Blackstone’s PE strategy up 2.8 percent in Q1 earnings; Harris Williams and Sixpoint join forces

Boutique investment banks Harris Williams and Sixpoint are merging.

Good morning, Hubsters. MK Flynn here with the Wire.

Today marks the second day of PEI Group’s Investor Relations, Marketing & Communications Forum.

(Reminder: PEI is the owner of PE Hub.)

It was great to see many of you there yesterday!

I enjoyed conducting the keynote Fireside Chat with Arielle Gross Samuels, managing director, global head of marketing for Blackstone, and learning more about the “Build with Blackstone” marketing campaign.

Speaking of Blackstone … the firm released its Q1 earnings this morning, kicking off earnings season for PE firms.

While earnings declined due largely to pressures in its real estate business, the firm’s AUM grew 8 percent from the previous year to $991.3 billion, close to its $1 trillion goal. The value of Blackstone’s private equity portfolio increased 2.8 percent.

We’ve got reporters listening in on the earnings call as I write this.

At PE Hub, we’re especially interested to hear any updates involving Blackstone’s $4.6 billion acquisition of events technology provider Cvent from Vista Equity Partners. The deal was announced in March but hasn’t closed yet.

Go-to-market models
Blackstone’s Cvent deal was one of several big software deals that dominated deal activity in Q1.

Earlier this week, PE Hub published Obey Martin Manayiti’s deep dive on what’s driving enterprise software deals.

I featured Obey’s story in Monday’s Wire, but it’s worth sharing more now.

There’s a lot of buzz about the story at the IR conference and on LinkedIn this week!

Enterprise software deals generate a lot of cash flow, and they have a high degree of predictability over time because they have “good go-to-market models,” Mike Hoffmann, a partner at Thoma Bravo, told Obey.

Thoma Bravo closed its $8 billion take-private deal of Coupa Software in February. The sector produces high recurring revenue and high gross margins, and the investments don’t require material capital expenditures, Hoffmann added. Enterprise software developers “have very low capital intensity, so you don’t have to build manufacturing plants like what some other industries require.”

Enterprise software businesses also lend themselves nicely to consolidation, added Hoffmann, noting that investors who own such businesses can acquire another software company that sells to the same end buyer, creating a “complementarity” that can be utilized through the same distribution channel in a very efficient manner.

We expect to see many more enterprise software deals this year, including more take-private transactions, now that valuations in the sector have come down.

Collective expertise
In other news…Earlier this morning, two boutique investment banks that do a lot of business in PE-backed middle-market deals announced they’re teaming up. Harris Williams, a Richmond, Virginia-based investment bank specializing in M&A advisory services, is merging with Sixpoint Partners, a New York-based investment bank focused on private capital advisory.

The combined entity will provide clients with expanded advisory services including M&A, capital solutions and primary fund placement.

Harris Williams will continue to be led by co-CEOs Bob Baltimore and John Neuner. Eric Zoller, founder and partner of Sixpoint, will join the Harris Williams leadership team as head of private capital advisory.

“Sixpoint has built a terrific business, providing the private equity community with service offerings that are complementary to and synergistic with our own,” said Neuner in a statement. “For over 30 years, our private equity partners have trusted us to help them build their business through our M&A advice. The collective expertise of Harris Williams and Sixpoint will enable us to support our clients throughout the life cycle of their firms—from fundraising to generating returns.”

Listen up
Before I sign off, I want to mention a highlight from the IR conference yesterday: the afternoon keynote by Meagan Loyst, founder & CEO of Gen Z VCs.

Loyst spoke about the increasing role Gen Z is playing in venture capital and private equity, and she urged the audience to pay attention.

I’m with her. I love this generation and spend a lot of time with them – my daughter Samantha is 20.

Gen Z is the generation after millennials – it starts with people born in 1997 – so they’re in their 20s now. They grew up with iPhones and social media, they’re entrepreneurial, they care about making a difference, and they see VC and PE as powerful ways to make an impact on the world.

If you haven’t already read Venture Capital Journal’s profile of Loyst, I encourage you to do so now.

Here’s to the next generation!

Obey will be back with tomorrow’s Wire, and I’ll see you on Monday.