Deal Talk: Interviews with Private Equity Leaders

• Nic Humphries, Executive Chairman at Hg, on firm’s unique approach to exits

  Nic Humphries is one of Europe’s most prolific technology investors and the Senior Partner and Executive Chairman of Hg — a specialist in enterprise software with over $75 billion in assets under management and a portfolio of more than 50 companies.Nic became part of Hg in 2001, where he also served as CEO for ten years before assuming the role of Chairman in 2017.In an interview with Steffen Pauls, Moonfare’s CEO and Founder, Nic talks about what makes a capital compounder, the investment strategy behind great portfolio companies like Visma and the thought process that drives the firm's approach to exits — along with many other topics. Here are some of the key takeaways:What makes a great capital compounder?“The very best businesses have a great home market, offer the best quality products and services and attract customers who flock to them. However, that’s not sufficient to make a compounder. These businesses also have the ability to invest excess capital consistently over decades. There’s not a lot of these companies.”Investment case for Visma“Visma started as a leader in small business tax, accounting and payroll software in a small number of countries. We recognised we had the potential to transport that capability to many other markets. However, to do that you have to understand the culture, the tax and compliance rules in other countries — essentially you need to know how to operate in a local way and Visma had that from day one.”Hg’s approach to exiting investments“In an average portfolio, you have some good exits early on and poor investments that are left at the end. But that’s like cutting the flowers and watering the weeds. We wanted to reverse that by acknowledging that unfortunately, some investments won’t be so good, and selling them early to drive DPI and cash. You should then keep better investments for later.”Advice to his younger self“Pick a sector that will be growing for the next 10, 20 or 30 years, where the winds are at your back. I grew up in a mining town and lots of my friends went to work in the local pit. And I could have been the world's best miner and still wouldn't have a job today. But you could have been a very average software developer and you’d still do okay.”Important notice: This content is for informational purposes only. Moonfare does not provide investment advice. You should not construe any information or other material provided as legal, tax, investment, financial, or other advice. If you are unsure about anything, you should seek financial advice from an authorised advisor. Past performance is not a reliable guide to future returns. Don’t invest unless you’re prepared to lose all the money you invest. Private equity is a high-risk investment and you are unlikely to be protected if something goes wrong. Subject to eligibility. Please see https://www.moonfare.com/disclaimers.

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• Permira’s co-CEOs Brian Ruder and Dipan Patel: We see interesting opportunities for take-privates

  Founded in 1985, Permira has invested around €75 billion in hundreds of businesses worldwide from a platform that spans large-cap private equity, growth equity and credit strategies.Brian and Dipan have played key roles in expanding the firm’s global presence and diversifying its investment strategies.In their conversation with Steffen, they shared insights into their transition to co-leadership, their outlook on the private equity market and Permira’s approach to take-private opportunities.Here’re some of the highlights: Benefits of a co-CEO model“The art of leading is about how to make high-quality decisions in a reasonable period of time. A co-CEO model allows us to share ideas, challenge each other and ultimately helps us make better decisions faster."The appeal of private equity “Private markets have been successful because they offer high alignment and control in how businesses operate. Their timeframes — typically a 7-year-plus horizon for creating value — is hard to achieve in public markets where shareholders want to see quarterly progress on pretty much every initiative.”Opportunities in take-privates “Public markets are great if you’re in private equity. There’s a level of inherent ‘short-termism’ in public markets where 70% of activity is driven by computers. Meanwhile, the world of long-only fund management is becoming smaller, which creates more volatility but also generates many interesting opportunities for take-privates.”Success in the consumer sector“We are looking for brands with great products that people love and where we see the opportunity to do something fundamentally different. Golden Goose, for example, had only a small presence in the US when we invested. It’s now a significant part of the business. Previously, the company's revenue came almost entirely from footwear, but now a meaningful percentage is generated from non-footwear products.”Important notice: This content is for informational purposes only. The opinions expressed by the interviewee are their own. They do not purport to reflect the opinions or views of Moonfare. Moonfare does not provide investment advice. You should not construe any information or other material provided as legal, tax, investment, financial, or other advice. If you are unsure about anything, you should seek financial advice from an authorised advisor. Past performance is not a reliable guide to future returns. Don’t invest unless you’re prepared to lose all the money you invest. Private equity is a high-risk investment and you are unlikely to be protected if something goes wrong. Subject to eligibility. Please see https://www.moonfare.com/disclaimers.

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• Robert F. Smith, Founder, Chairman and CEO of Vista: Emerging technologies are creating opportunities for software investors

  Robert F. Smith is the Founder, Chairman and CEO of Vista Equity Partners, an investment firm that specialises in enterprise software. Originally from Colorado, Smith began his career as an engineer before moving into finance, where he developed a focus on the tech industry.Under Smith's leadership, Vista Equity Partners has grown significantly, currently managing over $100 billion in assets. The firm is known for its approach to improving operations and driving growth in its portfolio companies.In a conversation with Steffen Pauls, Moonfare’s Founder and CEO, Smith shared his views on the rise of generative AI, the future of enterprise software, market trends in private equity and the advice he would give his younger self. Here are some of the highlights:The vast potential of software “Software continues to be the most productive tool introduced in the business economy in the last 50 years. Businesses have found that their next best purchase is to buy more software which can enable them to increase productivity and efficiency.  I thought that would be a good place to start investing capital. That’s why I started Vista.”Seizing take-private opportunities “For the first time in quite some time, enterprise software companies have become more affordable in public markets. That’s why we have completed many take-privates in the last 18 months. We look for companies that have product superiority and execution excellence capabilities but have, in some respects, fallen out of favour with public market investors who have turned their attention to generative AI-focused companies.”Investing in private markets “About 97% of software companies are private, and the vast majority of investors and consumers don’t really know that because people don’t necessarily talk about enterprise software. Privately owned software companies can take a longer-term view on the application of tools like generative AI, enabling them to better navigate innovation cycles.”The importance of being curious “The advice that I continue to support is to remain curious. Continue to expand the aperture of relationships early and learn from people who apply new thoughts and technologies, and see how you can apply them to the work you’re in.”Important notice: This content is for informational purposes only. The opinions expressed by the interviewee are their own. They do not purport to reflect the opinions or views of Moonfare. Moonfare does not provide investment advice. You should not construe any information or other material provided as legal, tax, investment, financial, or other advice. If you are unsure about anything, you should seek financial advice from an authorised advisor. Past performance is not a reliable guide to future returns. Don’t invest unless you’re prepared to lose all the money you invest. Private equity is a high-risk investment and you are unlikely to be protected if something goes wrong. Subject to eligibility. Please see https://www.moonfare.com/disclaimers.

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• Hugh MacArthur, Chairman at Bain & Company: It’s a fantastic time to invest in secondaries

  Hugh MacArthur is the Chairman of Bain & Company’s Global Private Equity Practice, which he helped establish over 25 years ago. With a wealth of experience advising private equity funds worldwide, he has been involved in hundreds of projects focusing on deals, strategy and operations. A recognised thought leader, Hugh is also the host of “Dry Powder: The Private Equity Podcast”, dedicated to discussing key industry trends with leading experts.In a conversation with Steffen Pauls, CEO and Founder of Moonfare, Hugh shared his thoughts on how the private equity world has changed and what’s coming next. They covered everything from current market conditions and secondaries to fundraising trends and emerging managers.Here are a couple of highlights from the interview: Public vs. private markets“In the public markets, you get 90% of the money but only 10% of the global investment opportunities. In the private markets, it’s the opposite. The room for growth in private markets is absolutely massive. The question is, what education is required to give people the confidence to invest in these markets with names they don’t necessarily know or understand?”The liquidity question“Markets need to recover. There needs to be an acceleration in exits, which would put money back in LPs' pockets. It’s a multiyear issue, and it’s not going to get better in three or four months. There are too many companies, and too much value needs to come back. It doesn’t have to be fully solved though, but we need to be on the path of solving it.”On investing in secondaries“It’s a fantastic time to invest in secondaries. It is absolutely a growth market with an asset class where even the entire fourth quartile generates positive returns. When we do surveys with institutional investors, they all tell us they’re planning to increase allocation to secondaries.”The power of AI“I have no doubt that in a few years, some industries will be fundamentally reshaped by the ways AI is being deployed. But for now, it’s important to understand what technology can and still can’t do for businesses. This is what many GPs are exploring in partnership with management teams.”Capital at risk. Moonfare does not provide investment advice. All views expressed by the interviewees remain their own.Important notice: This content is for informational purposes only. The opinions expressed by the interviewee are their own. They do not purport to reflect the opinions or views of Moonfare. Moonfare does not provide investment advice. You should not construe any information or other material provided as legal, tax, investment, financial, or other advice. If you are unsure about anything, you should seek financial advice from an authorised advisor. Past performance is not a reliable guide to future returns. Don’t invest unless you’re prepared to lose all the money you invest. Private equity is a high-risk investment and you are unlikely to be protected if something goes wrong. Subject to eligibility. Please see https://www.moonfare.com/disclaimers.

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• Mike O’Sullivan, Moonfare’s Chief Economist: Unlike the internet, AI is the domain of private markets

  In this Deal Talk conversation, Steffen Pauls, Moonfare’s founder and co-CEO, and Mike O’Sullivan, chief economist, explore the current technological revolution that promises to surpass the internet and the smartphone.Is this all just hype, or the dawn of a new era? Drawing parallels with the early 2000s internet bubble, the pair provided insights into the future trajectory of AI, addressing whether we might see a similar pattern of euphoria followed by a period of stagnation before substantial growth.Here are some of the key takeaways from the conversation:Domain of private marketsWe’re on the cusp of a new technology. What’s different compared to the internet era is the financial market behind it. The internet was effectively the child of the equity markets. AI is the realm of private markets.ReinventionAI is not only disrupting the broader economy. It’s also a fundamental disruption for the entire private market industry — from buyouts to growth and venture. The industry needs to reinvent itself both in terms of how they apply AI to existing portfolios and new investment themes.PE’s focusData centres are a major focus for private equity, as well as cloud infrastructure, AI models, and digital tools. Private equity managers are also very active as owners — half of PE-backed companies are investing in AI, compared to family-owned companies, where this number is 27%, according to Deloitte.AI’s role in turnaroundsPE has done very well in terms of returns over the past decade — some of the performance has come from leverage, but now attention is shifting to business turnarounds. A lot of these turnarounds are AI-driven in the sense of operators using data and analytics to understand consumer behaviour and to analyse where the business has gone astray.Important notice: This content is for informational purposes only. The opinions expressed by the interviewee are their own. They do not purport to reflect the opinions or views of Moonfare. Moonfare does not provide investment advice. You should not construe any information or other material provided as legal, tax, investment, financial, or other advice. If you are unsure about anything, you should seek financial advice from an authorised advisor. Past performance is not a reliable guide to future returns. Don’t invest unless you’re prepared to lose all the money you invest. Private equity is a high-risk investment and you are unlikely to be protected if something goes wrong. Subject to eligibility. Please see https://www.moonfare.com/disclaimers.

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