Guest Podcast By David King: Private Equity Today, Search Funds and Other Financial Buyers with Kirk Michie
David King and Kirk Michie talk about how private equity has changed from focusing on big buyouts to managing assets. They explain why big firms are earning less money now, which opens up more chances for smaller deals. They also discuss the growth of search funds and independent sponsors, along with the challenges they face. The conversation wraps up with how big mergers, like the Paramount-Skydance deal, show the importance of investment banking and careful planning in today’s market.
Highlights of the interview
Private Equity Evolution: The private equity (PE) world is changing, with smaller, middle-market deals getting more attention as big firms earn less.
Search Funds & Independent Sponsors: These newer investors focus on smaller, one-off deals without the backing of big firms, which brings new challenges.
Paramount-SkyDance Merger: The interview also talks about the Paramount-SkyDance merger, explaining the financial, legal, and strategy issues involved.
Private Equity and Investment Banking: Key Trends
Private equity has shifted from the traditional buyout model to a focus on managing assets. As large firms struggle with lower returns, middle-market deals are becoming more common. This change opens doors for newer players like independent sponsors and search funds, who focus on buying and running individual businesses.
How Private Equity Has Changed
Private equity has moved away from big, flashy buyouts and is now focusing on smaller, middle-market deals. These smaller deals give investors new ways to make money, but the competition is tighter, and big profits are harder to find. Private equity firms now focus on making businesses run better and growing them strategically, using creative deals and smart management to succeed in today’s competitive market.
Search Funds and Independent Sponsors
Search funds and Independent Sponsors are becoming important in lower-middle-market deals.
Search funds: Raise money to buy and run one company, usually targeting smaller businesses with a steady income.
Independent Sponsors: These are similar to search funds, however, they raise money one deal at a time, often going after larger deals.
Both bring new challenges for traditional private equity firms by increasing competition, as search funds might bid higher even without secured funding, creating more tension in the market.
Paramount-SkyDance Merger
The $28 billion merger between Paramount and Skydance Media is a great example of the complexities involved in big deals. One unique part of this transaction is the 45-day “free look” period, where the deal isn’t locked in, allowing other potential bidders to make offers during that time. This type of flexibility makes high-stakes mergers even more challenging.
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