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Private equity firms have evolved into subject matter experts that offer technology companies operational expertise. Because of this, some public tech companies are considering selling their companies to a financial sponsor to rebuild without the pressure of delivering returns in a difficult market environment. Find out what is the rise of private equity in tech M&A.

🚀 Private Equity's Ascendance in Tech M&A 🌐 In a landscape characterized by specialized expertise, a challenging IPO environment, and AI disruption, private equity firms are making their mark in technology dealmaking. According to Morgan Stanley, private equity led a staggering 57% of public-to-private technology deals in H1 2023, nearly doubling their share from previous years. The recent Capital Connections Summit, hosted by Morgan Stanley in Pebble Beach, California, brought together top executives from the private equity and venture capital communities to discuss the M&A outlook for software companies and emerging trends. Private equity firms have transformed into subject matter experts, offering technology companies operational excellence and investment opportunities in areas like sales, marketing, and R&D. They seek quality tech firms with growth potential and enduring business models, making them compelling buyers by not just reducing costs but also enhancing margins and growth prospects. With record funds of $2.49 trillion available, private equity is often willing to pay competitive premiums, narrowing the bid-ask spread between buyers and sellers. This, coupled with sellers moderating valuation expectations, is fueling increased private equity M&A activity. The macroeconomic environment, including higher interest rates and inflation, has prompted public tech companies to prioritize operational efficiencies and cost reductions. Some are even considering returning to private ownership to rebuild without the pressure of delivering returns in challenging market conditions. Additionally, the consolidation of cloud-based software firms offers new takeover opportunities for private equity. While AI innovations may disrupt some cloud businesses, they create greater demand for others, presenting a shifting landscape ripe for strategic M&A activity. The rise of AI is set to revolutionize the tech industry, attracting venture capital and reshaping the competitive landscape. Private equity firms are also keeping a keen eye on vertical software companies in sectors like healthcare, media, and industrials, as the technology spend continues its unprecedented growth. Stay tuned for an exciting era of tech-driven opportunities and transformations! 🌟 #PrivateEquity #TechMandA #AI #MandAOutlook #Innovation #InvestmentInsights

An interesting perspective on Private Equity and the challenges and opportunities - it introduced me to a new term The Zirpocorn ( as opposed to the Unicorn) To quote directly from the article; Profitable exits also do not depend on a robust IPO environment. From my perspective, exiting portfolio companies through sales to strategic buyers after making operational and business improvements is even more attractive. And this pathway is set to grow substantially in 2024. Secular trends in the economy such as the reshaping of geopolitics and the emergence of a new generation of artificial intelligence together signal a period of significant restructuring where firms will work to reorganise their assets and capabilities. Overall, the rapidly evolving turn towards greater scrutiny of business models and return on investment is evidence that the days of waiting a decade or more for technology firms to generate profits are over. And that’s good news. More expensive money that leads to more demands to justify valuations through business performance is healthy pressure for private equity managers. Meanwhile, investors will be moved to scrutinise even more carefully the sources of their private equity returns and understand how much of performance is coming from financial leverage, from valuation-multiple expansion, and — most importantly — from operational business improvement. We live in interesting times https://on.ft.com/3ULzKwh

Are higher interest rates a unicorn killer? In this article, @Will Craig and @Mark Watson, members of our late-stage private equity team, share their observations on the growing importance of investing in private companies with durable fundamentals, particularly capital efficiency. Unicorns may be even rarer, but they could be stronger (and more believable) than ever. #insuranceassetmanagementstrategygroup #insuranceassetmanagement

Are higher interest rates a unicorn killer? In this article, Will Craig and Mark Watson, members of our late-stage private equity team, share their observations on the growing importance of investing in private companies with durable fundamentals, particularly capital efficiency. Unicorns may be even rarer, but they could be stronger (and more believable) than ever.

Key Takeaways ·           Private equity firms have evolved into subject matter experts that offer technology companies operational expertise. ·           Some public tech companies are considering selling their companies to a financial sponsor to rebuild without the pressure of delivering returns in a difficult market environment. ·           The consolidation of cloud-based software firms could create additional takeover opportunities for private equity companies.

“Low interest rates helped drive company formation and follow-on funding helped valuations rise to record highs through 2021. Since then, high interest rates and other macro factors have lessened market enthusiasm for technology start-ups.” Muted 2024 outlook from Cambridge Associates on the state of private equity (and particularly VC within it). #privateequity #venturecapital #secondaries

🚀 Exciting times ahead in the world of Private Equity! 🌟 Dive into the dynamic landscape of deal making, where technology and innovation are steering the course towards unprecedented opportunities and growth. Here's a glimpse into the transformative power of tech in reshaping Private Equity deal making: 🔍 Enhanced Due Diligence: - Analyzing terabytes of data within hours, advanced AI algorithms offer deeper insights into potential investments - Utilizing big data, firms can accurately assess risks and valuations, processing millions of data points in real-time. 💼 Efficient Deal Sourcing: - AI-driven platforms and machine learning algorithms scan thousands of deals daily, identifying promising opportunities with lightning speed. - Accessing a network of millions of investors globally, digital platforms facilitate targeted outreach, unlocking access to a vast pool of potential deals. 💡 Innovative Investment Strategies: - Blockchain technology enables the issuance of digital securities, revolutionizing fundraising by enabling instant, global transactions. - SPACs have raised billions in capital in recent years, offering investors alternative routes to market entry and liquidity. 🌐 Global Reach and Connectivity: - Virtual deal rooms and digital collaboration tools connect investors and stakeholders worldwide, transcending geographical boundaries. - Remote due diligence processes allow firms to explore opportunities in multiple markets simultaneously, expanding deal flow exponentially. 📈 Data-Driven Decision Making: - Predictive analytics and machine learning algorithms forecast market trends, guiding investors to make decisions with unparalleled precision. - Real-time monitoring tools track portfolio performance, enabling investors to optimize strategies and maximize returns. 🔒 Cybersecurity and Risk Management: - Investing millions in state-of-the-art cybersecurity measures, firms safeguard sensitive data and protect against cyber threats. - Robust risk management protocols mitigate potential risks associated with digital transactions, ensuring investor trust and confidence. The numbers speak volumes: 🚀 75% of PE firms plan to increase their investment in AI and machine learning by 2025 💰 Firms that leverage AI and advanced analytics see a 17% improvement in investment returns ⏱️ Deal execution times have been reduced by up to 30% through the adoption of innovative deal management platforms 🌏 But technology isn't just transforming the dealmaking process; it's also reshaping the very nature of PE investments In fact, global PE investments in tech-focused startups hit a record $1.2 trillion in 2021, a staggering 92% increase from the previous year. 🤯 Are you ready to ride the wave of tech disruption in private equity? 🌊 Share your thoughts and experiences in the comments below! 💬 Follow Utkarsh Sinha for more insightful information 😉 Akshaykumar Sirsalewala Akshat Shrivastava Radhika Bajoria

𝐂𝐡𝐢𝐜𝐚𝐠𝐨'𝐬 𝐏𝐄 𝐚𝐧𝐝 𝐕𝐂 𝐃𝐨𝐦𝐢𝐧𝐚𝐭𝐢𝐨𝐧: 𝐔𝐧𝐥𝐨𝐜𝐤𝐢𝐧𝐠 𝐄𝐮𝐫𝐨𝐩𝐞𝐚𝐧 𝐏𝐨𝐭𝐞𝐧𝐭𝐢𝐚𝐥 Chicago, celebrated for its robust private equity (PE) and venture capital (VC) landscape, is elevating its global presence. With stalwarts like Thoma Bravo, which boasts a staggering $120.6 billion AUM—an increase of 17% from 2021—Chicago's PE and VC are on an upward trajectory. While local investments continue, a new horizon—Europe—beckons. Europe's rich market coupled with its innovation, stability, and talent offers an enticing arena for PE and VC firms. Yet, it's a terrain that demands a nuanced grasp of its diverse cultural and legal intricacies. 𝐂𝐡𝐢𝐜𝐚𝐠𝐨'𝐬 𝐄𝐮𝐫𝐨𝐩𝐞𝐚𝐧 𝐅𝐨𝐨𝐭𝐩𝐫𝐢𝐧𝐭: Thoma Bravo emerges as the trailblazer. Their European equity deployment stands at $11 billion across 11 transactions in a dozen years. Key European conquests include: - Sophos: Acquired in 2020 for $3.9 billion. - LOGEX: Investment made in March 2023. But they're not alone. GTCR LLC collaborated with Reverence Capital Partners, procuring Advisor Group in 2020 for $2.3 billion. Madison Dearborn Partners, LLC made its mark with the acquisition of IPL Macro in 2020 for $555 million, and Baird Capital invested in JMAN Group in 2021. 𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬 𝐀𝐡𝐞𝐚𝐝: As highlighted in another post, Europe’s PE and VC landscape is still thriving, despite some challenges in 2022. With €472.6 billion in PE and €91.6 billion in VC deal values recorded in 2022 (from PitchBook Data), the opportunities are abundant. For Chicago’s PE and VC firms, the message is clear: Europe is a market worth exploring. 𝐄𝐧𝐠𝐚𝐠𝐞 𝐰𝐢𝐭𝐡 𝐔𝐬: Aspiring to expand or invest in Europe? MC Square Luxembourg | Independent Third-Party Asset Management , a leading Management Company specializing in guiding PE and VC through Europe, stands ready. DM us or drop us a comment if you're ready to expand your horizons. Chicago, it's time to further bridge the Atlantic and create unprecedented value. #ChicagoPE #VentureCapital #EuropeanInvestments #GlobalFinance #InvestmentOpportunity #AssetManagers --- Good work by Crain's Chicago Business people. www.mcsquare.lu

Investment Thesis, Private Equity, Hunting Untapped Financial Tech IP   💰 💡 Imagine a private equity firm managing about $5 billion across various funds.The year 2023, has not been the most pleasant time for an investment organization, irrespective of type of investments made. The fundamental idea is to “hunt” for investment with relatively lower cost of acquisition but potentially larger returns over a much shorter period of 5 years. 🎁 🏆 By one analogy, these investments could refer to “untapped innovation and intellectual property”, trapped in their current ecosystem, which could be a financial institution, fintech, large software vendor, etc. due to varied reasons.   🚀 🦍 This being the core thought, this document was created for a private equity firm attempting to explore a path towards building an investment portfolio with the objective to acquire untapped intellectual property hidden across the financial technology industry. The focus is on essential aspects of a portfolio’s transactions such us; fundamental principles, and processes of “buying”, “holding”, and “exiting” businesses in the portfolio along with possible financial return scenarios over 5 years.   📚 🔎 The Hypothesis If a private equity organization can identify large organizations in the financial industry that have incubated innovation in form of intellectual property with proven commercial potential, and once identified, if the private equity firm can acquire and execute the businesses to a sustainable recurring revenue, and eventually exiting the portfolio in 5 years. Leveraging heavily on the execution capabilities of the private equity firm, this approach can offer a relatively higher value for every dollar invested. 📂 🎯 The document describes an approach, a baseline strategy to achieve this objective and focuses on three essential questions and suggesting processes and frameworks to execute ;   1️⃣ What would be the target segments and how would these businesses be acquired? Defining the target segment and approach to acquiring businesses. 2️⃣ What would be the execution approach? Defining a path to sustainable annual recurring revenue for the portfolio. 3️⃣ What would be the exit approach? Defining path to a tactical exit in a given time period.   These principles would be true for a private equity firm, a corporate venture, or a venture capital firm, and if the investment organization can capitalize on this highly operations intensive model courtesy the highly diversified nature of the portfolio, strong returns are possible. Ps: If this was relevant, do interact, share your opinions in the comments section and follow Ajay Singh Pundir and Econwired for more. #privateequity #venturecapital #fintech #strategy