Best sector/vertical to cover for PE
What are the best sectors or verticals to cover to maximise chances for buyout exits? I heard TMT is the most sought after but is it across all verticals? I was also told that within industrials business services offers great exits, which makes sense given that it is mostly a sponsor-driven market.
What about the other sectors?
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The answer to this question will be subject to personal interest/fit for the person. There can’t be a long term “best sector” from a returns perspective as competitors will enter the sector and compete out excess returns.
Agree but you can still have a POV on generating alpha within verticals over a set time horizon (next 5-10 years). Eg TB and Vista investing heavily in Software throughout the 2010s and consistently seeing above market returns. I think OP is trying to understand verticals today that have a lot of cap markets inefficiency whether its value or speculative.
Fair - That’s a harder question and one which I wish had a better view on. However, given OPs title and comments about hearing from others, I think the best advice for OP is to focus on sectors that interest them rather than searching for a golden goose from a returns perspective.
There are so many buyout shops that focus on sectors across the board that you can find good depth across most of the coverage sectors at a bank.
Obviosuly the big verticals will have a ton of exit ops - think industrials, business services, TMT, healthcare, FIG. I think the industrials/services/TMT offers you the most flexibility since the business models and drivers are relatively straightforward, whereas healthcare and FIG will position you really well for shops that focus on those areas (HC understanding the nuances of your specific countries system, similar for FIG local banking and insurance regulations).
I don't want the above to dissuade you from nichier groups, though. I've seen a number of folks pivot from real estate/gaming/lodging, metals/minerals, infra in banking to a completely different PE seat.
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