How Blackstone is Unlocking Lasting Value Across Private Equity with Viral Patel

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Check it out@dealroom.net or tap the link in the episode description here's to the deal. I'm Kisam Patel and you're listening to M and A Science, where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals.

Foreign.

Welcome to the M A Science Podcast. This podcast is part of a mission to rethink how M and A is done. The old school seller led approach? It's dead fire led. M and A is about strategy, alignment and efficiency, putting value creation at the center of every deal. And let's be real, it's not just about closing the deal, it's about making it successful. We uncover what truly works in M and A by learning directly from the best. I'm your host, Kisan Patel, Founder and CEO at Deal Room and Chief Scientist at M and A Science. Joining me today is Veral Patel, CEO of bxpe, Blackstone's Private equity strategy for Individual investors. Blackstone is the world's largest alternative asset manager. They seek to deliver compelling returns for institutional and individual investors by strengthening the companies in which they invest. There are more than 1.1 trillion in assets under management, including global investment strategies focused on real estate, private equity infrastructure, life sciences, growth equity credit, real assets, secondaries and hedge funds. Today we're going to explore the evolution of private equity, including perpetual fund models, value creation strategies and and the importance of alignment between investors and management teams.

Earl, how are you doing?

Good.

Thanks so much for having me.

And thank you for having me here.

Blackstone Global Headquarters in New York.

It's a wonderful place to be and I'm glad we get two Patels in the room to riff for A little bit.

That's true. Let's just throw some disclaimers. We're not related.

We're not related. That's right.

What else? Nothing you're listening to is any form of advice at all. Nothing. In fact, we encourage you not to listen to anything we have to say because we're both Patels. Is that good enough? Disclaimer?

I think so. I think we're good.

Okay, I got a bit.

I'm really flattered and excited to interview you.

I grew up running a boutique practice.

And that was one of the big things was looking up to Blackstone as a role model company and just thinking about some of these big iconic deals that you got to work on. The Equity Office Hilton take privates are probably the most memorable for me personally just watching it happen day to day in the news. I get to get more of the behind the scenes view. So I'm really excited to have that. Could we kick off a little bit about your background?

I've got a long history at Blackstone, about 20 years here now and have worked across a variety of different business units starting from our advisory business years ago when we had that, before we spun it off to bjt, worked in our Blackstone's Tactical Opportunities Fund, our growth business, our credit business, and today running the perpetual private equity strategy for individual investors.

You started from entry level role advisory.

I take it, kind of start off.

In banking and yeah, look, I started in banking. I came over as an associate here in 2005 and just worked my way up the ranks from there.

I'd love to hear more about.

You got the Tactical Opportunities Growth Fund. You're a part of getting that thing going. How did you do it? How did you get involved with it? How did that play out?

Blackstone has had a long history of innovation for many years and Tactical Opportunities was one of the funds that was launched coming out of the financial crisis. And we've done a really wonderful job historically of taking people in different parts of the organization and then moving them into new products as we're launching them as Tacops was launching. David Blitzer was the partner who was running that business. I thought it was quite interesting. I raised my hand and said I'd love to work with David. I interviewed, went over and the rest is history. Worked for him and learned the ropes.

From there, got that product going and then that turned out to be a big success, moved on to the next thing. Was that the credit.

I spent a bit of time with John Korngold who was running our growth Business and I helped him stand that up. We were spending time trying to understand other markets we could move into. Growth was one of the areas within tackup that we had previously spent time realized that our brand was really resonating in that end of the market and we could do more as a standalone strategy. So John Korngold came over to run that business and I spent some time there and then to your point, moved over to the credit business. We were really growing our private credit business and have been for the last several years. And as that business continued to scale, I moved over to help run the software lending team for that. I did that for about three years and then moved over to my current seat running the perpetual private equity fund.

The thing I wanted to get a sense of is just the culture of Blackstone, because I read Steve Schwarzman's biography and if you look at the overall theme of it, it was people that was so much around fostering that culture to attract top level talent. But it seems like there's a little more to that. Just because you've moved around, you gotta opt yourself into opportunities. Can you walk me through a little bit of what that's like, just in terms of the actual culture that drives the success?

Alluding to Steve's book is the right thing. Cause there's so much in there that is pervasive to the way Blackstone runs, the way we were built, and how we're driven. For all of your listeners, I'd encourage you to actually go on the Blackstone website because there's a lot of really wonderful information on there. One of the nuggets that is really interesting is Steve has a quote that he has on there, and it's a quote that he's used internally quite often in terms of motivating people. It drives the way we think about culture, the way he built culture. He's very keen on saying exactly what you just noted, that the firm's achievements are possible because of our people. And he goes on to say, I love this line, but he says there's no patents in finance. He talks a lot about the success of the firm, relying on the talent of our teams around the world being knit together, in his words, a shared mission to be the best in the world at what we do on the behalf of our investors. That's how he thinks about what it is that Blackstone does. And when you have a founder and a CEO kind of coming at the business from that perspective, it builds a culture that really focuses on attracting best in class talent. Best, best in class People and putting together a set of systems, processes that enable everyone to live up to that quote. So when we think about Blackstone culture and you talk about me moving around to a bunch of different business units, that's not unique to me. There's a very team oriented approach that this firm takes to everything that we do. If you want to talk about Blackstone culture, I'd say a few things. The first that probably comes to mind is relentless pursuit of excellence. And that's a phrase that we use internally quite a bit.

Say that one more time.

Relentless pursuit of excellence. And it's actually more than a goal. It sounds like a goal, but it's more than a goal. It's really an expectation. The expectation is that in everything that we do, in every aspect, every process, every workflow that encompasses Blackstone, there is going to be a relentless pursuit of excellence. There is an expectation that if we're going to do something, we're going to want to excel at it. We're going to want to be the standard bearer in the market for whatever that is. That is the expectation. When you first come here and you walk the halls of Blackstone, you feel that, you feel this sense of responsibility, you feel this sense of needing to live up to the standard that this firm has. And it creates this amazing culture of a group of individuals that are really trying to relentlessly pursue excellence. That is a key tenet of Blackstone. Part and parcel with that is delivering for our customers. So that relentless pursuit of excellence ultimately has to result in delivering for our customers, because that is what we are doing. And Steve talks about that, John talks about that. But we wake up in the morning, we go to bed at night thinking about how are we going to deliver for our customers? And that can mean what investments are we doing? Risk management, Generating attractive returns, delivering what we said we were going to do. But it also means doing everything with an incredibly high standard of integrity. That's another piece of Blackstone that's always been a part of our history. We want to maintain and deepen our clients trust because at the end of the day, we're managing capital and investments on behalf of our customers. They have to trust us to make the right decisions. And everything has to be the highest degree of integrity. When I joined Blackstone in 05, I remember at that time we were obviously a lot smaller, but everyone had to meet with Steve. So you had lunch with Steve when you joined. Steve talked a lot about integrity, about doing things the right way, the Blackstone way. And when you're a Young associate joining a firm and you sit down with the CEO and the founder and he's giving you that message that stays with you the rest of your career. And everyone I've hired, I give that message to. And then the last thing I would say is there is just a focus on innovation. We are a group of builders is the way you think about it. If you look at where our AUM growth has come from, yes, there has been acquisitions historically, but a lot of that growth has been organic. It's been individuals coming up with ideas and thinking less about what we did yesterday and much more about what we can do tomorrow. And that is just ingrained in the way we think. And if you have a group of individuals, if you attract high class talent that believes that there needs to be a relentless pursuit of excellence and believes that ultimately we have to deliver for our customers with the highest degree of integrity, and you believe that innovation is a way of growing the business, not just to drive revenues, but as a way of retaining our best talent. But if you can do all of that, which I think Steve and John Gray have done an immensely amazing job of doing, you got a chance to create something special, which is what I think the firm has been able to do.

You're the best in the world. Relentless pursuit of excellence. The entrepreneurship part, I feel like every company waves that and use that as their slogan that we encourage entrepreneurship. But how do you actually do it? Is there sort of like a mechanical or like a tactical approach that's underpinning it to actually make it happen?

At Blackstone, there is a immense amount of focus on team play. It's an expectation that you're going to have team play. When we do our 360 reviews, there's a discussion of how much you've been helping other parts of the firm. An expectation of your day job is that you're working with other parts of the firm. We have a very team oriented culture. We have a very debate oriented culture, we have a very open culture.

What about entrepreneurship?

Everyone talks about that. You can just see it in our results. And you think about where we've gone over the last 20 years in terms of the number of strategies that we've launched over time, how many of those have been organic strategies that we've launched over time, how we've been able to continue to innovate in our products, in our markets. You can just see it in the results.

I know I still want to try and dig in and find out how you actually do that. It's easier said Than done.

Yeah, no, it is easier said than done. Blackstone isn't an environment where there's a lot of change. We embrace that change. If you find people that embody that spirit, the innovation happens. You got to one set up an environment that expects that and rewards that, which we've done. You have to hire the people that perform well in that environment, which our recruiting processes do. And then you have to give them the Runway and the freedom to do it, which our management has done an exceptional job of doing over time.

Let's talk about your approach to investing. The big thing I've been writing a lot about put a framework around is buyer led M&A. This is what I've learned from doing hundreds of these interviews and working with corp dev teams. That first deal you do could be very subtle, led process, bringing things out. But as you do more deals, your process evolves and matures and becomes more buyer led, which ultimately produces better outcomes. You've been in this game for a while. I want to hear from your lens and what that looks like in terms.

Of investment process and our approach. We as a firm are highly, highly thematic investors. So everything for us starts with where's the puck going? Where do we think the world is going to be in a few years? And really trying to invest behind good long term secular tailwinds. If you think about that today for us today, that's in a few areas. Electrification, power, massive funding needs in that market. That's a big focus for us as a firm. If you look at the data center growth that's happening globally, the reshoring of manufacturing into the United States, just the electrification needs, power demand in the US is going up. That's a significant dollar spend that's going to be required to get the energy infrastructure of the US to increase. So we think that's a great opportunity. Digital infrastructure, that's something that we've talked about for a long time. We continue to think that's a really attractive space to continue to invest behind high quality franchise businesses. You talked about Hilton before. That's a high quality franchise business that we bought many years ago. We acquired Jersey Mike's recently. Great sandwiches by the way, if you haven't tried them. But we like these high quality franchise businesses with a lot of white space. And if you think about a couple of those themes that I just said, those are long term secular, growing themes. You can talk about rate of growth, you can maybe things slow down, maybe things accelerate, but they're long term growers. Like the US is going to need more power in the next five to 10 years, we're going to need more computational infrastructure to enable artificial intelligence, to enable data storage, enable cloud migration. These things are not going away. You can debate how fast they're going to grow, but they're not going away for us. We want to start with good neighborhoods, good sectors, highly thematic areas that we think the market's going to grow in. A lot of that is informed by our size and our scale and the data that we see across our entire footprint, across our entire $1.1 trillion of assets. If you think about investing as being connecting the dots, we happen to have a lot of dots to connect. There's some really great pattern recognition that comes out of that. So it starts with really good sectors that we want to invest behind. Then you move to, okay, well, we want to invest in the best in class companies within those sectors. And we're asking ourselves, how important is this company? If it went away tomorrow, would anyone care? Is it providing a service or a product that's essential to its customers that's hard to replace? The answer, no. Lots of people can probably do it. You start getting a sense of the business, you start getting a feel for, is this a leading company in a space? Does it have a right to exist? Does it have a moat that's gonna last for long periods of time? So you're looking for leading companies that are gonna be able to take share in these themes that are growing. And then you couple that last piece with a really strong view on management. We need to have a management team that can execute against the initiatives that we talked about. Too often you see particularly at very junior levels, because the colleges have gotten very good at training investment bankers and training investors. Now, from a modeling perspective, and too often I think you see a spreadsheet that shows how this investment's going to be really attractive. What people oftentimes forget is that there are actually people who have to do things to make that spreadsheet do what you want it to do, and that's management. You have to have the right management team to be able to execute against those visions. But pick good neighborhoods, pick the best companies in those neighborhoods. Make sure you've got the right management teams to execute against them. And from an investing perspective, that's how we approach the market.

Long vision, leveraging the data, since you've got a big footprint already. So that helps you really validate some of those themes that you develop and then identify the likely winners. Getting to that management fit, what does that look like? What are the key elements that you're looking for to really get a sense this is the right management team that's going to work well together. What are the red flags on the other end?

It's more art than science, and it's as much understanding how a team works together as any one individual. But obviously it'll start with the CEO of the business, and he or she is someone that we spent a lot of time really trying to think about, are they the right fit for the strategy that we're trying to execute? It's not necessarily. I found the right CEO. It's the right CEO for this job. And there are some CEOs that can be wonderful growth investors, but not really wonderful for maybe a mature business that's growing more slowly, or vice versa. It's understanding the experiences that those management teams have had in the past and how applicable those are going to be to what we need them to be able to do for the investment that we're trying to make. We have a group of people on Blackstone's operating team that spend their time evaluating talent, understanding whether those CEOs, CFOs, chros down the line have the skill set necessary to, to do what we need. And we're evaluating that as part of our diligence process. It's really an extensive part of our diligence because you can get the first two right, meaning sector and company, but if you get the third one wrong management team, it's really, really hard to make that work.

That sounds super important. Got to have the right management team, you got to back them. Sometimes all the pieces aren't perfect, but if you got a plan to fix those pieces, you ever got examples of where it just didn't work out or anything, that would be like a surprise reason why things didn't pan out the way you wanted it to.

Companies are living, breathing things. And back to my spreadsheet example, it's rare that a team will have an 8% revenue CAGR in their model. It doesn't grow at 8% every year. You're going to have your ups and your downs. You're going to have markets that go up, markets that go down. Things happen to these businesses, they happen all the time. And it's really more if you have the right management team in place to begin with, much easier to manage through the issues that are gonna come along. The hard ones are when something bad happens to the company idiosyncratically, something happens market oriented, structure oriented, whatever. And then on top of that, you've got the Wrong management team. Now it's very difficult to actually fix the underlying problems and navigate through choppy waters. It does really go back to finding that right team at the outset.

How about value creation? This is something that's been really interesting cause I've been having more conversations with private equity firms and then you have a deal team to get the deal done. Then there's this portfolio support, portfolio op team. And I feel like there's a very wide range of how the philosophy of private equity works here. Trying to learn from the best of the best. But you see a very hands off approach. We're just going to give you a bigger Rolodex of consultants that you can engage with to very hands on. We have a playbook and we're going to use our playbook approach to something in between. You give us an areas that you want to help support on and we'll be proactive in supporting you in those specific areas. What's the Blackstone way?

We're probably somewhere in between is the answer. I'd say the big difference though is we're somewhere in between with the resources to be able to address everything. It's just a question of what is it that company actually needs. We have a team internally, Blackstone operating team. It's run by a gentleman by the name of Rodney Zimmel who actually came over to us from McKinsey after 29 years at McKinsey and then he joined us. That is a group of operating executives with expertise in virtually every functional area a company might need something in. We talked about the talent in the org design from before, healthcare design, healthcare costs, procurement, pricing, all the way down the line as it relates to the company. We've hired a subject matter expert and a team of subject matter experts internally to help our businesses with those areas. What's interesting is when you take the size and scale of Blackstone, let's just pick on procurement for a second and you pool all of that together, you have a tremendous amount of buying power. As part of our process of diligencing a company, we're evaluating where we think we can be the most value at and what we think is going to have the highest roi. There's typically three or four things in every single business where if we get these right, that's gonna be a meaningful driver to the overall investment thesis. And we try to take those areas as ones that we push into our businesses with our management teams. And it's really a partnership led approach. Our CFOs and our CEOs are working with our operating teams to help figure out the right way to get the benefits that we're looking for. You don't have many firms with the size and scale that we do to bring the amount of resources to bear.

Do you ever bring that to the front of the process to use to be competitive, that hey, here are these unique ways that because we have the scale, we have this buying power that we're going to be able to support you and differentiate when you find yourselves in maybe more of a competitive situation.

Absolutely. Our data science team is probably one of the best examples of that. So we have a 50 person data science team at Blackstone. They're involved in our upfront diligence. We will often take the insights that come out of that team and actually share them with the management team and say, look, this is what we're seeing in your business. Here's where we're seeing potential opportunities. Maybe we identified something from holes in their go to market motion with their salesforce or we're seeing things with their customers that could potentially drive better retention. It could be anything. But those insights are ones that we will often share back with our management teams as part of the diligence. It engenders a lot of trust back and helps them become an advocate for us as part of any potential to.

Start courting the company.

Yeah, absolutely. It's what I was saying before. It all comes down to people. You want to build that trust. You want to show folks why you're going to be a value add partner. We're not in the business of just buying a company and letting it be. We're in the business of buying a company and helping it turn, making it better. And if we can show as part of that courting process, as you just said, how we're going to do that and the insights we're going to be able to bring to the table. And oftentimes we find those insights are differentiated relative to others that might be having discussions with that company. That certainly helps position us in a much better light.

Here's data that you have being able to share that, maybe even investment ideas. Hey, we see how a couple of these companies in this sector could come together and be able to openly discuss that.

Absolutely.

I mean you build trust that way because they're like, hey, they actually know what they're talking about.

That is the key. Because you're going to be working with these folks for a long time. You need to have that alignment.

Anything else unique when it comes to creating value. I just try to learn 20 years experience of what you've seen work really well. We talked like having the culture, having the alignment with the management team, having a model to support these companies and the unique ways that they would need the support, and even taking that ability to build that trust to actually make that deal happen.

The last one I just mentioned would just be making sure that we're always building for the long term. As private equity investors and as Blackstone, we think about long term investing, building businesses that are going to last. It's why we spend so much time on those questions I asked before. If this company were going to go away, would anyone care? You want to build lasting businesses, you want to make investments that are driven for long term roi. And if you do that, the sale, the exit is going to come as opposed to building to a sale, which is a little more dangerous because you don't know when you're going to sell a business. Some of the best investments we've made from a return perspective in the firm's history have been where we've just been building because it's the right thing to do. And a buyer comes along and says, you've made something fantastic here. I'd love to buy it. That can be as part of a process because that's the right timing, but oftentimes it can just be because of strategic acquirer thinks it's a really wonderful asset that you've built and want to own. Making sure that we've got multiple ways to exit and timing the exit for when the market is right as opposed to trying to timing an exit. Because it's been three years, it's time to exit now. So you want to build for the long term, not for the short term.

Position, the business to be bought. What are you doing today?

What am I doing today? What am I doing this weekend? So today I oversee Blackstone's private equity strategy for individual investors. So that strategy is designed to make private equity just much more accessible for eligible individual investors and to provide greater investment flexibility across the breadth and the capabilities of Blackstone's private equity franchise. Historically, individual investors have accessed private equity and alternatives more broadly through drawdown structures. These evergreen and perpetual structures that have come around are actually allowing individual investors to get much more access to the asset class. I'm now leading that effort on the private equity side for the firm.

Let's break this one down. I'm really interested in this. This seems to be the new emerging class is these perpetual fund models.

If you look at back in 2011, Blackstone started its private wealth business and that started with literally just one fund offering through one distribution partner and $10 billion of AUM back in 2011 in the private wealth channel. So that's individual investors, not large investors. And if you look at our capital today, the over trillion dollars of assets that we manage, there's over 270 billion of that today that is through from our private wealth channel. So that's across 300 plus dedicated professionals in our private wealth business that are serving nearly 300,000 investors. So just to give you a sense the world of just the pension plans and the sovereign wealth funds funding private equity, we've come a long way from that, but we're still a long way from where we think the market can go. Interestingly, just to put some numbers around it, our pension plans as an example, will allocate maybe 20 to 30% of their overall portfolios to private investments or alternatives. Endowment funds will push 50 to 60% into alternatives. What do you think the average individual investor does?

Not even 10%, 3%. 3%.

When you think about the amount of wealth that actually sits within individual investor portfolios and how little of that is actually in private markets, the opportunity for that capital to flow into the private markets so that those individual investors can get the benefits that the institutional investors have had for such a long time. And if you think about why those institutional investors and those endowments have wanted private assets, it's a few things on the private equity side, because that's my world. We all talk about wanting to build diversified equity portfolios. Investing 101 diversification. Diversified equity portfolios don't time the market. Long term investing, stay invested in markets. And we've historically done that in public markets. But another quiz question for you. What percentage of companies globally are public?

Like less than 3%.

But I'll go the other way. You've got nearly 90% of companies private. So if you're trying to build a diversified portfolio of equities and you do it in public markets, you get 10% of the actual pie. It's just not that much. So institutional investors have known this for a long time.

You mean private businesses that are already in the private equity ecosystem or.

No, not even in the private equity ecosystem, just not public, just private companies owned by a founder, owned by an individual, owned by private equity, owned by anybody, but just not traded on a public exchange, meaning you can't get it unless you're accessing it through a private capital fund. You really want to have and our institutional investors known this for a long time. You want to have exposure to the private markets. Institutional investors have known this for a very long time. It's why they're allocated as much as they are into alternative investments. And individual investors again are just now starting to get to this phase that I think is going to be one of the biggest trends that we see in the next 10, 15 years is individual investors now accessing private markets and making that a more core component of their portfolios.

Yeah, I had no idea that already high net worth individuals, you've gotten a pretty big chunk of that as part of your aum and now it's going down to the retail. Can we go back to the mechanical difference? We sort of understand the general fund structure. It sounds like there's some actual mechanical differences between a perpetual fund.

I mean, look, evergreen and perpetual funds out there have slightly different structures associated with them. But as a general matter, the big differences are rather than making a commitment to a fund, you make an actual investment into a fund. So your money gets put to work immediately. And then the second big difference is that the underlying liquidity in a drawdown fund, you're locked up for 10 years. And in a perpetual fund, most of these funds will allow for investors to get periodic liquidity. Whether that's quarterly, they might have caps on them. Each fund's got a slightly different structure, but the funds are being set up in a way to allow individuals to get access to that capital to the extent that they need it. They're still very much long term investing vehicles. No one's thinking about these investments as let me trade in and out of them. They're still private capital, illiquid investments, but they do provide much more liquidity than the traditional drawdown structure. And those two switches, meaning I can invest immediately, not make a commitment, and I have access to the capital, let's say, on a quarterly basis to the extent I want. It is the fundamental shift from an industry perspective that's going to allow individuals to go from 3% of their portfolios to something higher.

Are these going to be just on general trading platforms? I got everything on Robinhood these days, so I don't know.

Not general trading platforms. A lot of these products are still really meant for qualified purchasers or accredited investors. So you still need to have a level of net worth or a level of sophistication before you can invest within them. They're not truly retail products where you could just buy like a dollar share.

It's going through the wealth management.

Yeah, it's still going through the wealth management. There's still a Financial advisor typically tied to doing that to make sure the suitability requirements work and that the product is appropriate for that investor base. We're early in this big shift. There's a fundamental lack of understanding in the market of how these products work. How does this actually differ versus a drawdown? What am I investing in? What are the risks associated with this? Even more fundamental than that, what is private equity? We spend a lot of time educating our investors on what private equity is, what the benefits of it are. And as we go out to a broader and broader universe of investors, we still think we're in the education phase of, of this market. That I think has been, from a scaling up perspective, one of the biggest challenges. And we've done a number of things over the last decade to help enable this to actually come to fruition. So we have something called bxus, so Blackstone Universities, and we have those here at Blackstone and we do them regionally, globally actually. And those are sessions that we create where we bring advisors in to Blackstone to meet with our investment professionals. They can hear us talk about what we're doing in private equity, how it works. A lot of the conversation that you and I just had, frankly, and we do those many times throughout the year, cycling advisors through to just give educational resources to them, to explain to them why they should be considering this as an asset class as part of their overall portfolio. We also have, as I mentioned, our Blackstone Private wealth team, those over 300 professionals dedicated that we have there. They travel the world to meet with advisors where they work and they live, meet in their offices door to door, spending time explaining what is private equity, what is Blackstone. We're as an industry educating an entire group of people that have not had exposure to this asset class. Remember, 3% of your portfolio is in there. And if you really were to bifurcate that three, what you have is a number of people that are very educated on it and have a substantial amount of their net worth in it. Then you have a lot of people at zero. You gotta spend a lot of time explaining to those folks who are at zero what this is. The biggest challenge today is the education. And we've built an amazing mousetrap to be able to educate the market on this as that continues to build. And it's like a slow build that we've been doing over the last decade. You get to a point where we become a trusted brand in that market because we've been spending time explaining this to folks when we come out with a new product. And take it back into that channel. You have an ability to scale it in a way that a lot of our competitors can't.

It's interesting. I was wondering why they put you in this group or why you joined this group. So I was like, yeah, it seems boring, but now hearing you talk about it.

No, it's. It's anything but boring. It's been, at least for me, one of the most fun jobs I've had at Blackstone. It's one of the fastest growing areas in the private equity industry. Anything but boring is what I would say.

That's where things are going okay. We used to see this increase in private capital in general. The whole thing is exploding the credit, not what you're working on. What role do you see M and A playing when it comes to rebalancing which companies exist in public versus private markets? What are we likely to see more of public companies buying private companies and effectively making them public or public companies going private? Is there any big trends that you see during this continued growth in the private capital side?

These things always go in cycles. So for the last several years, you just haven't seen many companies going public. The public markets weren't that receptive to it. I'd say 2025, the expectation was that you were going to see a lot more companies go public. Given the more recent volatility, a lot of those expectations have probably been tempered. But you're going to see that pendulum swing back and forth. And right now we've been on the side of everything going private and not going back the other way. You will see that kind of go back as private equity firms really try to exit their companies back into the public markets for certain of their businesses. That being said, I do think long term secular trends, the big difference is that in the 90s, if you wanted to take a company of size and scale and grow it, the public markets were really the only market that existed that had enough depth to actually allow you to grow at scale. So you didn't have a choice, you had to go public. Today, because so much capital has been formed in the private markets, companies have a choice and they can choose to stay private and go into the hands of a private equity firm or a club of private equity firms and continue to grow at significant size and scale in the private markets. Or they can choose to go public and it becomes a choice for them. That's just a choice that just didn't exist 25, 30 years ago. By the mere fact that there is a choice means you're probably going to have less public companies. And you see that the number of public companies in the 90s versus the number of public companies today is much lower. That trend is one that will likely continue. But in these micro moments you're going to see the pendulum swing back and forth. And we've just been in an environment where it feels very one way. That'll come back. We're big believers in the public markets. You need healthy public markets functioning well in order for good financial markets. I just think you'll see that swing back and forth.

Markets will cycle. We'll see what happens. When we talk about what's next, the trends what you're working on is really promising. We talked about energy. That's a big secular theme. We talked about the data fiber things along to power. Probably AI is like the big hot thing. What's the big thing you're excited about?

The things that we're excited about as a firm right now are the ones that you just mentioned. Let me just summarize those and maybe a slightly different framework for you. One, the shift of individual investors allocating money to alternative investments. That is a very mega trend type of a shift. You've seen that obviously in private credit, we've seen that in real estate, we're seeing that in private equity, we're seeing that in infrastructure. So over the next decade plus that is going to be a significant driver of flows for the alternative asset management industry. That's one of the more exciting things happening industry wide right now for alternative assets. We're going to continue to innovate around that and continue to try to be a leader in that space. So that's one. And then on the investment side it's those long term secular themes. It is AI digital infrastructure. More specifically, it is the electrification trends that we're seeing right now, continued digitization. Those are trends that are not going away and are going to continue to really grow through a lot of the choppiness and the noise that we're seeing. We're going to continue to invest behind those trends and find companies that are going to be leading in those spaces.

Verel, thank you so much for taking the time.

Thanks for having me.

You've helped me become a better M and A scientist. Thanks so much fellow M and A scientists. If you tuned in this far, I appreciate you. Love to hear your feedback. What you thought of this interview, ideas for other folks I should be talking to or topics to cover. Reach out to me on LinkedIn. Until next time. Here's to the deal.

Foreign.

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