Private market investors have seen an extended period of deal activity over the last decade but the investment optics have changed in 2023. Higher rates, inflationary pressures, and volatile markets, have generated uncertainty and impacted deal volumes. As Bain & Company point out in their 2023 mid-year PE report, “uncertainty is the enemy of dealmaking”.
Blackstone, the world’s biggest alternative asset manager, has raised an initial $1.3 billion for a new private equity fund tailored for wealthy individual investors. The fund – Blackstone Private Equity Strategies (BXPE) – is further evidence of Blackstone’s decade-long push to diversify its investor base beyond large institutions, as it looks to build its private wealth client book. Blackstone is not the only group to think, ‘All hail retail!’ with Carlyle Group and Apollo also taking strides to offer investment funds to private investors. This could be the next step in solidifying Blackstone’s market-leading reputation, and more broadly, private equity’s appeal with the masses.
Happy New Year! With 2023 now behind us, many will be hoping that the next 12 months bring plenty of opportunities to do deals and recapture PE’s magic. Data by Edison shows that there are approximately 16 to 17,000 private equity and VC-backed firms. By contrast, the number of US public firms has dropped from 7,000 to less than 5,000 since the start of the century. As the private markets universe expands, GPs will look to shine bright like a diamond in 2024, as they seek out take-private deals, corporate carve-outs and family-owned businesses. Who knows how many ‘lightbulb’ moments could arise, as GPs get creative with their deal sourcing approach? Factor in a feeling of optimism on Wall Street that the US Federal Reserve will cut rates at some point in 2024, and…whisper it quietly, the PE industry might find itself whistling ‘let it grow, let it grow, let it grow’. Okay, bad joke – but hey it’s the New Year!
The AI revolution is well and truly happening. We’ve all seen it this year, with Open AI’s tool, Chat-GPT, entering the public consciousness. The AI revolution is well and truly happening. We’ve all seen it this year, with Open AI’s tool, Chat-GPT, entering the public consciousness. Such was its impact that it had 100 million users within two months. No other technology tool has even come close to such instant, widespread adoption.
For private equity, this is an exciting time. Blackstone’s Stephen A. Schwarzman enthused about the potential transformation that AI could offer at IPEM Paris 2023, this September (watch the video). A packed room (IPEM Paris 2023 had over 6,000 attendees) listened to Schwarzman discuss the wider implications of AI to government, education, and medical innovation, noting that it could help increase the ability to develop new drugs by three to five times.
If the first version of Chat-GPT had the equivalent IQ of a genius (above 140), in three to five years’ time, it will have an IQ of 12,000. For private equity firms, one can only imagine what this level of super intelligence could mean to how they approach portfolio transformation. This will be one of the key topics of discussion at IPEM Cannes 2024, where one of the afternoon summit sessions on Day 1 (Jan. 24th) will be “Portfolio Transformation”.
What PE groups must now consider is how quickly, and to what extent, their peers are looking to implement AI to help improve the fortunes of portfolio firms. The risk is this: those who are slow to use AI could find that their competitors become more formidable, and firms that they thought were doing fine, actually become mediocre (or worse).
Schwarzman is in no doubt as to the importance of AI. Blackstone is, for example, the largest developer and builder of data centers in the world. As Schwarzman said: “The demand for data centers, which you need to process AI systems, is through the roof.”
“Strap yourself in on this one,” said Schwarzman. “You do not want to be a second mover in AI.”
Happy Holidays and see you all in Cannes to celebrate the 10th edition of IPEM!
US private equity group General Atlantic, a leading growth equity investor, has apparently made a confidential filing with the US Securities and Exchange Commission as it considers an initial public offering. This is thought to be an early sign of interest, and will depend on whether the firm feels the market conditions improve. It could be a swell move, bringing General Atlantic in to the same public corporate sphere as KKR and Carlyle Group. Though it has to be said, the current IPO market has hardly been ‘awash’ with activity. Still, the fact that preliminary steps have been taken is noteworthy. Will it be a case of ‘Surf’s Up?’ Keep your eyes on the IPO forecast next year.