Private Equity Basics

In Case You Missed It: The World's Largest Asset Manager, BlackRock — Private Markets Outlook 2025 🏆 With industry estimates projecting the industry to reach >$20T by 2030, private markets has quickly become one of the hottest areas in finance. From private credit, private equity, infrastructure and real estate, here are the key takeaways from BlackRock's 2025 outlook titled "A new era of growth": • Outlook: The brightest days for private markets are still ahead, driven by higher investment activity, elevated-but-lower financing costs and greater demand for long-term capital. • Industry estimates: project private markets could grow from $13T today to more than $20T by 2030 - they believe private debt and infrastructure will grow the fastest. • Private debt: continues to expand globally, and into new avenues of finance, with wide performance dispersion depending on borrower size and sector. • Opportunity in AI: Investors can access the transformative possibility offered by artificial intelligence through infrastructure, as well as debt, private equity and real estate. • Key drivers: A series of profound changes in the world’s demographics, energy demand, digital technology and supply chains continue to propel investment across private markets. • Deal activity: is rising in both the M&A and IPO markets, which should drive more exits and distributions across private equity. • Real estate: valuations are nearing their bottoms, creating opportunities, though price recovery will take time, with wide dispersion among sectors and regions. What is driving the rapid and continued expansion of private markets? Companies staying private for longer: • The median time a “unicorn” stays private is 10.7 years, up from 6.9 years in 2014 New fund structures, broader access: • Retail-focused (ELTIFS, LTAFs) and fully-funded solutions • Evergreen fund structures Market development: • Asset-backed finance market growing in private debt • Regional market growth, in places like India Structural forces: • New technologies require early-stage investment • Real estate is evolving to meet the needs of a changing world Private Markets.

Hot off the press is the latest private markets quarterly update from our CIO team. Here’s what we’re seeing right now across asset classes: In #privateequity, we still like value-oriented buyouts, and specifically, managers with strong track records in operational value creation. We also recommend allocations to secondaries, as secondary exit solutions should remain a favored liquidity option and NAV discounts remain in the double digits. We continue to recommend #privatecredit, but selectivity will be key as manager dispersion is far greater here than in public credit. Spreads have tightened as competition has returned to the loan market. But we remain constructive on the sector given yields near 10%, low defaults, declining leverage, and ample covenants. Our outlook for lower growth combined with two Fed cuts in 2H25 is also supportive. In #realestate, a bottoming trend in a majority of CRE values began occurring in late 2024. We believe 2025-30 will be rewarding for investors that can identify and lean into markets benefitting from strong demographics, migratory patterns, and job creation. We believe there are opportunities emerging from properties facing financial distress that are still solid assets – which we’ve often seen in multifamily. Full report below.

Choosing the Right Valuation Method: A Practical Guide This decision tree shows the core valuation methods in a single framework. Knowing when and how to apply each approach is critical for professionals in finance, investing, or corporate strategy. Across investment memos, pitch decks, and strategic planning discussions, three valuation techniques consistently stand out: 1. Discounted Cash Flow (DCF) DCF aims to capture a company’s intrinsic value. By projecting future cash flows and discounting them back to today at an appropriate rate, it provides a forward-looking view. This method is most effective for businesses with stable, predictable cash flows and when you have a clear perspective on risk and growth assumptions. 2. Comparable Company Analysis (Comps) This method benchmarks against similar publicly traded companies using multiples like EV/EBITDA or P/E. It’s quick, market-oriented, and often used to cross-check other approaches. Its usefulness, however, depends heavily on identifying truly comparable peers. 3. Precedent Transactions Looking at past M&A deals provides insight into what real acquirers have paid for similar businesses. It’s particularly valuable in deal-making but can be influenced by factors like timing, buyer synergies, and market cycles. How to Decide Which Valuation Method to Use That’s where the Valuation Decision Tree comes in—a structured guide to narrowing down the best method based on a company’s fundamentals: Will the business continue operating? Is it more than just an asset-holding entity? Does it create commercial goodwill? If the answer is “yes” across the board, you’ll typically be weighing Income-based (DCF) and Market-based (Comps, Precedents) methods—positioned at the bottom of the framework. This structured approach is an invaluable tool for financial analysts, corporate development teams, and anyone tasked with valuation-driven decisions. For a deeper dive, explore our courses at Corporate Finance Institute® (CFI).

Private Thoughts From My Desk………. #37 It’s Time to Clean Out the PE Attic   There’s a musty corner in every LP’s private equity portfolio: a collection of tail-end buyout funds that quietly aged past their prime. They once promised 2x+, but now they're clinging to dusty assets with fading upside and growing risk. The latest data confirms what most LPs already suspect: by year 12, TVPI begins a universal decline……across top, middle, and bottom quartiles. Value doesn’t just plateau. It erodes.   And yet, many institutions cling to these positions. Why?   Maybe it’s inertia. Maybe it’s hope. But in today’s low-distribution world, that’s expensive optimism. PE holding periods are stretching. Upwards of 30% of portfolio companies are now held for over seven years. That means more capital locked up, more fees paid, and less flexibility to pursue new opportunities. Meanwhile, the secondary market is maturing. Volume is up 83% in five years. Tools abound…..classic LP portfolio sales, GP-led restructurings, NAV-based loans. There’s no longer a good excuse for being passive.   If you’re a portfolio manager, this is the call: Get aggressive. Run the numbers. Rank your funds by vintage and quartile. Anything sub-median and older than a decade? It deserves scrutiny. Be proactive in managing exits, because in private equity, dead money is worse than dry powder.   But this isn’t just an LP story.   GPs, especially those interested in fundraising, should expect more pushback. This pushback can come on fund extensions, on fees, on the status quo. The bar is rising, and the leash is shorter. If you’re asking LPs for extra time, be ready to show real value creation, not just the passage of time.   Better yet, do the work before you're asked. Re-underwrite the tail. Dust off those 5+ year hold companies and pressure test whether they still have upside under your ownership. If the answer is yes, prove it. If the answer is no, sell them to someone with a fresh idea and the conviction to act on it.   Because in this environment, nimble capital wins, and the attic isn’t getting any less crowded.   #privateequity #privatemarkets #privatethoughtsfrommydesk

If I were designing a PE platform for 2025, I wouldn’t start with M&A capacity, I’d start with the stack. Legacy firms were built around sourcing networks, financial engineering, and the ability to raise and deploy capital. But in today’s environment, where entry multiples are elevated, timelines are compressing, and cost of capital is no longer cheap, the firms that outperform will be those who can drive operational leverage from day one. That means your edge isn’t in the deal, it’s in what you do after the deal closes. The next generation of PE winners will operate more like high-performance growth platforms than financial vehicles. 1) Centralized CRM & Lead Management – shared systems across portfolio companies to manage pipeline, track performance, and reduce leak. 2) Integrated Media Buying – portfolio-wide scale in paid search, social, and CTV to drop CAC by 30–50%. 3) Data Infrastructure – a warehouse that tracks LTV, channel-level ROI, pricing impact, and sales velocity. 4) RevOps & CRO Engines – aligning sales, marketing, and service while optimizing every conversion path across the funnel. 5) Shared Talent Pool – not advisors, but embedded operators: growth marketers, analysts, creative teams. On top of that, embed a true growth engine. Conversion rate optimization, SEO and SEM expertise, pricing strategy, and performance creative. Deploy playbooks that are tested, repeatable, and customized by vertical. Add a RevOps layer to align marketing, sales, and service across the portfolio. Now you’ve got a platform that doesn’t just improve EBITDA, it accelerates it. This isn’t a support function. It’s a compounding capability. Centralized marketing and RevOps can reduce CAC, increase close rates, and deliver revenue growth that simply isn’t possible when each portfolio company operates in isolation. It also de-risks the investment. Better measurement, faster feedback loops, and tighter execution mean fewer surprises and more consistent outcomes. The future of PE isn’t about who has the most capital, it’s about who has the most capability. The firms that win the next decade won’t just own companies. They’ll operate platforms that scale them. Who’s already building this kind of stack? BayPine, Thoma Bravo, TSG, and a handful of others? This playbook is still wide open.

🚀 Saudi Arabia’s Private Equity Market: A Shift Toward Growth Investments Saudi Arabia’s Private Equity market is evolving—$2.8B invested in 2024, but where is the capital really flowing? MAGNiTT’s latest report, in collaboration with our long-standing partners SVC, reveals key trends shaping the market: 📉 Buyout activity declined sharply, with deal volume dropping 76% YoY, signaling a shift in investor priorities. 📈 Growth-stage investments surged, making up 67% of all transactions, as investors favored scalable, mid-market opportunities. 📡 Telecom & Communications led PE investments, driven by a major buyout, while sustainability and healthcare gained traction through growth equity deals. 🏦 Institutional capital became more concentrated, with only 13 active PE investors in 2024 (down from 19 in 2023). However, Public Investment Fund (PIF) and TVM continued to play a pivotal role. Notable other investors included BlackRock, Merak Capital, Olive Rock Partners and Jadwa Investment. As Saudi Arabia’s private capital ecosystem matures, what’s next for investors and businesses? 📊 Explore the full trends & database here 👉 https://lnkd.in/dhh94_bz 💬 What do you think this shift means for the region? Let’s discuss in the comments! 👇 cc: Nabeel Koshak, Athary Almubarak عذاري المبارك, Osamah Alamri, Nora M. Alsarhan, Bill Ford, Tariq Al-Sudairy, Ravi Thakran #PrivateEquity #SaudiArabia #InvestmentTrends #VentureCapital #GrowthInvesting

Compelling insights on the evolution of private #realestate investing from Henry McVey and his team’s latest KKR piece, “An Alternative Perspective”. In the world of real estate, we’re witnessing a new cycle emerge. From the early days of opportunistic investments during the RTC era to the post-GFC structural shifts, the landscape has evolved dramatically. Today, we’re at another inflection point, echoing the past while accelerating into the future. Key takeaways: 1) 𝐇𝐢𝐬𝐭𝐨𝐫𝐢𝐜𝐚𝐥 𝐂𝐨𝐧𝐭𝐞𝐱𝐭: Real Estate Private Equity emerged from the need for new equity capital during the commercial real estate crisis of the late '80s and early '90s, kicking off the industry’s first leg of growth. 2) 𝐏𝐨𝐬𝐭-𝐆𝐅𝐂 𝐄𝐯𝐨𝐥𝐮𝐭𝐢𝐨𝐧: Institutional interest surged behind the modern generation of multi-strategy private markets investors, with multifamily and industrial sectors coming to the forefront and new alternative sectors like data centers, life sciences and senior housing beginning to flourish. 3) 𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬: With rates plateauing and valuations largely corrected, the stage is set for a promising new upcycle where we see opportunities for scaled providers of real estate equity and credit to create attractive diversified portfolios. The future of real estate is bright, and the opportunities are vast, anchored to ongoing deleveraging and durable demand drivers for modern property sectors. Dive deeper into these trends and more in the team’s comprehensive report. 👉 Download it here: https://go.kkr.com/3zAJqld

Private Equity success comes down to one thing: Value Creation The fund managers who can demonstrate their mastery of #Strategy execution leading to tangible #valuecreation are the long term industry leaders. We hear so much about Technology today, and in particular #AI . How are funds actually deploying machine learning in their portfolio companies to drive results? The most effective working paper I have read on this to date is hot off the presses this week by Theodoros Evgeniou at INSEAD together with Oliver Braydon at Armstrong International, Shahbaz Alam at Amazon Web Services, and Caroline Zimmerman at Profusion. "Leveraging Digital, Data, & AI Technologies to Increase Enterprise Value: How Private Equity firms are Getting it Right" may be a mouthful of a title however is a highly recommended read. The working paper is divided into five key sections: 1. Data and data technologies as value enablers 2. Leveraging data and AI to drive innovation 3. Leveraging data and AI to deliver bottom and topline growth 4. Leveraging data and analytics to improve strategic decision-making 5. Overcoming cultural barriers to data and AI adoption "The times when you could buy the assets you wanted and have a pretty decent runway without having to do too much intervention are gone," Operating Partner and C-Suite portco leader explains in the paper. "Firms must work harder than before to create value, and to be able to demonstrate their value-add to investors." Where are PE firms such as EQT, Hg, Apollo, Blackstone, Triton, Cerberus, TDR Capital, and Silver Lake aggressively investing in data? And notably this is commencing at the DD stage and proceeding all the way through to exit. As with so many projects I have been involved in, the paper notes "Cleansed, accessible, proprietary data on which to train models will be the greatest source of competitive advantage." How are you building your data culture for the future? As one operating partner notes: "We're not doing the cool, sexy, revenue-generating, front-end stuff yet, but it's coming in 2025." Particularly for those of you in the B2B space, section 3 on "Leveraging data and AI to deliver bottom and topline growth" will be an insightful read as it focuses on Commercial team enablement, Price elasticity modelling and price rationalization, and importantly improved Demand forecasting. I found section 4 "Leveraging data and analytics to improve strategic decision-making" right on topic as bettering understanding of growth models increases the effectiveness of long term investment decisions. This underscores why the most successful leaders know "BI Is Not Enough." A participant in the working paper noted that growth models allow their company to "improve the quality of board discussion." Lastly, section 5 highlights how to overcome cultural barriers to adoption and the importance of building credibility with your leadership teams and boards. Strategy is Mastery. Great Sunday morning read.

🚨Private equity recovery is starting to take shape - according to Bain's latest report 3 key take-aways: _________________________________ 1️⃣ Deal activity is back to life: ‣ Investments: +37% in deal value in 2024 vs 2023, biggest jump in Europe (+54%) ‣ Exits: +34% (deal value), mainly due to acquisitions by sponsors (vs strategics / IPOs) ‣ Valuations (TEV / EBITDA): up in both USA (11.9x, +7%) and Europe (12.1x, +5%) _________________________________ 2️⃣ Fundraising is still facing headwinds: ‣ Funds closed: -23% (deal value), -12% (fund count) ‣ Only 2 strategies did not see a decline: direct lending (+3%) and infra (+0%) ‣ Key driver: LP appetite for new commitments has declined due to lower distributions vs calls in the last couple of years _________________________________ 3️⃣ GPs are focussed on jumpstarting liquidity: ‣ Distributions as a % of NAV fell from 29% in 2014-2017 to 11% today ‣ GPs are getting creative in generating liquidity: minority interests, dividend recapitalisations, secondaries (continuation funds), and NAV loans _______________________ 👋 Follow me Andrea Carnelli Dompe' (PhD) for weekly private markets insights 🔔 Tap the bell on my profile and you'll be notified when I post Source: Bain's "Global Private Equity Report 2025" #privateEquity

An interesting trend we're seeing in the European PE market: North American PE investors are gaining share. They now account for 30% of all PE deals over €10m in EBITDA (up +9 p.p. over the last 7 years). A couple of reasons why: 📈 Europe has lower PE valuations compared to the US. This makes it an attractive market for both platforms and add-on deals. 📈 US sponsors have had stronger fundraising momentum than European investors. This has allowed them to outcompete in many deal situations. 📈 US sponsors are more familiar and experienced with alternative financing and private credit, given the higher maturity in their home market. This gives them an edge. Not to mention, many US investors have announced European expansion plans and launched dedicated funds in Europe. 💵 Thoma Bravo announced its first-ever €1.8bn dedicated fund in Europe. 💵 Blackstone announced an additional $500bn commitment for the next decade. 💵 Apollo announced plans to invest $100bn in Germany over the next decade. US investor activity is the strongest in: ⏫ UK&I (39% of all entries), DACH (27%) and Iberia (25%) ⏫ Large-cap transactions (>€200m EBITDA — 37% of entries) ⏫ Financial Services (42% of all entries) and TMT (31%) Where do local investors still dominate? 🇪🇺 France, Benelux and Nordics (~80% of deal flow is local) 🇪🇺 Small-cap transactions (<€10m EBITDA — 90% local) 🇪🇺 Science & Health, Services, and Consumer (~75% local) ________ FULL REPORT AND DATA We've just released a 44-pg report on the State of European Private Equity, covering entries, exits, holding periods, growth rates, and much more. Don't miss out on the 56+ charts. 👉 Get it here: https://lnkd.in/emkSDDzz #Europe #PrivateMarkets #Insights