Which PE firms are on the rise?

james55

Shore capital

I am skeptical at best on Shore. They borderline pioneered the practice roll-up space that is stupid expensive now. I'd argue their best returning funds are all behind them at this point. They tout never losing money on a deal but I know for a fact they're shutting down multiple companies in their latest fund and they'll be donuts return wise. Everyone there is smart but the space they play in is now very saturated and their fund sizes have kept growing, bad combo for producing 3-4x returns for LPs...

Dude are you the guy that keeps spamming about Shore in all these threads? It's an OK firm at best, man. 

Shore Capital kinda sucks

STG?

Na

Agreed, perhaps a bit too matured but would add CD&R, H&F to the list as well 

Which ACP is this?

One of the best posts I have seen, and although not an all-encompassing list a decent chunk of firm names to consider. Really helpful for headhunter calls as example firms to give, really appreciate it!

Any PE firm that is (1) raising significantly larger funds successively, especially with a large step up in a fundraise in 2H2023 - Present when conditions deteriorated, and (2) Has solid performance across their recent vintages and not too many of their current portcos look like they were bought at way too high of a valuation or are on fire, and (3) hasn’t experienced significant turnover, can be considered to be funds “on the rise” these days. Off the top of my head, some firms (not necessarily “up and coming” in that they can be both established and steadily “on the rise”) that fulfill the above criteria include 

- Arcline

- ACP

- Genstar

- Gemspring

- Greenbriar

- H.I.G.

- Nautic

- NMC

- Veritas

At the end of the day, IMO these funds (not exhaustive list) are “on the rise” in that they’ve displayed good traction and stability historically and are positioned well to continue experiencing great traction and growth

Arcline is in big trouble IMO. Haven't returned shit to shareholders and are going to have many sell side processes return less than portcos are marked at. They bought up a ton of shit while money was cheap and leverage was readily available.

Would add gridiron capital as well

Seems like KPS is killing it

+1

Absolutely

.

Infra is the play right now

I’ve had a bit of exposure to infra and digital infra, and the way you threw out the many names that have digital infra exposure doesn’t make sense. This isn’t a rising tide lifts all boats kind of environment

Digital infra has tailwinds, but it also has a lot more commercial risk (both ways) than conventional infra. Some of these players have only really operated during the heydays and invested at very frothy valuations.

For one of the firms on your list, I’ve seen them:

- retain and promote senior execution folks (eg. VPs, SVPs) who don’t understand basic corporate finance and LBOs. Not the end of the world, but obviously problematic for calculation of returns that they show the IC

- rely heavily on bridge financing not to juice returns but because they overbid vs. actual dry powder available and had to syndicate this out in co-invest. The bridge lender probably figured this out and doubled the interest rate to near core infra PE IRR levels last minute… and they still took the financing, which raises questions about their ability to fund the capex for their portcos without going cross fund

- grow AUM vs. actual fund size aggressively using co-invest, but this meant that the co-invest was practically free - a miserable double digit bps in mgmt fees at best. This was during an era of plentiful capital, so now imagine co-invest demand in an era where fundraising is already tough

- I don’t think they’ve delivered many good exits other than splitting yieldcos and devcos. The single non yieldco / devco exit I saw was them just selling a dream on to a greater fool.

And then more generally on the industry:

- tower deals aren’t as great in the rest of the world ex-US for multiple reasons. US towers are done and dusted so you HAVE to look at ex-US for any meaningful investment.

- data centre deals too. There’s a huge amount of annual commercial risk unless you serve hyperscalers, and hyperscalers are smart and will squeeze you on margins. HS contracts can be as short as 3-5 years, and while everyone is claiming that they’re super sticky, the thing is, to date, HS have never had a de growth / slowing growth scenario in cloud / other DC-related demand. Just wait till they do.

- fibre (whether land or subsea): this shit is very capex intensive + you seem to be a sitting duck for technological obsolescence to some degree. This is also a super regulated industry and depending on the country you’re operating in, you might be a few government policies away from getting fucked. Some players have taken the build-and-they-will-come approach, especially in last mile fibre, and I think that was already attempted several decades ago in subsea cables… and the outcome was multiple bankruptcies

Good post and somewhat helpful, but the firms you mentioned are all UMM/MFs that are already known as being top-tier performers. Not exactly new firms on the rise, but rather just established firms further growing share. Still upvoting, but feel like this isn't super value additive sine almost everyone knows which MFs are rising vs. which ones are relatively falling. 

Permira's latest fund is doing absolutely terrible and the only reason they upsized fund size is because 90% of the fundraise was done when the market was stupid hot. H&F has struggled recently and will close well under target, still the top place to work in PE for me. The rest is ok.

Permira is getting cooked

Why is Vista always the standard that so many firms are compared to on this site? Probably says something…

TA is certainly a great shop, and has been on a meteoric rise along with FP, in terms of tech PE shops (mainly tech PE at this point at least) fundraising.

However, to reply to the original comment, in the other thread "Which PE Shops are going downhill", this is also the exact same person who attempted to group Vista, TCV, H&F, and Silver Lake in the same bucket as firms like Carlyle (actually on a severe decline, unfortunately), saying "they will seem fine for now but the next fund is going to be half the size and partners will leave"

Just because a few firms overextended assets in 2021 certainly does not mean their 20+ years of excellent track record will simply go down the drain - it is crystal clear you are not at a UMM/MF, or maybe even PE for that matter, as anyone who actually is would laugh at a statement alleging that Vista, H&F, and Silver Lake, easily 3 of the top tech PE investors ever are going to have future funds "half the size and partners will leave". The statement becomes even more laughable when you consider H&F and Vista just raised $22B and $20B funds.

It is also fine that some of these firms "huffed and puffed" for fundraising - again, anyone at a MF or similar competing firm knows how rough the fundraising environment has been - the roughest the asset class has seen since the GFC. And if you pair that with firm-specific reasons, such as TB raising at the exact same time as Vista is going through RFS's tax fraud - of course it is going to take longer? Bain Capital has dealt with some issues with returns, yet they are continually raising funds and maintain their place as a strong mega fund?

These should all be common sense points for anyone with just a few years of experience in private equity.

randomguy

Surprised no one is mentioning TA, last 3 funds have been absolute top decile (Check out HEC Paris rankings) and fund size has gone from 8 to 18.. they closed their last fund without breaking a sweat in a couple of months unlike a Vista who huffed and puffed over 2 years to hit 20b

I interpreted this thread to be asking about up and coming firms that may be overlooked, underappreciated or unknown, in their 1st, 2nd, or 3rd vintages. Not a firm that was founded in 1968. The other comments in this thread are also wild...citing firms like Veritas and CD&R...like what are we doing here? 

Think second or third best performing buyout fund in the world according to HEC

PE is a small part of what they do is why

Why does Sixth Street have similar access to capital like Apollo and Athene?

HAHAHHAHAHAHAHHAHAAH

Have that Save Mart bs, and other dumb stuff according to a CEO of one of their other portcos... not so sure.

What’s the word on Stellex? Culture, analyst program, etc. Much appreciated