The next decade, and beyond, represents a key staging post for private markets. The fact is, more companies are choosing to stay private for longer, as the route to going public is increasingly viewed less favourably by company founders and entrepreneurs.
Moreover, private equity groups continue to target large established companies to take them private; for example the $16.5 billion acquisition of Citrix Systems by affiliates of Vista Equity Partners and Elliott Management. According to Reuters, PE firms spent $226.5 billion on such deals in the first half of 2022, up 39% on 1H21. In the UK alone, the total value of UK listed companies taken private increased from £4 billion to £29.3 billion last year.
As private equity wields further influence on capital markets, it is likely to change the way people view the industry. Remaining private means no quarterly disclosures and reporting obligations to investors, meaning less visibility, less accountability and less ability for the broader public to understand how companies are being run. When this applies to vital areas of the economy, such as Healthcare, Media/Advertising, Technology and Energy Transition, it could lead to increasing unease among the general populace – not only in Europe, but globally.
It therefore stands to reason that PE firms will attract greater attention from media, government and regulators as they put record amounts of dry powder to work in the coming years, targeting more public companies: especially for those GPs running ‘mega funds’ of $5 billion plus. Understanding exactly what the consequences will be, in a wider economic context, is hard to say at this stage. One thing that is clear, however, is that as private equity’s sphere of influence grows, it will need to embrace a willingness to engage publicly and demonstrate the positive effect it is having on the economy, on the climate, on jobs etc.