Side Letter: The main thing keeping LPs up at night; BC’s de Rosière leaves role; fundraising during a war

Montana Capital shares its latest LP survey exclusively with Side Letter. Plus: another BC partner moves shop; and Central and Eastern Europe GPs feel the effects of Russia's Ukraine invasion. Here’s today's brief, for our valued subscribers only.

Just happened

Economic downturn: Biggest worry on LPs’ minds

The dreaded ‘R’ word
An economic recession is the top concern for investors over the next 12 to 24 months, according to a survey shared exclusively with Side Letter. Almost 40 percent of respondents to Montana Capital Partners‘ Annual Investor Survey 2022 said economies consistently experiencing low growth was front of mind, with a further 30 percent saying it was the second-most concerning issue. Inflated private equity valuations came in next, with 44 percent saying it was a first or second key concern. PE valuations have remained elevated compared with their public counterparts, which have faced more intense corrections – an issue that some, such as US retirement lobby group the Equable Institute, have said LPs should press their GPs about.

Of all respondents to Montana’s survey, 84 percent expect buyout multiples to decrease by one to two turns over the next 24 months, up from 35 percent of respondents indicating they expected this to happen last year – a year marked by its lofty M&A levels.

Here are a few more key findings:

  • Mid-market buyout is the most attractive strategy for investors going into 2023, followed by secondaries and growth capital.
  • LPs are most likely to use the secondaries market for strategic repositioning purposes, followed by the need for liquidity.
  • One-quarter of LPs believe single-asset GP-led continuation funds – secondaries processes that involve a sole asset – will develop into their own asset class. More than one-tenth of LPs believe these processes are a “temporary phenomenon”.

Taking (tech) stock
With top tech stocks losing $3 trillion of market cap in the first six months of this year alone, investors have been understandably cautious about re-engaging with the sector. All is not lost, though: speaking to Private Equity International as part of our 2022 Investing in Technology special report, multiple market sources say the drop in valuations is no more than a market correction, rather than a long-term cause for concern. As a result, rather than avoiding the sector altogether, sponsors will simply focus on what constitutes a good tech investment moving forward.

Here are three key considerations for making worthwhile investments in tech:

  • Choose the right vertical. “In this market environment, it is more important than ever to invest thematically in verticals and companies that are supported by secular growth trends,” according to Victor Englesson, global co-head of TMT at EQT Growth. Other sources say enterprise software, green tech and climate tech are key areas to watch.
  • Focus on value creation. A short-term drop can create good buying opportunities for investors looking for long-term returns. John Park, who leads the technology industry team within KKR’s Americas private equity platform, says: “Management teams that weren’t returning our phone calls 18 months ago are now willing to enter into a conversation. They want to know how they can do the things that they want to do without the volatility of the public markets.”
  • Be selective. The tech correction will benefit new PE tech funds – those launched in late-2022 and early-2023 in particular – as they will be able to buy assets at attractive multiples. Investors that have previously taken a closer look at their tech position will find themselves in an advantageous position.

(Another) BC move
Laurent de Rosière, partner and global head of strategic relationships at buyout firm BC Partners, has joined Italian sustainability-focused manager Ambienta, per a statement. He has been hired as Ambienta’s head of investor relations and strategic partnerships. De Rosière’s decision follows a series of people moves at the firm: Jean-Baptiste Wautier, partner and CIO for PE, will leave at the end of January after nearly two decades with the European stalwart. Two other partners, Christian Mogge, who covers the European business services sector, and Pascal Heberling, who covers the healthcare sector and DACH region, are also leaving towards the end of this year. Side Letter understands that de Rosière will remain a senior adviser to BC.


Ukraine war’s impact among CEE GPs. The direct effect of the war on Central and Eastern Europe-focused PE and VC funds operations is limited – in terms of dealflow, performance and executed transactions – and likely to diminish over the next year. That’s one of the key findings of a report from Bain & Co on the region. That said, 88 percent of GP respondents said the war has negatively impacted capital raising efforts, while close to 90 percent indicated that exit options were significantly affected.

Today’s letter was prepared by Adam LeCarmela MendozaHelen de BeerMadeleine Farman