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Our team had a fantastic evening,
and the event as a whole was utterly scintillating! Great chance to network also and meet others in the PE space –
a full-bodied spectrum of talent in attendance.

The evening awards ceremony celebrated innovative Value Creation strategies, practitioners and more, as nominated by the private equity community. The winners were chosen by our panel of esteemed judges including: Sam Smith, Founder and former CEO, Advisor to the Board of finnCap Group plc; Dharmash Mistry, General Partner, Lakestar; Virginie Favre, Global Head of Market Data, Financial Services, Natixis

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It was the who’s who of operating partners in big funds

With offices in 152 countries and almost 328,000 people, PwC are among the leading professional services networks in the world. They help organisations and individuals create the value they are looking for, by delivering quality in Assurance, Tax and Advisory services.

Exploring unexpected angles, their agile community of solvers works with you to define new approaches to value creation—from making your business more resilient to bolstering your ESG framework. PwC looks holistically at all aspects of an organisation’s performance to propose enterprise-wide transformation initiatives or smaller-scale optimisation programmes.

Driven by data, their tech-powered teams use AI, machine learning and cutting-edge analytics to build scenarios for your value chain. Their expertise in finance, operations, deals, strategy, tax and accounting, enables PwC to go wide and take the long view to ensure your business is positioned to deliver sustained outcomes for the future.

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Each year, over 2,500 leading companies and finance players around the world trust Addleshaw Goddard to deliver. They help them
in multiple industries and in over 90 countries. Not just once, but again and again. Many of our 48 FTSE100 clients have been with us for more than 20 years: one for 150.

Tomorrow’s problems won’t be solved with yesterday’s answers. And, AG believes that good business demands good legal advice. Which,
ultimately, comes down to just four words. Yes. No. Stop. Go. Assuming you’d value that clarity, imagination and impact, they would be delighted to talk business. Your business.

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MICHELE GIDDENS OBE

Opening Remarks

“We are living through a period of great dislocation and uncertainty,” Michele Giddens OBE, Co-Founder and Co-CEO of Bridges Fund Management, exclaimed in her opening remarks as Chairperson for the day’s events. Giddens put into context how Actum’s inaugural conference – Private Equity Value Creation in a Recession – was as timely as it was relevant, taking place in the wake of the collapse of Silicon Valley Bank, yet another round of rail strikes and amid further disruptive economic forces.

“We’ve got double-digit inflation, rising interest rates, little or no economic growth; all of which have very real human consequences,” she said. “So the topic of today’s event seems incredibly timely: if private equity can no longer rely on cheap debt and a rising economic tide to generate returns, value creation is going to be absolutely critical.”

But amid these short-term pressures, the audience was reminded how it cannot afford to forget about the other transition that is taking place – that of the transition to an economy where we are using our natural resources in a more responsible way, and more people can fulfil their potential. Opening Remarks

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The topic of today’s event seems incredibly timely: if private equity can no longer rely on cheap debt and a rising economic tide to generate returns, value creation is going to be absolutely critical

BREAKFAST BRIEFING

B2B Value Creation in Recession

Value creation in portfolio companies has become increasingly important in recent years as companies have had to shift from primarily relying on financial engineering to drive target returns. Value creation initiatives are now key levers and considerations in maximising multiple expansions and valuations. Teneo’s David Reid and Ben Gregory suggested recent market conditions, however, have stymied traditional approaches to value creation and a new framework for growth is needed to create value.

Private Equity investors are facing a more complex market from deal origination to exit, as capital becomes more expensive and valuation multiples fall due to the current macroeconomic trends. Facing these headwinds, the Teneo team noted two key trends for operators to align on:

1. Profitability is being increasingly emphasised, with the correlation between profitable growth and valuation multiples now reaching 2x that of pure growth. Reacting to this, investors are placing increasing importance on margins, as
market conditions increasingly demand ‘safe homes’ for capital.

2. Market contractions and recession concerns have extended typical hold periods above five years as investors look to postpone sales until they can achieve target exit multiples and IRR.

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The largest opportunities to improve valuations sit in strategic growth focused initiatives not just tactical cost cutting exercises.

Teneo’s dataset suggests that management teams seeing top quartile NRR% have taken proactive value creation action, launching approximately 1.5 more initiatives in the past 12 months than lagging companies. The most successful companies in this space have moved beyond value extraction initiatives (e.g., price increases on existing customers) and are focusing on true value creation activities.

Teneo’s perspective is that the largest opportunities to improve valuations sit in strategic growth-focused initiatives not just tactical cost cutting exercises. Changes to the way businesses approach portfolio strategy, packaging of products, salesforce prioritisation and support as well as operating models, are all likely to push businesses to achieve superior returns.

View Teneo’s survey findings >

SIR OLIVER LETWIN

Financial Stability & Macroeconomic Review

Sir Oliver Letwin kickstarted the first keynote with a stark history lesson on how today’s geopolitical and economic landscape offers unnerving parallels with that which preceded World War I.

While the leap between private equity investment and global catastrophe may appear tenuous, Letwin explained how technological investment and advancements made during WW1 and now are alarmingly similar to today’s global tech race.

In the way that WW1 became a catalyst for telecommunications innovation, the twentieth century swiftly shifted towards an arms race and space race between the US and Russia. Each of these periods of technological advancement centred upon the world’s two largest global powers at the time gaining or maintaining global supremacy. Letwin noted how today’s tech revolution that is being largely contested between the US and China – or more generally, the West and East – is strikingly comparable with those during wartime or when the threat of war has been at its highest. And with the Doomsday Clock closer than ever to midnight – 90 seconds away at present – there is no escaping the value of technology, and therefore the investment needed to come out on top.

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In a period when extraordinarily low interest rates have abruptly ended, taking with it the investment model of arbitraging leverage, where do investors find security and enjoy growth at the same time?

PANEL DISCUSSION

Transact to Transform, Value Creation in Market Turmoil

Against a backdrop of social and financial instability, private equity investors are having to navigate their way through today’s macro chaos to create value in an environment that may appear to offer more in the way of impediment than improvement.

Technology and talent were two key levers discussed during the day’s opening panel highlighted as cursors for growth. And the combination of both is imperative in today’s tech-driven and talent-squeezed market, CVC Partner, Stefano Gastaut, said. “Talent is often key to much of our value creation. In today’s environment where technological advancement and application underpins much of a business’ transformation and development, the demand to hire young digital talent is huge, but difficult. Those that hire well will succeed.”

Yet issues surrounding talent stretches beyond that of simply recruiting tech geniuses, Pauline Spire, BC Partners Managing Director, suggested. Spire claimed that investment is needed across all elements of the workforce, while balancing this with investment in tech and automation.

Creating value in testing times is a challenge and one that PwC’s most recent CEO survey highlighted. Forty percent of the business.

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Despite being clear and obvious catalysts
for growth, value can be found beyond
technology levers

Rarely does a company grow blindly; and the significance of data cannot be under-estimated, the panel agreed. Blackstone, for example, has its own data science team that generates appropriate sector and macro analysis that revolves around its investments, Goodman said. “We work hard to embed this data into our PortCo’s alongside ensuring the companies themselves can generate and build their own data models so as to drive growth through their own analytics.”

Despite being clear and obvious catalysts for growth, value can be found beyond technology levers. This is especially so in today’s tumultuous market.

Pricing power in today’s economy is difficult and protecting margins can become a sensitive topic, Spire said. Supply chain issues; rising costs of raw materials; spiralling inflation; and keeping pace with paying employees reasonable market rates during a cost-of-living crisis must all be balanced alongside an acute awareness of how much of this increased cost for the company can be passed down to the customer.

So, while creating value continues as a mainstay of an investor’s philosophy, today’s market lends itself to sustaining growth as much as it does increasing it.

DENISE ODARO

The Sustainability Advantage: Creating Long-Term Value Across Economic Cycles

Denise Odaro used the second keynote of the day to emphasise the growing importance of ESG factors to value creation in the private equity industry.

In Odaro’s opinion, there are two factors that impact every aspect of the human condition – time and decision making. To address the growing climate crisis, it is essential to consider these two factors together because the decisions and actions taken today will dictate the future state of the world at large and the businesses within it.

So, how do we manage the issue of climate and how does private equity create value in these circumstances? Odaro’s answer is sustainability, meaning finding the correct balance between today and tomorrow. In the long term, sustainability creates value for businesses because it prepares them for the transition to a low-carbon economy.

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Private markets offer a tremendous opportunity for change given the
scope, scale and reach of private capital.

PANEL DISCUSSION

LP Valuations and the Link to Value Levers

For the Limited Partner community, value creation must work alongside a reasonable and measured risk position, panellists told moderator Richard Small, Partner at law firm Addleshaw Goddard.

In order for value creation and risk to co-exist as stablemates, the process of assessing where growth may be garnered in an investment must be thoroughly undertaken before entering into a transaction. To this end, Managing Director, Head of Portfolio Value Creation, CPP Investments, James Bryce, stressed that value creation is not a post-acquisition event, but that growth levers must be considered in advance of a transaction to best prepare, and therefore achieve the growth intended. And for this, the use of data has become an essential part of the investment community’s toolkit, the panel agreed.

The vast reams of data that can be generated on both a macro and micro scale is crucial in identifying where these growth opportunities may lie within an individual company, the wider sector or in relation to global trends and sentiment.

While pre-investment diligence has become part of a common approach exercised by private equity firms when considering the growth potential of a new portfolio company,

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Value creation must look beyond its
ownership period. Value must be passed
onto future owners.

consumer conscience and habits can equally dictate change within a business to this regard. If a company is considered to not tackle green issues within its business model, the court of public opinion may well influence how successful such an enterprise continues to be.

With this in mind, in the way that value creation is not a post-acquisition event, many value creation levers are not applied solely for the duration and immediate benefit of the incumbent investor, Bryce said.

“Value creation must look beyond its ownership period. Value must be passed onto future owners,” he said using the example of a go-karting company to stress his point. The business in question independently decided to replace its existing carbon-spluttering go-kart engines with greener electric alternatives. Regulation did not force this but the move was considered something that would not only intrinsically improve the company and its green credentials, but also increase the value of the business upon any future sale.

Whether ESG expenditure is considered extraneous or essential, sustainability is an increasingly key value creation lever, the panel concluded.

LORD WILLIAM HAGUE OF RICHMOND

Political and Regulatory Landscape Review

Lord William Hague delivered a speech centred on the end of geopolitical normalcy and the key trends that will impact the world over the coming decades. In Hague’s opinion, it is important for businesses and investors to both prepare for and react to these trends if they hope to remain resilient to changing economic headwinds and to excel in a changing world.

There are three major fault lines in world geopolitics, Hague said. The first of these lies in Eastern Europe, stretching from Finland to Georgia and encompassing the growing struggle between Russia and the West. In Hague’s view, there is no political prospect for an end to the war in Ukraine, and the conflict is unlikely to reach a conclusion in the near future unless either side experiences an unexpected collapse. Ongoing fighting could importantly increase the likelihood of eventual Chinese support for Russia, leading to further economic sanctions by the West and growing disruptions to global business and trade.

Another major fault line is in the South China Sea, separating China and Taiwan. Because of the high risk that it would pose to the Chinese government, Hague does not believe that a Chinese invasion of Taiwan is likely in the next few years. However, such an operation is possible in eight–10 years depending on the strength of ongoing Western deterrence.

6. The decline of global governance and international agreements on issues other than climate.

7. The rise of new networks of cooperation in the world such as the AUKUS alliance between Australia, the UK, and the US and the deepening relationship between Russia, Iran, and China. These networks will become increasingly important to energy, security, technology, and business in the coming years.

8. Continued decoupling between the West and China in areas such as semiconductors, critical minerals, and pharmaceuticals.

9. Governments are now thinking more than before about risk and resilience.

10. The increasing speed of innovation. “We are entering the fastest period of innovation in the history of human civilisation, and the state sponsorship of innovation is accelerated by these other trends,” Hague said. Areas including artificial intelligence and quantum technologies will be the focus of not only commercial, but also geopolitical competition. And governments will be prepared to dedicate large amounts of resources in order to establish an advantage.

In Hague’s view, businesses must be prepared to react to and seize upon these global trends if they are to succeed. “If a nation or a company can be on top of this surge of change, then they will be in a very good position for the future.” Similarly, it is businesses in the private sector that are often making a difference in today’s geopolitical conflicts. For example, in Ukraine “it’s Microsoft who will take all Ukrainian services to the cloud, it’s Palantir creating a digital model of the battlefield, and it’s Elon Musk and Starlink turning on satellites over the country,” Hague said. And while many of these may have received government backing, it is the private sector and entrepreneurs that have developed and continue to generate innovation.

PANEL DISCUSSION

Tech-enabled Services
in Value Creation Strategies

In a technology-led world, it may be assumed that each and every successful business is one that is driven by the best, the newest or the fastest software, automation and IT. And for certain sectors, this is true. There are other sectors, such as that of traditional services businesses that are adopting technology and changing how the industry operates in a tech-led environment.

The emergence and proliferation of tech-enabled service companies has provided private equity houses with a new breed of businesses in which to invest. It has also opened the door for investors and business leaders to transform their companies from traditional service providers, such as law firms or transportation companies, into tech-enabled enterprises. This set the scene for the day’s third panel discussion, led by Teneo’s Senior Managing Director, Tim Nixon.

But distinguishing the difference between a services company that uses technology and a tech-enabled services company can sometimes become muddied. As such, the panel agreed it is key to understand the definition of a tech-enabled business before exploring how an investor’s value creation strategy can work within them.

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There are two main routes a traditional services company can follow to transition into a tech-enabled service: buy or build.

margins to higher gross margins; you shift from higher fixed costs to lower fixed costs and begin to see higher levels of scalability and greater margins.

So, if higher margins are a fundamental target of tech-enabled companies, how does this translate into a business’ valuation?

While Hallstrom said there may not be a standard multiple that can be placed upon the valuation of a tech-enabled services company versus that of a services company, the addition of increased tech and automation naturally increases the efficiency, quality and volume of work that can be conducted by a company. This in itself is what boosts a company’s margins and therefore its overall valuation.

There are two main routes a traditional services company can follow to transition into a tech-enabled service: buy or build.

Hallstrom pointed towards the financial services sector as one that over decades has invested huge amounts of money in building its own software and IT in-house, much of which has proved unsuccessful. “I think a non-software business attempting to build technology solutions internally has proven to be the wrong approach,” Hallstrom said. “One thing we encourage most of our portfolio companies to do is leverage as much third party packaged software solutions as possible. People that run services companies do not appreciate what it takes to run a truly software-based business, and vice-versa.”

ED CLARKE

Value Creation Through Tech
Infrastructure Investment

In a world now more reliant on technology than ever, the infrastructure that enables homes to receive superfast broadband or that allows businesses to house vast capacities of data storage is crucial.

Given the essential nature of technology infrastructure, equity investment is inescapable regardless of market conditions, Co-Founder and Managing Director of Infracapital, Ed Clarke said.

As a post-COVID society becomes accustomed to working from a home that houses increasingly more internet-enabled and internet-of-things devices, cable and wireless connectivity requires far greater broadband than traditional copper networks can provide. Consequently, a wave of investment is being pumped into full fibre broadband in an effort to provide gigabit fibre-to-the-premises (FTTP) technology.

A global roll-out of fibre networks needs vast amounts of capex, which Clarke said incumbent providers have been reluctant to finance. This has opened the door for an emerging altnet market.

Altnets build their own independent telecommunications networks as an alternative to the larger incumbent networks and have become an attractive investment proposition, Clarke explained.

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Given the essential nature of technology
infrastructure, equity investment is inescapable regardless of market conditions.

PANEL DISCUSSION

Lessons Learnt From
Previous Economic Cycles

The final panel of the day, led by Andros Payne, Managing Partner and Founder, Humatica, convened to discuss some of the lessons learnt from previous economic cycles that can help firms navigate rough economic waters.

While there is still uncertainty around what a future recession might look like, the panel predicted that we will likely need to learn how to deal with a longer period of low growth and structurally higher inflation. Private equity firms can no longer expect the markets to help them, and they will need to do the heavy lifting to create value in the face of an economic downturn.

Ian Gray, NED at The Clancy Group, Holyhead Boatyard and SVM UK Emerging Fund plc, noted that firms need to ensure that they have sufficient capacity to weather an economic storm, and that portfolio companies need to be stress tested. “You need to ask yourself what it would take to break a company, and then why that won’t happen,” Gray said.

In order to practically deal with these headwinds, firms need to back themselves to drive the best operational performance, consistently be on a war footing, and build a team that can deal with every area in which value can be lost or won.

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If your company is okay, that is the opportunity to take advantage of the ones that aren’t okay.

The panel concluded with a final question: what advice would each panellist have for fund managers and deal teams when they find themselves facing a challenging business environment. A resounding theme emerged on the importance of preserving a portfolio company’s cash. “You need be sure that you understand your portfolio companies’ cash and that you are very clear on what it is, how it is forecast to move, and what the drivers are,” Alan Gullan, Independent Director, NED and NED-plus at The London Restructuring Network, explained. Similarly, the calibre of a business’ management team is essential, and particularly their willingness to accept help when needed. Finally, it is important not to let a crisis go to waste, and firms should keep their eyes up and take advantage of opportunities to gain market share, attract talent, and weaken competitors. “If your company is okay, that is the opportunity to take advantage of the ones that aren’t okay,” Ellis said

VALUE CREATION DEAL
OF THE YEAR

This award is divided into four main categories and is judged on investments realised in 2022. These are deals that have created the most value measured by the percentage increase in EBITDA between acquisition and exit, coupled with value creation metrics delivered.

• Large: The Large Deal category covers deal values more than £500m.

• Upper-Mid: The Upper-Mid Deal category includes deal values in the range of £100m to £500m.

• Lower-Mid: The Lower-Mid Deal category covers deal values in the £20m to £100m range.

• Growth: The Growth category looks at deals with values up to £20m.

VALUE CREATION ESG AWARD

The Value Creation ESG Award covers the Environmental, Social and Governance impacts a sponsor has made upon a company.

Judges consider Environmental initiatives that have been introduced to a business such as making a company carbon neutral, reducing the use of travel across the company and making workspaces greener.

The Social element of this award is judged on how proactive a sponsor encourages diversity and inclusion across a company’s workforce and management. Additionally, it looks at the work a company does for its community and charitable initiatives it may champion.

Governance initiatives take into account how a sponsor has ‘professionalised’ a company by installing best practise procedures, creating relevant reporting lines or establishing a Board and ensuring
the company meets all of its sector-specific regulatory requirements.

GROUP PORTFOLIO COLLABORATION
EXCELLENCE AWARD

Judges look for examples of sponsors that use high levels of knowledge-sharing and cross-pollination of ideas throughout its various portfolio companies. This could include annual or quarterly events attended by CEOs and centralised online portals where management teams can make contact with investment managers and fellow management teams for advice

VALUE CREATION INNOVATION AWARD

Judges award this to a private equity house that has introduced novel ways of growing a company or applied new or revolutionary value creation strategies and levers that have led to material improvements to a particular business or sector. Judges also take into account innovative R&D within companies that has resulted in new, cuttingedge product development or launches that have made a significant impact and impression on its specific sector.

BEST USE OF TECHNOLOGY IN VALUE CREATION

In this category, judges explore how private equity firms have deployed technology to identify, develop or execute value creation levers. This could include the use of data or software in ways that had not previously been considered or applied by the portfolio company.

VALUE CREATION INITIATIVE OF THE YEAR

In this category, judges look for a standout initiative implemented in the last 24 months that has had a material impact on the operations of a business. This could include, among other things, complementary or
transformative bolt-on acquisition; new product launches; new pricing models; digital enhancements or implementation; or internationalising a company. The award covers initiatives made in the last two years to allow them to demonstrate value.

VALUE CREATION TEAM OF THE YEAR

In this category, the judges look for a case study that demonstrates a high degree of collaboration and teamwork between sponsor, executive management, and third-party consultant to successfully deliver a specific value creation goal over the last 12 months.

VALUE CREATION ADVISORY FIRM OF THE YEAR

This advisory firm award is separated into categories that cover Revenue & Growth; People and organisational strategy; Digital transformation; Operational Process Improvements; and ESG.

Submissions made by advisors in each category demonstrate the achievements that have been made during value creation projects for private equity backed businesses and the success they have since earned for the company.