Direct private investments: unlocking potential in Europe

Q: What value can private equity bring to these areas?

A: The opportunity for private equity is that a lot of smaller middle-market businesses struggle with bringing the expertise to adapt to these changes. Private equity investment enables us to back businesses and founders who have a very strong core service or product offering but need help to professionalise and future-proof or require capital to unlock new growth opportunities. This could mean introducing new technology or automation into their businesses or helping them become more sustainable and more energy efficient.

Q: How do you go about investing in these businesses?

A: This can be done by taking stakes in companies and partnering with them for the long term. In these partnerships, private equity creates an aligned vision for business transformation with management early on in their relationship and then plays an active role on the board typically together with external industry experts, who it can bring into the company as board members or operating partners. The private equity team then works with its dedicated internal value creation team to implement a pre-agreed value creation plan.

Q: How important is sustainability for value creation?

A: The responsible deployment of capital can bring economic growth to society. We believe that Europe’s ageing infrastructure creates both challenges for the economy and opportunities for investment. Huge capital investment will be needed in electrical grid infrastructure as just one example. Many businesses will also have to re-engineer their supply chains. Private capital can play a significant role in addressing these gaps.

Q: The economy in Europe – your area of focus – appears to be struggling to grow in many places at the moment. How do you see the market for private investments?

A: My message to investors is always to look beyond the macro headlines. There is a large volume of entrepreneurial activity in the economy, often in subsectors where there are compelling long-term growth drivers. The mistake one can make with Europe is to look at headlines and high level data which can often paint a complex picture, but underneath the surface there are always exciting growth opportunities and great entrepreneurs in many sectors.

Q: Where is the dynamism to be found?

A: We find real dynamism in subsectors that are driven by long-term secular tailwinds like digitalisation and the transition away from fossil fuels to a more sustainable economy. In particular, this vibrancy is most felt at the small- and mid-cap section of the market where we frequently meet entrepreneurs and families who are building exciting, fast growing and robust businesses that are supported by these megatrends.