Key Takeaways
- • Dipan Patel, co-chief executive of Permira (manager of approximately €100bn in assets), told the FT Private Capital Summit in London that private equity investors could achieve some of their strongest returns by deploying capital now, as lower valuations and reduced competition create attractive entry points.
- • Patel drew parallels to the periods following the dotcom crash and the global financial crisis, which he said produced some of the industry's most successful investments.
- • Patel argued higher interest rates, while challenging for portfolio companies and sellers, could benefit buyers by bringing acquisition prices down.
- • Exits remain constrained by subdued IPO activity and elevated borrowing costs, as sellers anchored to ultra-low-rate-era valuations resist lower prices, limiting distributions to institutional investors.
- • Patel said software has moved from overcapitalised to undercapitalised from an equity perspective; Permira, which previously allocated up to 30% of its investment activity to the sector, has not completed a software deal in the three years since ChatGPT's launch.
Summary
Dipan Patel, co-chief executive of Permira, said private equity investors could achieve some of their strongest returns by deploying capital in the current market, according to a Financial Times report on his remarks at the FT Private Capital Summit in London. Patel argued the environment resembles the periods following the dotcom crash and the global financial crisis, which produced some of the industry's most successful investments. Permira manages approximately €100bn in assets.
Patel contended that higher interest rates, while difficult for existing portfolio companies and sellers, could benefit buyers by lowering acquisition prices to more attractive levels. The comments come against a backdrop of a prolonged slowdown in exits. Subdued IPO activity and elevated borrowing costs have made it harder for firms to sell assets at targeted valuations. Many investors acquired businesses during the era of ultra-low interest rates and have been reluctant to accept lower prices, which has constrained distributions to institutional investors and limited their ability to recycle capital into new funds.
Artificial intelligence is also reshaping investment strategy, particularly in software, a sector that has historically drawn substantial private equity investment. Uncertainty over the impact of AI agents on established business models brought software dealmaking to a near standstill earlier this year, according to the report. Patel said software had shifted from overcapitalised to undercapitalised from an equity perspective. Permira, which had previously allocated as much as 30% of its investment activity to the sector, has not completed a software deal in the three years following the launch of ChatGPT.
Patel cautioned against assuming other industries would be shielded from technological disruption. As investors concentrate capital in sectors perceived as less exposed to AI, he warned that competition for suitable assets could intensify.
Patel contended that higher interest rates, while difficult for existing portfolio companies and sellers, could benefit buyers by lowering acquisition prices to more attractive levels. The comments come against a backdrop of a prolonged slowdown in exits. Subdued IPO activity and elevated borrowing costs have made it harder for firms to sell assets at targeted valuations. Many investors acquired businesses during the era of ultra-low interest rates and have been reluctant to accept lower prices, which has constrained distributions to institutional investors and limited their ability to recycle capital into new funds.
Artificial intelligence is also reshaping investment strategy, particularly in software, a sector that has historically drawn substantial private equity investment. Uncertainty over the impact of AI agents on established business models brought software dealmaking to a near standstill earlier this year, according to the report. Patel said software had shifted from overcapitalised to undercapitalised from an equity perspective. Permira, which had previously allocated as much as 30% of its investment activity to the sector, has not completed a software deal in the three years following the launch of ChatGPT.
Patel cautioned against assuming other industries would be shielded from technological disruption. As investors concentrate capital in sectors perceived as less exposed to AI, he warned that competition for suitable assets could intensify.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.