Dry Powder: The Private Equity Podcast Navigating the Evolution of Private Equity: An Interview with Hugh MacArthur
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May 13, 2025 Explore the dramatic shifts in private equity over three decades, as insights from Bain reveal how the industry has transformed. Discover the necessity of strategic due diligence and strong industry ties amidst rapid technological changes. Delve into the critical communication strategies that enhance trust between General Partners and Limited Partners during economic turmoil. Learn how data analytics and AI are revolutionizing due diligence, while individual investors increasingly play a vital role in the evolving landscape.
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Origin Story of Bain PE Practice
- Hugh MacArthur recounts starting Bain's private equity practice by pitching consulting to buyout firms skeptical of consultants' value in deals.
- They demonstrated unique external market insights, like customer views and competitor errors, that dealmakers hadn't considered before.
Shrinking Stability and Rising Multiples
- The half-life of business stability is shrinking due to technology and regulatory changes, demanding more external market focus.
- Private equity deal multiples have roughly doubled in 30 years, squeezing margin for error to nearly zero.
Lost Edge in Sourcing and Financing
- Proprietary deal sourcing via Rolodex and bespoke bank financing once differentiated private equity firms.
- Now, most deals are intermediated, staple financing is common, and competitive dynamics have changed the value levers for returns.