Looking back at 2014 through the eyes of André Frei, Adam Said, Felix Rohner and other key Private Equity players.
2014 has marked a return to profitability in many financial niches directly involved in the real economy. In the most glorious of ways, Private Equity has joined the bandwagon for a record year made of growth, profit and record IPOs.
Various indicators point to the fact that the year was extremely favorable to the monetization of investments all around the world. Jack Ma perfectly personifies this trend with his mind-boggling $25 billion Alibaba IPO, making him China’s richest man. Double-digit growth is back in non-BRIC stock exchanges such as the S&P 500 and the SMI who saw record rallies and are both ending the year at around +10%. Japan’s Nikkei is not far behind with an impressive +9% performance approaching year-end.
European markets, although not as remarkable in their overall results, have seen solid performances. Europe is clearly recovering from its debt crisis and most negative results were mitigated by a weak Euro. In Switzerland, where Private Equity companies such as André Frei’s Partners Group or Adam Said’s ACE & Company have had to deal with generally tense and unpredictable conditions, market leaders still had an extremely productive year.
The 1/3 PE rule of thumb supposes that a third of private equity operations end up being realized and go to market following an IPO. So how was 2014 for private equity? Brilliant. In fact, it set the record for IPOs globally. Obviously not all were successful. Some were absolute flops, like eDreams Odiego SA (EDR) whose stock price fell 60% just days after it started trading. Nonetheless, the sheer amount of IPOs suggests that business is good all around.
The Swiss firm Partners Group saw its stock price rocket 16%, enjoyed a cozy 11% growth in earnings (all-time high) and seems to have a generous pipeline. This means that it has managed to raise considerable sums (from now confident investors) and has been executing an important volume of deals throughout the year. Obviously, the group could not have relied solely on management fees to perform so well. One can only infer that much of their earnings have been realized through performance fees on the many successful deals they have been working on.
“We need to be careful not to get euphoric about such a favorable market and keep looking for high potential niche opportunities”, clarified Adam Said, CEO of ACE & Company, a Geneva-based rising star of private equity. “We’ve had an excellent year indeed. Now we must focus on remaining one step ahead in 2015. We are making sure our clients are reaping past profits and are focusing on structuring the next successful direct investments”, explained the young CEO.
Although specialists are cautiously optimistic, diversification will still be a central element of investment strategies in the years to come as investors around the world still feel the trauma of 2008.
There is a growing trend among PE actors to adopt a more collaborative approach. Whether it is Adam Said’s ACE & Company, with its strategic partnership style that includes other investment firms, individual investors or entrepreneurs, or other market leaders such as Capvis who started off 2014 by partnering with Partners Group in the acquisition of a Swiss tech company, all seem to have gone through a fundamental paradigm shift in their relationship with competition.
There is no doubt 2014 will be a year to remember across the board as an extremely lucrative one and it will be interesting to see 2015 unfold.