Who will win the consolidation race in private markets?

The long-predicted consolidation of the private capital industry has started in earnest and media commentators are intensifying their quest to identify the likely winning firms. 

Barely a week goes by without a new announcement of a significant acquisition or tie-up designed to expand AUM, geographic reach or asset diversification. The two acquisitions of note in January so far are that of secondaries specialist Coller Capital by EQT for $3.7bn and that of US private credit specialist by CVC for $1.6bn, which confirm the continuing attractiveness of secondaries and credit strategies. These also follow a series of announcements about new strategic partnerships designed to increase access to more permanent sources of long-term capital, including tie-ups with large insurance partners, such as CVC’s partnership with US insurer AIG. 

This wave of activity creates the opportunity for amusing headlines including the FT’s “Private equity make deals - with each other” continuing on the past few years’ criticism that firms have been operating in an increasingly closed eco-system selling private equity and credit assets back to themselves. It also leads to the question of what will happen to smaller firms, and which ones might be left behind in this accelerating global race to scale. 

To answer that, reporters have been scrutinising fundraising databases with renewed intensity to spot which firms may have fallen behind on their historical fundraising cycle. This has been uncomfortable for smaller, less diversified firms without the ability to redirect their efforts towards faster growing asset classes or geographies. 

Meanwhile large, listed firms with multi-strategies, global fundraising platforms and acquisition firepower have been having a much better time with data showing that larger GPs have been taking a significantly bigger share of LPs capital than was previously the case. Evidently both EQT and CVC belong to that latter group. 

Although both firms are notable in that they share deep European roots, have a public listing and are aggressively going global, their communications approach could not have been more different historically. EQT, perhaps because of its Nordic roots, stood out very early as a pioneer of transparency and was one of the first private equity firms to embrace brand building, including striking non-blue corporate colours. CVC meanwhile decided to stay largely off record and as far as possible off the public’s radar. 

Both firms have been phenomenally successful, becoming market leaders during the years of high growth for the industry. However, it is worth considering whether a low-profile approach to communications is still viable today for private markets funds who want to win this highly competitive race to scale and reach out to new types of investors. As is becoming routine these days, and mirroring what less sophisticated investors might do, we decided to ask Copilot what its views were on the likely winners and this is what we got: 

The winners will be: → Global, multi-asset-class platforms with scale, diversification, deep operational infrastructure, and access to permanent capital. 

These include: 

• publicly listed or quasi-institutional GPs 

• firms acquiring specialised PE/credit/infrastructure franchises 

• managers with advanced AI/process capabilities 

• platforms with internal secondaries and liquidity tools 

They are set to become the “BlackRocks of private markets”: fewer, bigger, more diversified, and systematically preferred by large LPs. 

This was a fascinating response to us for one reason – the mention of BlackRock in the last sentence. In a world where AI is becoming the greatest influencer of them all, it singled out Blackrock as the brand of reference. A good reminder that we are now a world apart from the environment in which the private equity industry grew up. This reinforces our belief that funds which consistently invest in their brand can, and will, develop a significant competitive advantage.