Image (LtoR): Alesha Cheah, Fay Margo, Weight Partners Capital's Jim Weight, Sullivan Street Partner's Layton Tamberlin, Lara Hunt, Daniella Okoli
From bifurcation of the exit market to a shift in attractiveness of Europe compared to the US, this year’s Mergermarket M&A Forum brought to light some salient trends within private equity.
Most notable was the rise of continuation vehicles the industry has seen over the last few years as this liquidity solution becomes increasingly sophisticated and widespread. According to Imogen Richards, Partner and Head of Primaries from Pantheon, continuation vehicles account for 14% of exits, up from 9% last year. This is potentially a creative solution for LPs and GPs alike, provided that all parties are aligned on the dynamics.
Brackendale’s media relations clients Layton Tamberlin, Managing Partner at Sullivan Street Partners and Jim Weight, Managing Partner at Weight Partners Capital joined Richards in the panel discussion, which also covered the rapid changes and strong competition within the debt market. Tamberlin warned that the high levels of debt could deter sensible buyers. In the wake of high interest rates and a challenging macroeconomic environment, fund managers can no longer rely on the low cost of debt or growing GDP when it comes to a positive balance sheet. GPs need to prove through tangible and creative measures how they can truly create value, for example through strategic M&A.
Meanwhile, Jim Weight explained how the increased national insurance contributions, which all businesses are now having to pay, is expected to impact sectors such as retail, hospitality and healthcare services. With the underlying cost base rising significantly for businesses, companies that have been built to withstand headwinds and with above average EBITDA margins, including Weight Partners Capitals’ own portfolio of healthcare services firms, will continue to perform well. However, Weight predicted a market shake-up, noting that many companies in these sectors operate on lower margins and will be particularly vulnerable.
The panel wrapped up by considering geographical focus areas for investment opportunities. There has been a palpable shift in attractiveness of the US to Europe, a sentiment shared throughout the event. Richards confessed to seeing a heightened interest from Canadian and Chinese investors in European funds, who are showing a strong preference for Europe over the US. There are plenty of opportunities for European investment into the private equity space, and in the UK specifically the lower-mid to mid-market segment is being perceived as increasingly attractive.
Another pertinent insight came from Edward Little, Managing Director and Head of Buyouts UK at Ardian on the bifurcation of the exit market. This has been driven by strong interest in quality deals that are in high demand. Nonetheless, many assets still remain on private equity balance sheets due to ongoing macroeconomic uncertainty. These assets will need to be exited soon, so prospects on the horizon for 2026 are set to be promising!
