Publisher’s Preface
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