equity. Also finan­ciers of start-ups are some­what more optimistic.

Laun­ching new funds has also become more diffi­cult at the moment, even though the finan­cial inves­tor CVC set a record in Europe this year with a new fund of 26 billion euros. For many newco­mers in the market or lesser-known private equity houses, laun­ching new funds is curr­ently taking longer or the funds are getting smaller.

Howe­ver, the majo­rity of insti­tu­tio­nal inves­tors (limi­ted part­ners, LPs) are still posi­tive about the outlook for private equity in North America and Europe in 2023 and 2024 and expect it to be a consis­t­ently stable, some even say strong, year, accor­ding to Coller Capital’s Global Private Equity Baro­me­ter. For private equity, most insti­tu­tio­nal inves­tors believe that the health­care and phar­maceu­ti­cal sectors will offer attrac­tive invest­ment oppor­tu­ni­ties over the next two years. Three quar­ters feel the same way about IT and busi­ness services. Two-thirds of LPs say their buy-and-build port­fo­lios have perfor­med better than average. There are clear diffe­ren­ces in the energy sector, where more LPs favour rene­wa­ble energy than fossil hydro­car­bons. For three quar­ters of insti­tu­tio­nal inves­tors, arti­fi­cial intel­li­gence is gaining importance in the initia­tion of private equity transactions.

A new sub-segment is curr­ently emer­ging in the field of alter­na­tive invest­ments: climate tech invest­ments. It is esti­ma­ted that the climate tech market is worth around 100 billion euros and is growing at over 25 percent per year. At present, the majo­rity of inves­tors’ money is still flowing into climate tech venture capi­tal. Howe­ver, in order to achieve the UN’s Sustainable Deve­lo­p­ment Goals, 4 tril­lion euros in private capi­tal would have to be mobi­li­sed annu­ally. Accor­ding to the fore­casts of climate tech inves­tors, huge markets will emerge around climate tech­no­lo­gies, and ther­e­fore this asset class will also grow strongly.

Private debt has grown up in the shadow of private equity. Loan funds fed with insti­tu­tio­nal money that provide debt finan­cing for the company acqui­si­ti­ons of private equity firms – a conge­nial duo. Howe­ver, as debt funds mature and grow in size, they are alre­ady evol­ving – both along and off the private equity value chain. An incre­asing number of debt funds have laun­ched senior funds in addi­tion to the estab­lished unitran­che funds. In other words, the debt funds are evol­ving into incre­asingly diver­si­fied assets. Senior finan­cing consists of a purely senior and thus safer loan and was ther­e­fore tradi­tio­nally provi­ded by banks. A trend seems to be deve­lo­ping where senior funds are also speci­fi­cally ente­ring exis­ting bank finan­cings with addi­tio­nal loans, where more capi­tal is needed that cannot be provi­ded through the pure banking market or where one or more banks are to be replaced.

In the maga­zine section of our 21st issue, you can once again expect nine promi­nent authors as well as exci­ting and new topics from the finan­cing and corpo­rate finance industries.

Arti­fi­cial intel­li­gence (AI) is not only on everyone’s lips these days – AI, tech­no­logy and data have an extreme impact on value crea­tion and tran­sac­tion advice. Not only compa­nies are stri­ving for digi­ta­li­sa­tion stra­te­gies, but also nume­rous private equity firms are seeking advice on evalua­ting the digi­ta­li­sa­tion poten­tial of new targets or port­fo­lio compa­nies. Dr Stefan Sambol and Dr Anja Konhäu­ser (OMMAX) describe how the digi­tal age can be maste­red for compa­nies even in a rela­tively short period of time and what the stra­te­gies and prepa­ra­tion for the digi­tal exit can look like.

Mean­while, our long-stan­­ding authors Dr Chris­toph Ludwig and Thomas Unger (BLL Braun Leber­fin­ger Ludwig Unger) ask them­sel­ves whether private equity is not expen­sive stuff after taking a closer look at the many tax deve­lo­p­ments of recent years.

The sudden increase in the comple­xity of the respec­tive new company struc­ture in buy & build concepts meets the simul­ta­neous increase in the demands of inves­tors, banks and manage­ment. Martin Sper­ling and Elena Sali­ni­tro (loyos bi) explain that trans­pa­rent finan­cial report­ing not only saves time, but is also a value driver. – Digi­ta­li­sa­tion has now also arri­ved in the onboar­ding of inves­tors. This means simpli­city, clarity and less effort for ever­yone invol­ved, as Dr Stephan Schade and his co-authors Katha­rina Hammer and Dr Philip Schwarz van Berk (POELLATH) explain in detail. – In vola­tile times, close scru­tiny of assets and (tran­sac­tion) finan­cing is more important than ever. Carl-Jan von der Goltz (Maturus Finance) will tell you why object-based models offer a secure solu­tion for the latter.

Climate protec­tion as an asset class offers great oppor­tu­ni­ties for inves­tors and compa­nies. Sandro Stark (Vana­gon Ventures) explains why this field has such enorm­ous poten­tial. – In the German venture capi­tal and start-up scene venture debt is still a rela­tively new and inno­va­tive finan­cing instru­ment. Dr Stefan Gott­ge­treu and Andrea Schlote (Bird & Bird) explain why, in the current diffi­cult market envi­ron­ment, venture debt can play a much grea­ter role in the future.

Dr Sofia Harr­schar (Univer­sal Invest­ment) explains why the asset class private equity will remain attrac­tive for inves­tors in asset allo­ca­tion despite the rise in inte­rest rates and why they should pay more atten­tion to in the future when selec­ting provi­ders and products. – Times of crisis are a good oppor­tu­nity for plan­ning and prepa­ra­tion. The IPO of a company is a funda­men­tal decis­ion. It is prece­ded by a long prepa­ra­tion phase, as well as consul­ta­ti­ons with specia­lists. Stefan Maas­sen (Deut­sche Börse Frankfurt/Main) and Cars­ten Huth (Deut­sche Börse Berlin) describe how this process leads to success.

FYB 2024, in its 21st edition, conti­nues to enjoy great popu­la­rity with a consis­tent number of company profiles. You will also find entries from foreign PE compa­nies that want to be present in the FYB Finan­cial Year­Book and on the German market. The FYB 2024 provi­des you with an over­view of private equity and venture capi­tal firms, private debt and mezza­nine provi­ders, fund of funds, compe­tent law firms, as well as corpo­rate finance specia­lists, manage­ment and HR consul­tants and networks, etc. FYB 2024 thus remains the leading refe­rence work for alter­na­tive finance in Germany. It regu­larly offers inte­res­t­ing news at www.fyb.de.

Yours since­rely

Tatjana Ande­rer