Private Equity trends rising to the surface in 2019
In such a rapidly evolving environment, it’s not always easy to forecast what the future holds, but there are certainly some clues as to what the private equity (PE) industry might expect in the coming year. From evolving skill sets to a rapidly changing investor base, there are a number of emerging trends on the cards for 2019.
These insights, along with how the industry can better prepare for the shifting PE landscape of the future, were discussed in a panel discussion at the Southern African Venture Capital and Private Equity Association (SAVCA) Conference, recently held in Stellenbosch.
Panel member and Managing Partner of Egon Zehnder, Xavier Leroy, says that of all the trends rising to the surface for General Partners (GPs), the evolving skill set of fund managers is right at the top. “The new skills that private equity practitioners will require revolve around storytelling and the narrative, and you can’t tell a story if you don’t have facts and you haven’t put your mind to it.” Storytelling skills, however, are not readily available in the industry, says Leroy. “Most of the PE professionals I talk to lack that storytelling skill. They need to add a dose of inspiration, a dose of charisma; something that appeals to emotions and to people’s hearts. “Today, investors and family offices particularly, pay a lot of attention to this. You are leaving money on the table if you aren’t skilled at storytelling and are unable to communicate the true impact you have on employment, the economy and the environment,” he adds.
Allied to this so-called soft skill is the need for private equity practitioners to be mindful of the psychology of the entrepreneurs or management teams they work with. Samantha Pokroy, CEO of Sanari Capital, says that more than half of her time is spent dealing with the psychology of the various players, particularly because of her firm’s focus on founder-run, owner-managed and family-owned businesses. “As a private equity professional, you have to know the numbers, do the value-add, support the strategy – all of that is important. However, shifting the mindset and helping entrepreneurial businesses to make that often-painful transition to being more professionally managed, scalable businesses; that is where the magic is. That is where you create equity value and wealth that is de-linked from the founders,” notes Pokroy.
SAVCA CEO, Tanya van Lill, says another trend gathering momentum is that of pension funds wanting impact to underpin their investments, beyond just returns. “Last year, the sorts of enquiries we got at SAVCA were from investors who had not yet allocated to the asset class, but were doing their due diligence because they are starting to see the value and question why they haven’t made allocations in the past. This is coming particularly from pension funds wanting to make a positive impact on the lives of their current and future members.”
Lastly, John Bellew, the Head of Private Equity at Bowmans, believes that the evolution of the African model for private equity will continue to attract innovative solutions. “The whole African model for private equity has been under discussion for several years and we are definitely seeing it evolve, with different managers employing different strategies.”
It’s this sort of flexibility and adaptability, says van Lill, that GPs will be well advised to refine. “Be it in their fund structures, partnering with portfolio companies, or when communicating with investors, flexibility will prove key to successfully riding the crest of the new wave of trends that will wash over the industry in 2019,” she concludes.