General Atlantic on EMEA; Heartwood on native seeds; plus women in PE share insights

Good morning dealmakers, thank goodness it’s Friday.

It’s Obey Martin Manayiti here with the newsletter and a wide range of dealmaking topics today.

To cap off the week, and Women’s History Month, I will be revisiting key themes that were raised in more than a dozen interviews with women in private equity that PE Hub, PE Hub Europe and Buyouts carried out during March.

I also have a story about Heartwood Partners, a Norwalk, Connecticut-based firm, about its acquisition of NativeSeed Group, a company that focuses on habitat restoration, land reclamation and erosion mitigation through native seeds.

And we’ve got an interview with a General Atlantic exec about investing in Europe, the Middle East and Africa.

But to kick us off, I’d like to share some data that just came in.

Banking deals down
S&P Global Market Intelligence has a report out this morning indicating that global private equity and venture capital investments in the banking sector dropped in 2022, reflecting the overall downturn in deals, as interest rates rose and concerns over the direction of the global economy increased.

The report further indicated that the aggregate transaction value stood at $2.03 billion in 2022, down 63.5 percent from $5.57 billion the previous year. The number of transactions also fell to 59 in 2022 from 70 in 2021, according to the report.

Dealflow generally has been down for many sectors this year. As the first quarter draws to a close, we’ll be looking for numbers to quantify the drop in activity and will share them with you as they come out.

We are keen to hear what you are seeing and what could change this year as compared with the last. Please get in touch at mk.flynn@peimedia.com or obey.m@peimedia.com.

Investing in EMEA
In an interview about investing in the EMEA region, General Atlantic’s co-president, managing director and head of EMEA, Gabriel Caillaux, told PE Hub Europe editor Craig McGlashan that he expects 2023 to be among the most exciting vintages ever.

“Everyone talks about how exciting 2020 and 2021 were,” Caillaux said. “We actually thought those were more challenging years because we’ve never seen a valuation environment quite like that in a competitive environment quite like that.”

With interest rates jumping and capital markets freezing, change of behavior is needed in the way that investors price risk assets in private equity, he said. “Our behavior was one of caution, but we were still super active. We invested about $5 billion globally. We also generated about $4 billion of liquidity, which is an even more unique statement. A lot of firms got paralyzed on the liquidity front.”

On investing in the region, Caillaux said:
“Investors occasionally ask me, how can you do growth investing in Europe when Europe stopped growing 10 years ago and is in permanent crisis? Actually, in a lot of ways, Europe is at an earlier innings in technology disruption than some of the other markets where GA operates.”

The end of a brain drain to the West Coast of the US has also helped. “Those people have come back and realised that if you have a winning business model, a winning team and the right access to capital, there’s no reason not to be multi-regional, and that the cost of becoming multi-regional goes down tremendously with time,” Caillaux said. “It used to be that the big challenges were different consumer trends and different customer acquisition trends. The global consumer acquisition platforms are now all the same.”

Addressing erosion
Many private equity firms have increased their focus on ESG. To that end, earlier this week Heartwood Partners, a Norwalk, Connecticut-based firm, acquired NativeSeed Group, a company that focuses on habitat restoration, land reclamation and erosion mitigation through native seeds.

I caught up with James Sidwa, a partner at Heartwood to hear more about opportunities that the firm identified with this investment as well as the growth strategy.

NativeSeed, which mainly operates in the Rocky Mountain states and the Pacific Coast, areas battered by extreme weather, provides seed and erosion control services to a wide range of markets, including federal and state government agencies, small and large farms, private companies, homeowners and more.

There are different opportunities that come, depending on the nature of the clients. For instance, oil drilling and mining activities disturb the natural habitat in the area that companies will be working in. After those activities, companies will need to restore the land and will require native seeds to do that, Sidwa noted.

In other instances, infrastructure projects, such as construction of power lines, can cause harm to the natural habitat. At the conclusion of those projects, NativeSeed can help companies respond in different ways to rehabilitate the land.

Other opportunities lie in agriculture-focused strategies, such as keeping soil nutrient-rich, or reinvigorating it to mitigate against erosion or landslides when faced with extreme weather.

New frontiers
In celebrating Women’s History Month, we heard from many women about their experiences the world of private equity. Here are some of the insights shared with us:

Ingredient to success: “Successful investing requires thinking in new and different ways that may lead to finding new frontiers for growth,” said Stephanie Geveda, founder of Coalesce Capital. “Historically, when I have noticed something that has piqued my curiosity, I have always tried to lean into that curiosity and dig deeper, which has differentiated me as an investor and partner.”

From PE Hub Europe, Raymond James’ Sunaina Sinha Haldea said that the general consensus around gender diversity was that there is still work to be done, describing the stats on women in PE as “pretty dismal.”

“Sub-5 percent of senior folks in private equity are women,” she said. “The industry knows it’s important, but it’s not materializing into the representation figures that we really should be seeing.”

Same challenges: While progress has been made in PE, Suyi Kim, global head of private equity at Canada Pension Plan Investment Board says gender discrimination persists, especially in the form of “unconscious bias.” She recalls negotiating a deal a year ago, when a male business executive insisted on talking to a senior person. “I had to tell him three times I was that person.”

Overcoming roadblocks: “We don’t give up,” explains Suma Kulkarni, partner at the Washington, DC-based buyout shop ACON Investments when discussing work challenges. “We stick through issues and just work our way through a positive outcome.”
Specialize to grow: Sector specialization is something that Anna Tye, MD and partner on the technology investing team for Carlyle says provides an edge for mastering the PE sector. “I am a big fan of sector [specialization] and even sub-sector specialization as I think it creates a competitive advantage.” This can also help during times of market volatility, she added.

“Turbulent markets are not the time to experiment in uncharted waters, but if you know a sector well, have been studying it for years and across cycles, have invested in companies in the ecosystem, and already know the competitive landscape and market trends, turbulent markets can provide an opportunity to capitalize on attractive investment opportunities – as long as you stick to your knitting.”

Consider a career in PE: Kate Wallman, managing director at Encore Consumer Capital had a few words of advice for young women contemplating a career in private equity. “Women tend to feel they have to be over-prepared and really buttoned-up. Be yourself and show your personality. You’ll be more memorable that way.”

That’s it for me today. MK Flynn will be back with the Wire on Monday.

Have a great weekend.

Cheers,

Obey