Yann Robard - Liquidity Solutions for Private Capital at Dawson (EP.392)

Performance

Yann Robard highlights the superior performance of private equity over public markets, attributing it to strategic governance and long-term focus. He explains that private equity often buys well and adds value during the hold period, resulting in better exit multiples. This approach contrasts with public companies' focus on quarterly earnings, which can hinder long-term growth 1. Robard notes that private equity's governance model aligns management, shareholders, and beneficiaries, enhancing operational value 2.

Generally speaking, on average and over the long term, private equity has done better than public markets.

--- Yann Robard

This alignment allows businesses to improve and secure better multiples upon exit.

   

Valuation

Robard addresses the criticisms of private equity valuations, emphasizing their consistency and rationality compared to public markets. He argues that private equity is often undervalued, with exits showing significant gains over initial valuations 1. Even companies held for extended periods exhibit valuation pops, challenging the notion that private equity is overvalued 3.

There is a 28% gain at exit, which suggests that private equity is undervalued, not overvalued.

--- Yann Robard

Robard contrasts this with public markets, where multiples have fluctuated significantly, questioning their rationality.

   

Governance

The governance model in private equity is pivotal to its success, according to Robard. He explains that private equity's focus on long-term value creation, rather than short-term earnings, allows for strategic improvements in businesses 2. This model fosters alignment between management and investors, leading to better outcomes at exit.

If you got a better governance model, where private equity can add operational value to these underlying companies, where there's more alignment between the management team, the shareholders and the underlying beneficiaries, then what you have is you have a situation where businesses can get better on exit.

--- Yann Robard

Robard also highlights the role of secondary markets in providing liquidity, balancing the needs of general and limited partners 3.