Here we answer some additional questions from the audience we didn't get time for in the live discussion between Steffen Pauls and Johannes Huth.

Q: How would you rate the competition now with respect to deal sourcing? Are you seeing fierce competition for assets and if so how are you keeping an edge?

A: Yes, competition is tough but we think we have developed some key differentiating angles in our European business that really help us. I would cite three of these in particular: 

1. The combination of our local presence in Europe that is supported by our global platform, an iconic brand and expert resources across multiple sectors and industries. 
2. A highly thematic approach to sourcing deals, with a particular focus on technology and sustainability. For example, we believe KKR has emerged as Europe’s leading technology investor and this knowhow is really permeating our thinking behind all our deals today. 
3. We think our deals are genuinely differentiated. Around 50% of our deals are proprietary. How do we get there? A lot of intensive relationship building, in Europe especially with families and founders. 50% of our deals are partnerships with families and founders, who we think we can offer more than just capital through our value creation toolkit and global platform.

Q: In terms of the quality and size of the opportunity set, are there particular geographies that stand out for you right now?

A: In Europe, the DACH region has always been an incredibly active region for us and we expect this to continue. Also, in spite of the uncertainty caused by Brexit, the UK has historically been the largest buyout market in Europe by deal volume, and we do think we will continue to see interesting opportunities emerge there.  

One region where we have recently further stepped up our efforts is France. I am personally spending a lot of my time in France today and we have grown the team in our Paris office which is really starting to bear fruit in terms of deal flow. 

Q: You mentioned the idea of monetary policy and its effect on asset prices. What do you tell friends or partners who believe they can get rich in the stock market, or who think they should be overweight public equity to participate in these increasingly high public equity prices? 

A: In my opinion private equity has had and will continue to have a risk/reward profile that makes it a valuable addition to a portfolio, for investors with a long horizon. Private equity’s performance reflects the illiquidity premium and the value added by the sponsor through M&A support, internationalization, digitization, and other tools of active ownership. And for investors who want access to fast-growing companies, private markets can offer a greater range of opportunities than public markets.  

It’s getting better, but European public markets still have a relatively small share of fast-growing, technologically enabled companies, for example. Many of those kinds of companies are still in private ownership. So, my advice would be to consider the whole spectrum of potential opportunities, not just public markets. 

Q: Could you name 2-3 trends you expect to emerge this year in the private equity industry?

A:

• ESG and broader sustainability is obviously not a new theme but will now evolve to a core investment theme. We see an increasing number of investment opportunities in the green space.
• Europe is home to many of the world’s most successful family-owned businesses, more than any other region.  I expect the partnership with this ownership segment to develop further where private equity’s core competences of internationalization, digitalization, capital markets and M&A led growth can be highly complementary.

View the conversation between Steffen Pauls and Johannes Huth below and feel free to share within your network. To stay informed about future Deal Talk events, follow Moonfare on LinkedIn. And if you haven’t yet created your Moonfare account, you can register in a few minutes by clicking here.

Important notice: This content is for informational purposes only. The opinions expressed by the interviewee are their own. They do not purport to reflect the opinions or views of Moonfare. Moonfare does not provide investment advice. You should not construe any information or other material provided as legal, tax, investment, financial, or other advice. If you are unsure about anything, you should seek financial advice from an authorised advisor. Past performance is not a reliable guide to future returns. Don’t invest unless you’re prepared to lose all the money you invest. Private equity is a high-risk investment and you are unlikely to be protected if something goes wrong. Subject to eligibility. Please see https://www.moonfare.com/disclaimers.