"Private equity should be creative"

"Higher volumes, fewer transactions - how can you stand out from the crowd in a saturated market?" This was the motto of this year's WHU Private Equity Conference, PEC for short. Last week, 120 international students and professionals met for two days on the WHU - Otto Beisheim School of Management campus to discuss the future of private equity during various workshops and lectures.

After Dr. Burkhard Varnholt, Chief Investment Officer of Credit Suisse, was the first speaker to open his presentation with the words "Don't follow the Money," he was joined by numerous speakers who also emphasized the term passion. Among them was Jörg Metzner, Director in the Private Equity Team of KKR's London office, who in his speech presented investments in the areas of leisure, hotels, and travel. In times when physical products no longer count as status symbols, but rather experiences, such branches of industry are becoming more and more important and more profitable. Due to high regulations and relatively small margins, however, the attractiveness of these industries for investors is still rather low, which is why investments often remain unattainable. "Private equity must shift its boundaries in order to remain profitable," explains Metzner. In a saturated market like today's, the leisure industry is a good example of this and has a completely different advantage: you make people happy. In this context, however, Metzner also notes that one should not forget the responsibility one has in private equity transactions.  

Responsibility was also what particularly preoccupied the audience during the panel discussion on "Chinese private equity - how Chinese investments are changing Europe". After one participant asked about the thread pullers in the background of Chinese transactions, Markus Mentz, partner at Oliver Wyman, confessed that it is often almost impossible for his team to recognize who the real decision maker behind Chinese investments is. Trump's America-First policy would bring Germany further into the focus of Chinese investors and would place it second only to the UK in terms of Chinese direct investment in Europe, added Daniel Koller, Managing Director of Ginko Tree Advisors. The rising number of Chinese transactions is not only due to the fact that on average Chinese pay 10-20% more than Western investors, but above all to the fact that they can argue with very good chances on the Chinese market and their large network. Even if we often don't know where the money comes from, Michael Drill, German Managing Director of Lincoln International, reports, we must not forget that Germans have invested more than five times as much in China over the past decade as they have in China.  

Even if the absolute number of private equity transactions worldwide has been declining since 2014, the prospects for the industry are good. Tobias Eichner, McKinsey's private equity partner, agrees with this statement and adds: "Private equity must remain creative if it is to remain viable".