Recommended Reading: Language/Market Fit
Public/Private
State Street was first to market with a liquid index that claimed to mirror PE returns. In 2019, Efficient Alpha Capital debuted a novel approach. Advisor Perspectives has more:
“The Efficient Alpha Capital Free Cash Flow Index focuses on companies with strong free cash flow characteristics, a powerful financial metric that incorporates a comprehensive view of a company’s financial profile, including capital expenditures and working capital needs. In the end, as a shareholder of a company, one should only care about how much free cash flow it generates. After all, cash is the only thing you can use to buy anything; EBITDA, net income, and EPS are just accounting concepts. Private equity investors are particularly focused on free cash flow, since cash is needed to paydown debt in a leveraged buyout.”
Private Markets
The first “looking ahead to PE in 2022” report is here from Dechert. Quick takes:
There was a sense that activity paused somewhat in 2020, even though overall deal value was greater from the previous year. Flash forward to 3Q21, and deal value is already double that of 2020 ($1.2tn vs $600bn)
The vast majority of respondents (64%+) to the Dechert survey expect Distressed deals to pick up in 2022. Yes, that’s an indicator of their economic expectations for the coming year
Biggest divergence in opinion about the deal market? A majority (53%) North American GPs expect club deals (wherein at least two GPs team up to complete a deal) will pick up in 2022, EMEA and APAC respondents are sub 38%
The SPAC craze hasn’t hit APAC yet, at least not the way it has the US. That is a bullish sign for exits in the region as volume picks up
Key drivers of the deal environment:
“Recent data from Clearwater reveals that deals with a value of between €500m and €1bn are transacting at the highest multiples – more than 14x – with the UK and Nordics reporting the highest levels in Europe. Naturally there are sector variations, with tech, healthcare and financial services in particular commanding high multiples. Data-rich businesses are also highly sought after, which is why many private equity firms… are drawn to these, and work with existing portfolio companies to maximise data and digital opportunities.”
PE firms are getting more and more comfortable with owning sports franchises and the response of leagues has been varied. In the US, Major League Soccer has proposed a framework to protect teams
Limits coming for the ownership percentage a fund may hold, conflict of interest limitations, and more.
Reuters: End of the PE boom?
Step into the Metaverse
Thinking a lot about our current ‘Metaverse lite’ existence on near-permanent Zoom and related meetings. It has to explain at least some of the mainstream resistance that Metaverse boosterism has received to date; who wants to go from 11 vid chats a day to a full-time digital existence?
Luckily, the post Facebook/Meta hot takes are cooling and more thoughtful analyses are emerging. We’re going to continue documenting what we think are meaningful developments along the way.
NY Mag and Scott Galloway: “Facebook’s Metaverse is dead on arrival”
It’s important to listen to the other side… You’ll see what we mean.
FastCo: “The Metaverse won’t be able to fix this major work issue…”
A different take on Metaverse skepticism, this article addresses the quintessentially human parts of work: sense of belonging, shared values, and personal interaction, that are hard to imagine transferring to a digital plane (at least right now)
But what if the “all-in” version of the Metaverse isn’t for the generations who are rejecting it? Put differently, what if this is a future application for a future generation?
Closer thank you think:
“Seoul’s metropolitan government will develop its own metaverse platform by the end of 2022. By the time it is fully operational in 2026, it will host a variety of public functions including a virtual mayor’s office, as well as spaces serving the business sector; a fintech incubator; and a public investment organization.
The platform will kick off with a virtual new year’s bell-ringing ceremony this December. In 2023, the city plans to open “Metaverse 120 Center,” a place for virtual public services where avatars will handle citizen concerns that could previously only be addressed by physically going to city hall.”