New data suggests private equity may be able to deliver value through the transformative potential of artificial intelligence, and also by supporting industrial revitalisation.
Some 40% of respondents in PwC’s annual global survey of private equity chief executives reported that AI had increased their firm’s revenues by more than 5% over the past year, with 45% seeing a similar increase in profitability.
This is specifically AI used in mission-critical areas such as deal sourcing and evaluation, and portfolio company enhancement. But the survey also noted that only one-third of CEOs actually trust the technology.
It also shows that sustainability refuses to go away as an investment theme notwithstanding the wishes of the US administration. Some 51% of respondents reported increased revenues from climate-friendly investments, while 21% pointed to reduced costs.
According to PwC, markets exhibited “an urgent need for reinvention, driven by AI adoption, sustainability pressures, and geopolitical uncertainty”.
In a report last month, Michael Bruun, global co-head of private equity at Goldman Sachs Asset Management, said that “we see tremendous growth around the application of AI and with companies that assist other companies in bringing AI into their toolboxes”.
Meanwhile, news reports citing PitchBook data may raise hopes for Europe’s industrial base from private equity.
According to PitchBook, some 13.5% of private equity deals thus far this year came in the form of European private equity-led carveouts, delivering US$69.5 billion in value.
These deals were selloffs by European conglomerates of assets deemed non-core to their business.
Bruun’s report listed financial services, technology, business services and healthcare as particularly favourable sectors for dealmaking. One such deal announced last month was SoftBank Group’s decision to buy the robotics division of Swiss engineering firm ABB for $5.4 billion.
According to Bruun, “there is a lot of fragmentation in European industries…There are companies that are not big enough, and they are concerned they will be left behind.”
European deals should also see sustainability factors as a deal driver, with a favourable regulatory environment.
