Just happened

IFC conference day one: Tech, trade and CEO-swapping 

Our reporter Preeti Singh is attending the IFC’s Annual Global Private Equity conference in Washington, DC this week. Here’s what we learned on day one:

• Tech is driving investment gains. The IFC’s Maria Kozloski said more than half the gains in its portfolio are driven by gains in technology. Sectors that have benefited the most include logistics, cold storage, consumer branding, healthcare and fintech. General Atlantic chief exec William Ford said tech innovation is accelerating penetration into emerging markets, some of which are now leading in tech development.
• Carlyle takes control. Eric Kump, head of Carlyle’s Sub-Saharan Africa Fund, said across Carlye’s global buyout platform, the firm’s data show that when it changed the CEO at the time of a deal, the investment generated a 26 percent IRR. This fell to 22 percent if the CEO was switched out after a year, and to 18 percent if the firm never changed the CEO.
• Trade tensions are a mixed bag. Trade tariffs between the US and China have not significantly impacted Chinese private markets, but uncertainty has affected market confidence, with some IPOs being delayed or cancelled. Many firms are raising pan-Asia funds to mitigate potential fallout and portfolio companies have begun reducing dependence on the US.

Second(ary) and Lexington

Lexington Partners has hit the $10 billion mark on its latest fund as the secondaries fundraising jamboree continues. The New York-based firm, which is targeting $12 billion for Fund IX, has already deployed around $2.5 billion, mainly on LP stake transactions, Secondaries Investor reports. This follows news in February that Ardian, the only firm with more secondaries AUM than Lexington, was to cast aside the $12 billion target for ASF VIII and shoot for $18 billion of commingled and co-investment capital. Click here if you’re wondering where all this money might be spent.

Essentials

Ready, set, mega-firm. If you’re looking to set up a future leader of the PEI 300 (just two weeks to go until we unveil this year’s list), it’s worth keeping an eye on Navab Capital Partners; it may become the playbook for how to achieve instant scale, senior editor Toby Mitchenall writes for our sister title pfm. Lessons to be learned include getting a seeding fund on board and going big on recruiting operational executives early.

Scout’s out. Shareholders have rejected a joint bid from Blackstone and Hellman & Friedman for Scout24. The €46 per share offer – which values the business at $6.4 billion, including debt – was only accepted by those holding 42.8 percent of shares, below the 50 percent minimum threshold. A lower initial offer was rejected in January. The transaction is the latest to highlight how tricky take-privates can be: even with the company CEO on board, there’s no guarantee a transaction will get done. Let’s see if the pair comes back with another offer.

Deep dive. Wondering what to do with that fortune you’re amassing from a career in private equity? You could take a leaf out of Insight Equity Holdings co-founder Victor Vescovo’s book and build a submarine to explore the deepest depths of the earth. Vescovo set a record for the deepest dive, descending 10,928 metres into the Pacific Ocean’s Mariana Trench. What did he find down there? Rather depressingly, litter. There’s another thing you could do with your fortune…

Inside tip

PEI’s Isobel Markham and Brian Bonilla will be at the Private Fund Compliance Forum in New York today. Say hello if you are there.

Dig deeper

Hoosier happenings. The $35 billion Indiana Public Retirement System has a target private equity allocation of 10 percent, and is currently sitting at 12.1 percent. The pension approved a $100 million commitment to Pathlight Capital Fund I, a debut fund seeking $500 million per an SEC filing. Here’s a breakdown of INPRS’s investment portfolio. For more information on INPRS, as well as more than 6,700 other institutions, check out the PEI database.

He said it

“Since we are buying control, we are using control. We replaced one-third of our CEOs, and two-thirds of our CFOs [and] made 35 executive hires across our management teams.”

Eric Kump, managing director and head of Carlyle Sub-Saharan Africa Fund, tells delegates at the IFC’s Global Private Equity conference in Washington, DC the firm is bringing “developed market domain expertise” to its portfolio companies in the shape of execs and ex-CEOs from Europe and the US.

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Today’s letter was prepared by Isobel Markham, Adam Le, Rod James, Carmela Mendoza, Alex Lynn and Preeti Singh.

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