Inside Private Equity - 10 July 2024 broadcast

This episode of Inside Private Equity sheds light on how private equity actually works and its role in creating value, drawing on both market data and a real-world case study of a portfolio company. Frédéric Stolar points out that the top-performing funds—those in the top quartile—have historically delivered high and relatively stable returns despite economic cycles. The differences between fund classes are mainly due to the timing of entry and exit within the cycle: some funds buy at high valuation levels and sell at lower ones, while others benefit from the opposite conditions. Today, following the rise in interest rates and the decline in valuations, the market has returned to more reasonable price levels, comparable to those of about ten years ago. The market has also experienced a temporary slowdown, linked to the gap between sellers’ and buyers’ expectations, but this impasse is by nature temporary and should resolve itself over time. The testimony of Dan De Wever, co-founder of Destiny, provides a concrete illustration of the impact of private equity. In just a few years, the company grew from approximately €20 million in revenue to over €250 million, with a significant increase in profitability. This growth was made possible by a combination of a clear strategy, rigorous execution, and support from a fund like Seven2. The entrepreneur emphasizes that the choice of fund is not based solely on personal connections but on a thorough analysis of its ability to support the project over the long term. The fund provides not only capital but also structure, strategic discipline, and access to expertise that help accelerate the company’s transformation.From the investors’ perspective, value creation is based on simple yet demanding principles: selecting growing companies, possessing strong sector expertise, and actively supporting management. This approach largely explains private equity’s long-term outperformance. It also helps debunk certain misconceptions, particularly regarding employment. Contrary to a sometimes negative perception, funds seek above all to grow companies. Data shows that supported companies create more jobs and post above-average growth, as the dominant logic is one of expansion rather than cost reduction. Finally, the program highlights the sector’s evolution with its gradual opening to private investors. Historically reserved for institutional investors, private equity is gradually becoming accessible to a broader audience, but this requires an appropriate framework and significant educational outreach. The product’s complexity, its long-term horizon, and its specific mechanisms require guidance to ensure it is properly understood and utilized. Ultimately, private equity emerges as an asset class structured around the long term, alignment between investors and entrepreneurs, and corporate transformation. More than just financing, it serves as a genuine lever for growth and the creation of sustainable value.