One of the key tenants of private equity investing is deciding when a company is best-served staying private or going public. Perhaps the same can be said among the largest firms, which have increasingly taken the step to go public.
Take TPG, for example, which had a well-timed IPO on Jan. 13 of this year. The S&P 500 has slumped 12% since then (TPG has declined 16%).
But not all firms are enticed by the liquidity of riches that the public markets can bring. Bain Capital, with $160 billion in assets, is one of the largest private, private equity firms. We sat down with John Connaughton in an exclusive interview for this week's Delivering Alpha Newsletter.
He said, for them, it's not a "competitive advantage being public,"..."because we don't give away our economics to public shareholders; it's fully retained inside the firm."
Connaughton believes that there's a mismatch in that public investors want their firms to be more "short-term oriented," while his goal is to be "long-term accountable to our investors" (limited partners). Connaughton is focused on the long-term for deal-making as well.
We spoke with him about the recent market volatility and what it means for buyout multiples. He says in every cycle, it takes time for valuations to settle lower and even longer for sellers to be willing to transact at those lower levels. He sees that happening in about a year, enabling buyout firms, like Bain, to be opportunistic.
And despite the recent fundraising blitz across the private-equity landscape, Connaughton does not see the industry contracting from here. In fact, he believes it will grow "significantly," thanks to global expansion and the size of the equity check required to get deals done these days.
In other words, just because firms like Bain aren't public, doesn't mean they're disappearing. Quite the opposite.
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