In this podcast, Dave Brett, Partner & Head of Co-Investments, and Michael Taylor, Partner, Co-Investments, discuss dynamics that are influencing the co-investments market with Thomas Kim, Senior Investment Officer with the San Bernardino County Employees’ Retirement Association.
Key Takeaways
- The macro environment remains uncertain, which makes it difficult to underwrite the medium- to long-term outlook for companies
- Deal flow momentum has improved over the past 12 months as business owners moderate valuation expectations, leading to improved liquidity as exit options begin to normalize
- LPs are being increasingly discerning about the private equity managers they allocate to, creating a strong bifurcation between high-quality firms that can hit fundraising targets, and under-performing managers that are struggling to raise capital
- Co-investments play a vital role in the mid and small market by providing sponsors the capital they need to complete transactions in a relatively tight timeline, allowing the lead GP to be competitive in auction processes
- Co-investments are a critical way to build lower volatility portfolios with non-dilutive diversification across time, industry and specialization, in sectors benefiting from secular growth, dislocation and change, including technology, healthcare, advanced manufacturing, and shifting consumer preferences
- Especially in periods of uncertainty, it is prudent to co-invest in durable companies in less cyclical sectors that can demonstrate expanding EBITDA margins emanating from strong and sustainable revenue growth. Adams Street’s co-investments focus is on opportunities where we believe the majority of upside potential will likely be generated by fundamental company performance rather than financial engineering
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This podcast is a recording of extemporaneous remarks delivered in an informal, conversational format. Statements herein regarding characteristics of Adams Street Partners, its investment process, past, current and potential investments, and market conditions or forecasts, as well as other statements are necessarily high-level in nature and should not be relied upon as a basis for any decision, including an investment decision. Many such statements are forward-looking statements and are associated with numerous known and unknown risks, uncertainties, assumptions and limitations. Before relying on this podcast as part of any decision, including an investment decision, a listener must contact Adams Street Partners to determine whether there are additional relevant material facts and/or contextual information that are necessary to understand the statements herein, as well as whether there are any risks or limitations associated with the information described herein. All such information will be provided upon request. All characterizations or comparisons are the subjective impression of the speaker and need additional context in order to be reasonably understood (which could not be provided contemporaneously due to the informal nature of the conversation). In particular, statements of differentiation, such as describing advantages, favorable comparisons, quartiles, deal quality and other statements should not be relied upon unless the same statement appears in written format in a document prepared by Adams Street Partners for its investors.
