Buyouts

“One of the things that we did do over the last few years was increase our target to buyouts and venture.”

“I think a lot of firms fall into the trap of they're really good at a certain stage. That's why they raise funds. That's why they raise multiple funds. But then because they raise such large funds, they have to start to think about, okay, now we're actually ed…”

“A buyout is an apprenticeship business, fundamentally. You can't walk in off the street with no credibility or history and complete buyout deals, generally speaking, because you've got to get an investment banker to show you a deal. You've got to get a commerc…”

“In most portfolios for our clients, we're 60% buyout, 40% venture, roughly speaking.”

“Look, I think the buyouts were willing to take, you know, five points lower than everything else. Everything else is blended pretty close to the same. You know, 30% is kind of a gross number that you'd say we target.”

“The challenge along the way is that sometimes the skill set that works with the small company is not Applicable to the bigger company. Also, bigger companies tend to be better managed, so maybe there's less you can do with them while you own them. There is a P…”

“It's going to be very difficult for private equity, broadly defined venture and buyout and related stuff to be the single defining alpha creating strategy for institutional investors the way that it's been over the last 3540 years.”

“There's still a trillion dollars of dry powder out there for buyouts, which means if the GP picks up the phone and says, I need your check, the LPs are writing the check, and yet they haven't seen much money back in the last four or five years.”

“If you look at the last 14 years of realized returns, Roughly speaking, 50% of the returns of buyouts have been due to revenue growth. 50% has been due to multiple expansion, largely owing to the low interest rate structure that we were talking about, and zero…”

“In the 19 nineties, if you said, hey, let's go get some software businesses and lever them up, and that'll be a great way to do a buyout, people would have laughed at you. That was not the buyout industry, and now it's the single biggest sector in all the buyo…”

“Most recently, I'd say the last five or six years, We've been really leaning in on the special situation subsector within buyouts because we think there's going to be some challenges ahead and some shoes are going to fall.”

“In venture, you can make the right asset allocation decision, but if you can't get the best managers, or at least the top quartile managers, it's not going to matter. It's not going to deliver. That's most true in venture, maybe a little less so in buyout and …”

“Good quality buyouts, probably in the nineties. Venture and growth, very much name specific. So some managers still very difficult to access. So you pay an access premium, but probably more like 60 to 80 cents on the dollar because there's a little bit of skep…”

“Since in the last 10 or 15 years, buyouts have been about 20% of delisting of public companies.”

“Obviously the number one technique for buyouts to exit was selling to other buyout firms.”

“And because venture and buyouts have essentially longer time horizons, whether people like it or not, they have to sit in their seats for a while. And that's actually, I think probably been to their benefit versus to their detriment.”

“Although that's probably more true in buyouts, I think, ah, where the track record piece, because in venture there is brand, right? And there is, I think, more persistence of returns around brand.”

“It is usually the case that an operational intensive team tends to use also less leverage at the beginning. So if we see a team that tends to use a higher leverage at the beginning, that is a bit of a warning signal to us, because if you are trying to really i…”

“The capital structure dynamics is also, I would say, more consistent than different. They tend to be anywhere between three to four times in leverage and entry. So when we see a deal that's four and a half times or more, we tend to raise our eyebrows.”

“We have not really done much in the venture side at all. It requires a very deliberate different strategy to do venture co-invest in our opinion. Idiosyncratic risk is far greater than buyouts, and therefore you have to approach it with a diversified enough of…”

“So we've been in private equity investing since the mid-nineteen nineties. It's roughly about 13 to 14% of our overall book, which is a sizable amount, but it's not nearly as big as some other investors have. I'm happy with that. It's roughly split equal betwe…”

“And a lot of buyouts these days, as we found in the financial crisis, are being done with less leverage or in some cases no leverage.”

“That persistence used to have to happen in buyouts. But that effect is mostly melted away in the last 20 years, and it's very difficult to find persistence in public markets at all.”

“Buyouts, by the way, have consistently been a little bit better than private equity have been a little bit better than venture. They're much less episodic or dramatic, and they tend to chug along a little bit over one PME.”

“And so it turns out if you look at venture capital in particular by the way, in public equity markets, very limited persistence, right? So if you did really well last year, your expected value is closer to the average the following year. Buyouts. They used to …”

“We're not doing a lot of buyouts right now because the valuations we think are insane and the leverage multiples are really high.”

“So in venture, the advantages might be around personal brand, firm brand. On the buyout side, it might be really around their ability to add value post-close. And on the long only or hedge fund side, it might look, it might be much more around their approach t…”

“But I would say 90% of the times buyouts will work. Venture capital, which we were not really in, probably 90% of those deals didn't work.”

“So the stress credit opportunity funds, secondaries down the line, I think that there's budding interest going to be growing interest. In those areas as we go forward, but relative impact and weight within member portfolios, traditional buyouts is where the fo…”

“In some ways, I think that one of the advantages of private equity for, I will speak specifically to buyouts, Is that investors can't pull their money out of these things. And as a consequence, they don't see the volatility. They have no chance to transact at …”

“Our portfolio has no large buyout at all, because we think that, well, that makes the capacity so much harder, by the way, but we think that large buyout is really just levered equities, typically. And if there's skill added on top, and there might be, then mo…”

“So I figure that, I think that probably the asset class is somewhere between, on average, money losing to simply underperforming relative to, say, buyouts or whatever, as an asset class.”