Conference Videos: Alvarez & Marsal Private Equity



About this Video

Can private equity play a key role in reviving the financial services industry - or are the risks and regulatory hurdles too great? Alvarez & Marsal hosted "The New Paradigm for Private Equity" Conference along with the NYU Stern Salomon Center. Listen to thought leaders Nick Alvarez, Joe Bob Edwards, Professor Edward Altman, and Fred Price give their perspective on private equity and the future.

Video Transcription

The New Private Equity Paradigm: Age of Uncertainty

Nick Alvarez, Managing Director Private Equity Services Operations Group

I think the new paradigm of private equity is sticking with the basic model of what private equity is, and that's being an activist owner. Having a sense of urgency, focusing on the business fundamental, monitoring the management team, and making sure that the management team monitors and manages those business fundamentals.

Joe Bob Edwards, Managing Director, First Reserve

The new paradigm in private equity, as we see it, is the ability to access your limited partner base for new funds. Our limited partners, as well as the entire industry, have really faced a perfect storm of liquidity crises of their own. And the ability to actually raise a new fund, even with good performance in your historical funds, will be key to any private equity firm surviving. Anytime we look at an investment, we have to make sure, that from the CEO to the CFO to the Chief Operating Officer, that we have the right horse for the right course.

Fred D. Price, Managing and Founding Principal, Sandler O'Neill & Partners

The new paradigm in private equity, I think, is the balancing of the private investing versus government involvement, which is going to be a completely new paradigm and unlike anything any of us have been through before. And I think the change that we need to see coming out of government is they have rules, but their interpretation of the rules seems to shift a lot. So, I think what really needs to happen here is just a transaction that we all can understand and that can be replicated.

Wilbur L. Ross Jr., Chairman and CEO, WL Ross & Co. Chairman of Invesco Private Capital

I think there are several new paradigms for private equity. All of which, in my view, will make our lives more complicated than ever before, and some of which are especially relevant to distressed investors.

Professor Edward I. Altman, New York University Stern School of Business

For private equity, the debt markets are critical. Right now, the large mega buyouts are finished. The banks are not in the deals very much, and the high yield bond market can only supply so much. But, some of the new trends are things like the amount of equity being put into deals, record amounts, more than 50 percent in the United States and well over 65 percent in the UK. Another new trend in private equity is the fact that these private equity funds are much more focused on distressed buying of companies, either in distress or in bankruptcy itself, providing a less amount of capital necessary to buy out these firms because they are very distressed, buying them at discounts. I think that trend will continue and will be one of the "new paradigms."

Nick Alvarez, Managing Director Private Equity Services Operations Group

Things are a lot tougher now than it was fiver years ago, given the environment. There is a lot less liquidity in the market, so that means that there is a lot less time for management to get their plans executed, to get the returns that many private equity firms are looking for. The best advice that I would give to any private equity firm is be courageous. Making tougher decisions now is much better than making tougher decisions later when time and money are not on our side.

What we focus on is helping you access value creation, driving rapid results, and at times riding the ship to avoid distress. And it is my personal belief and one that is broadly shared by members of my firm that the private equity model of value creation continues to be the superior model in today's market and in the future. Private equity's ability to bring fresh capital to companies, best practices to management teams, and align the interests of owners and managers outside of the public market drives superior value creation.

Alvarez & Marsal
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