IPEM 2022 Cannes

Key Takeaways

1 M&A

• While private equity remains the top-performing asset class, the COVID-19 pandemic, the war
  in Ukraine and rising inflation (driven largely by energy costs) have challenged the industry.
  General Partners (GPs) managing their portfolios – and sourcing potential targets – are now
  confronted with these challenges along with additional pressure points such as 1) China/US
  trade relations; 2) Europe's anaemic GDP growth; 3) Energy transition and 4) Inflation.
• Democratisation of private equity – shorter investment periods, lower investment capital
  requirements for investors, easier access. The risk for GPs to be aware of is reputational
  damage.
• GPs hold on to good assets for longer provided they are acting in the interests of Limited
  Partners (LPs). Lessons can be learnt from the real estate industry, which has built core, core-
  plus and opportunistic strategies for investors to consider
• Impact of listed equity versus private equity – there has been a shift in private markets and a
  sell-off in public markets. This will likely result in increased secondary market activity
• Software sector - perfect sector to combat inflation, backing companies whose technology
  can help clients re-engineer their processes and remain productive in a tight labour market
  with rising costs
• ESG - raising capital for impact funds requires managers to have a clear investment
  proposition as accusations of greenwashing continue to surface in the industry. There is a lot
  offocusonsustainability,yetsomebelievethatthereisadetrimentinfocusingon
  sustainability. We believe the opposite. There is no arbitrage between financial impact and
  sustainability.

2 FINANCE

• Healthcare predictably continues to be a major counter-cyclical haven for investment.
• The reduction in anticipated multiples (for the time being) will likely delay some sell-side
  opportunities until alignment is reached between buy-side and sell-side of what a fair multiple
  is for a particular asset.
• With interest rates rising and volatility among currencies, there is renewed focus on hedging,
  and volatility may lead to high pricing.
• Funds continue to fundraise in a slightly more challenging environment but PE and private
  credit provide alignment for 'patient capital' to deliver strong returns to investors over the life
  of the funds.
• Stressed anddistressedopportunitiesaregrowing,whichmayprovideformarket
  consolidation in certain asset classes.
• Very strong (and growing) focus on ESG among investors who also see that ESG investments
  (as opposed to investments with an ESG requirement) are capable of driving very strong
  returns through the value chain.

3.FUNDS

• Healthcare focused private equity funds are in resurgence, with this sub-sector of private
  equity growing ever more important in a macro environment of an ageing population combined
  with the reality that the provision and expansion of state sponsored healthcare models may
  be nearing their limit of what is possible without private sector help. Healthcare private equity
  will become ever more important over the medium to long term.
• Distressed debt and distressed asset funds are perfectly placed to take advantage of the
  changing macroeconomic environment (but still a valuation gap mismatch between buyer and
  seller expectations remains).
• A clear focus on private equity as an asset class in adding meaningful and measurable value
  to portfolio companies and investing in the right management teams even more so than before
  to generate returns.
• Growing importance of secondaries and a return to old-style secondaries i.e. buying and
  selling second-hand fund interests and tail-end assets, rather than the GP-led secondaries.

4 FRANCE

The country has access to a deep SME market and the French government has been supporting
companies in growth technology. The growth equity market is getting very crowded and is very
much "in demand" so investors need to be mindful of this. In Venture Capital (VC), France has
enjoyed a record fundraising year YTD in 2022. This has been helped by the fact that talent is
choosing to remain in France rather than travel overseas. President Macron has also overseen
an effort to attract talent to France. The message to large corporations is: "Sign more contracts
with start-ups. It is how you drive change."

5 GERMANY

Germany has everything to make a successful PE market: hidden champion Mittelstands,
companies led by successful entrepreneurs, sophisticated management teams, efficient debt
providers and experienced advisors for all functions

6 ITALY

Although family business is still the backbone of the Italian economy, interest in private equity
and venture capital investments is growing strongly. If there is a need for capital — as there is —
Italian entrepreneurs seem to look less and less to banks as an answer, often to private equity.
Not least because there is an evolution taking place in the latter's operating philosophy. In fact,
private funds are increasingly willing to consider minority stakes in companies and not just
control. And what is more, buyouts, which were a rare event in the Italian M&A landscape just a
few years ago, now account for more than a third of PE transactions.And the same approach
applies to scalable companies. Q2-22 recorded the second best result in the last five years and
venture capital rounds are showing a noticeable growth in terms of maturity: Series A and Series
B raised more in the first half of 2022 than in the whole of 2021, up 17% and 66% respectively,
despite international macroeconomic and financial tensions. Several elements, including the
increasing interest registered by foreign operators in investment rounds, suggest that we are
indeed on the right track to witness a decisive growth of the entire Italian innovation ecosystem.

7 United Kingdom

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