The Financial Women’s Association recently featured a Private Equity Panel: The not-so-secret Evolution of Private Equity. The term private equity is now commonly featured in worldwide headlines and is continuously being credited for revolutionizing the landscape of business today.
Sponsored by BakerHostetler, Steven Goldberg, co-leader of the firm’s Transactions Practice team, provided opening remarks for this special keynote presentation. Moderating the program, Mariafrancesca Carli, Managing Director with J.P. Morgan’s Family and Family Offices Investment Banking Coverage, led the discussion with featured panelists Adrianna Ma of General Atlantic, who leads the Business Services sector and Suzanne Donohoe of KKR, who is the Global Head of Client and Partner Group.
Looking back, Adrianna Ma grew up in New York and studied engineering at MIT. Ms. Ma kick started her career through working at Hewlett Packard where she found her true passion was in unlocking capital and finding good businesses. She then moved to HBS and worked at Morgan Stanley in M&A before joining General Atlantic where she currently heads the business services sector. Ms. Ma is also actively involved in the community, including sitting on the board of the Nature Conservancy and staying involved with the alumni efforts at MIT. On the other hand, Suzanne Donohoe worked at Goldman Sachs heading the GSAM Division in Europe and in the US before joining KKR, where she is currently the global head of KKR’s Client Partner Group. With three young children, Ms. Donohoe is also actively involved in the community including sitting on the board of the Nature Conservancy and remains closely tied to the alumni efforts at Georgetown University.
Throughout the event, the dynamic panel discussed recent activity in the market, as well as trends in the alternative asset class and different private equity models including growth focused private equity and large asset gatherers.
When referring to the overarching investment thesis Ms. Ma said, “GA looks for micro trends in specific industries (ex: digital marketing, mobile, e-commerce, accessible luxury). GA doesn’t have a fund, but rather, manages capital from families and long term investors which give them the flexibility to make long term investments. They don’t have to have control instead they can make minority investments or hold a public stake.” Ms. Donohoe added, “Some current opportunities are found internationally (ex: Asia).”
As the conversation continued, the theme of sourcing and identifying good investments was addressed. Ms. Ma commented, “Making a good investment happens throughout the entire process, from identifying the company to deal structuring and actively supporting the company once it’s part of the portfolio. Deals are no longer simply about financial engineering but about identifying the right business and surrounding it with the right board and resources.”
Additionally, the best ways in which to successfully grow a business were highlighted. KKR Capstone, for example, is an operational team that helps run business lines at the level of portfolio companies. Further, a GA can definitely enable a business to expand through surrounding it with the right resources. Other key tools such as a board can help open doors or even provide specialists (ex: audit specialist or ex-entrepreneur); a resource group that is comprised of experts for different functions such as HR can help each portfolio company; and capital markets can be utilized to guide a portfolio company through the financing processes. Also, how to identify the right price and derive a good return was discussed in detail. Some of the most important steps related to this process include:
- Looking at price paid / unit growth
- If leverage at entry is low, the risk of loss of equity is lower
- Hold longer and sell higher to improve return on capital
- Try to identify breakout potential – identify other levers to pull throughout investment
Closing out the evening, invaluable career advice was given related to taking risks in your career, building your network, branding yourself to elongate your shelf life in the company and that ultimately, communication is crucial in all elements of business. A lively Q&A session followed in which Connie Jao asked, “With the onset of stricter banking regulations and underwriting standards for many investment banks, how do you think private equity firms will navigate these issues and obtain financing needed for future deals?” Panelists joined together in the response, “The creation of a capital solutions group helps fill the void of some of the middle market companies that don’t meet the regulatory requirements. It is helpful for private equity firms as they can provide the capital needed.”
Special thanks to BakerHostetler for hosting this event, and specifically to Shiny Mathew and Ferve Ozturk and the FWA’s Professional Services Liaison Committee and Co-Chairs Susan Migliaccio and Kalinka Moundrova-Rothman.