Private equity managers "are more mindful about the businesses they buy and view them more holistically, identifying things that should be fixed," said David Fann, senior managing director and vice chairman of Apogem, in an interview.
One example is worker safety in a factory, which might not have been something a private equity firm focused on in the past if it was strictly buying a business based on its financials, Mr. Fann said.
"Some of these issues are now being identified because ESG considerations are now becoming integrated in their due diligence," he said.
Meanwhile, most private equity managers (60%) that responded to the survey said fundraising is more difficult though still possible, increasing from 39% in 2021.
"That sentiment is one of the numbers that might be higher now in the first quarter," Mr. Fann said.
Some 102 middle-market private equity managing directors and partners responded to the survey, which was conducted in the third quarter.
"2022 was expected to be the year of the re-up, but most firms weren't successful in hitting their fundraising targets,"Mr. Fann said. "Those firms have rolled their fundraising into 2023 and are now competing with firms that had scheduled to raise their funds in 2023. So there is now a crowding effect."
This is the worst fundraising environment since the global financial crisis, he said.
"We might be in the best buying environment we've seen in the last decade. But it's going to be a disappointing year for those trying to raise capital," he said. "For many investors, allocations to private equity have diminished due to the denominator effect and many investors are focusing only on managers already in their portfolios rather than new ideas."
