Tania Daguere Lindbäck is a Managing Director in the Private Equity Group, and has been associated with Blackstone for over a decade. In her view, one of the keys to successfully conducting a buyout is to be selective on the deals to be pursued.
Leaders League. Does being a woman give you an edge in the private equity world, an industry considered to be dominated by men, or does it add to challenges?
Tania Daguere-Lindbäck. It is a bit of both. Being a woman does give you an edge as you tend to stand out and can be easier to remember. Depending who you are meeting, it can on occasions be a bit of a challenge, albeit not an unsurmountable one. At the end of the day, the only thing that really matters is getting the job done.
Leaders League. In your view, what are the secrets of conducting a successful buyout?
T.D.L. The private equity market is very competitive, multiples can get inflated and it can be difficult to find a company to buy where we are not in competition with someone else. So we try to be selective when it comes to deals we want to spend time on.
We are also price disciplined, so when we find a company we would like to invest in, we try to find angles or upsides that allow us to gain insight and help us to be more competitive. This can range from a company’s add-on acquisition potential, the ability to expand into other markets and a differentiated view on the market or growth cycle.
Backing a good management team is also key. We have made good returns investing in companies in difficult, volatile sectors by backing a strong team with a differentiated strategy or the ability to adapt when the environment they operate in changes.
Leaders League. How important is diversification, both in terms of sector and geography, for private equity funds?
T.D.L. It is important, both from a deal generation and fund performance perspective.
From a deal generation perspective, it allows you to adapt your investment strategy depending on where you are in the cycle, for example investing in less cyclical businesses at the peak of a cycle. The same holds true in terms of geography. Whilst Europe is typically a quarter to one-third of any of our funds, the allocation may vary through the cycle depending on the deal environment in Europe in comparison to other regions.
Having said that, it does not necessarily mean you need to cover all sectors and all geographies – some markets or sectors generate too limited a deal flow to justify having a dedicated team solely focused on it.
Leaders League. Blackstone is a leader in the private equity space. It is said that the firm’s success is driven by its open work culture. Could you elaborate on this?
T.D.L. We pride ourselves on having a very open work culture. An example of this is the Monday morning meetings which are an institution at Blackstone. All global teams gather every Monday to discuss the live deals we are working on. This includes New York, London, Mumbai and Asia. They provide a forum to discuss deal situations as well as an update on the general market and deal environment. These meetings are important as they help to provide a broad view of what’s going on across all sectors and regions, as opposed to being focused on the day to day of one’s own market or sector.
Similarly, on deals the full deal team participates in investment committee discussions. Everybody is expected to have a view, and deals tend to be intensely discussed. Decisions are not made behind closed doors but in an open forum and debated at length.
This has the benefit of ensuring both a transparent process and an opportunity for everyone on the team to participate in the debate and the decision-making process.
And finally, despite the fact that we have grown so much in the past decade, most people have been at Blackstone for a while which has allowed for continuity of culture.
Leaders League. What is Blackstone's investment strategy in terms of allocation to important countries in Europe. The firm has presence on the ground in the UK, France and Germany - is this sufficient to cover deals across the entire continent?
T.D.L. We have offices in the UK, France and Germany but most of our deal team is based in London. We do cover all of Europe (Western and Eastern Europe) including Scandinavia from our London office and it has worked well for us up till now. We have done deals in the UK, France and Germany of course, but also in Spain or Italy where we do not have an office. For the size of deals we look at, we have not found it necessary to have a local presence to attract deal flow.
It is obviously helpful to have French people when you look at a French deal, Germans for a German deal, etc. We are well covered in this regard as we have professionals from most European countries in our deal team in London.
Leaders League. What are the other differentiating factors that give Blackstone a competitive advantage over its peers?
T.D.L. Mainly, the ability to work across teams. Blackstone has a diverse global business platform which encompasses private equity, a tactical opportunities team, real estate funds, hedge fund solutions, and credit funds. We also have teams in the US, Europe, Asia, India, and Australia. This gives us an edge in terms of having the ability to look at deals from a different perspective or in different parts of the capital structure, as well as allow businesses we invest in to leverage our global footprint and expand into markets they don’t have access to.
Leaders League. Does the ever-increasing complexity of regulations and tax laws have an impact on the acquisition strategy? How much does ESG matter for Blackstone?
T.D.L. Both are important. I used to be on the Board of Center Parcs (the short break holiday operator) in the UK, and ESG matters constituted one of the company’s top priorities given they operate in woodland locations. And for the firm, ESG is a top priority.
Regulation and tax laws are increasingly important as they affect both the flexibility and the costs of running a business. The increasing complexity and changes in regulation and tax laws require our continual focus on these matters, whether it is when we structure a deal or during the course of our investments.
Leaders League. For the UK private equity industry in general, and for Blackstone in particular, does Brexit bring more challenges or opportunities?
T.D.L. In the short term it brings uncertainty which may impact transaction volumes. In the medium to long term, when there is more visibility on the status between the UK and the EU, investment opportunities should return.
Volatility can generate good investment opportunities for the private equity industry.
Leaders League. Blackstone has raised a Core Fund. The fund is meant to hold investments for longer than the typical three to five year period. What are the reasons for this change in investment strategy and is this likely to be seen in upcoming funds?
T.D.L. First, the investment horizon for our private equity funds is usually five years or more, rarely less than that.
With regards to our core fund, our model is to invest in lower-risk companies for an extended period of time. These are sizeable and resilient businesses, potentially with a global presence and brand. These deals can generate attractive risk-adjusted returns that justify a longer hold period.
Affan Bin Mahmood