Spotlight On Podcast
Spotlight On Podcast
Spotlight On with Bridget Walsh, Global Head of Private Equity at EY
In this episode of Spotlight On, we sit down with Bridget Walsh, EY's Global Head of Private Equity (PE), who takes us through PE's remarkable journey, drawing on her vast experience leading PE professionals across 45 countries.
Bridget reveals insights about the current state of private equity, highlighting that 78% of firms are holding assets beyond their typical investment horizons, creating what she describes as "a pent-up wall of exits" awaiting the reopening of IPO markets. We talk about the heightened focus on strategic exit preparation, with firms increasingly investing in data readiness, management team preparation, and clear exit roadmaps.
The conversation explores technological disruption, particularly Generative AI. Bridget presents a thought-provoking hypothesis on private equity's technology adoption, also talking about regional investment and vividly depicts the increasingly interconnected global capital ecosystem. Certainly not one to miss!
Welcome to Spotlight On, the must-listen podcast series where visionary leaders, global executives, trailblazing entrepreneurs and top-tier experts come together to share their inspiring stories and tackle the hottest issues facing businesses today, brought to you by the Barton Partnership, an award-winning global talent solution organization. We specialize in executive search, independent consulting and consulting solutions from strategy through to execution. Our mission to help businesses accelerate their growth by connecting them with world-class strategy and transformation talent. Tune in and join us as we shine a spotlight on the game changers and thought leaders who are shaping the future of business. Joining me today I've got Bridget Walsh.
Speaker 1:Bridget Walsh is EY's Global Head of Private Equity, where she leads a team of PE professionals across 45 countries, advising on the most prominent global PE deals. She is widely recognized and respected across the PE industry as commercial and influential leader. Since joining EY 25 years ago, bridget has developed and grown several successful businesses, currently incubating a sports PE offering and a PE global gen AI practice. Bridget sits on the board of British American Business and chair of their REMCO committee. She's chair of the Island Funds of Great Britain, a prestigious global philanthropic network that raises funds to support Irish communities around the world and is deeply engaged in promoting international business and she is the host of EY's Next Wave PE podcast series. Bridget, great to have you here. Thank you for joining me today. I'm really looking forward to this discussion. How are things with you?
Speaker 2:Thank you very much, Nick. It's lovely to be here with you.
Speaker 1:Let's start with you. Let's talk about you. Tell us about your career history today.
Speaker 2:I've been really fortunate. I've had a really entrepreneurial career under a great brand, at EY. You know I joined EY over 25 years ago and my career has always been in private equity.
Speaker 1:Right From day one.
Speaker 2:From day one. From day one.
Speaker 1:Wow.
Speaker 2:Yeah, and private equity was just in its heyday back then. So I've seen this industry develop and grow and also, as you and I've talked about before, the amount of change we've seen in the last 20 years. I've gone from having the most important team being the team sitting around me in London to, you know, it's now serving some of our global clients. It's just making sure you've got teams everywhere around the globe to serve them. So phenomenal change, phenomenal growth, both within professional services and EY, but also in the private equity industry.
Speaker 1:And you still feel that EY is in it. I mean, we'll get into this in a lot more, but EY is continuing to evolve its proposition to serve that market. Well, in that time you look back 25 years to today, it must be night and day. Now it is night and day.
Speaker 2:You know, 25 years ago the industry was just starting off here in London and you know they were coming to us at the start looking for financial diligence, as they were doing deals and the deal sizes. Do you remember when we moved from millions to billions yes, crazy. And the deal sizes Do you remember? When we moved from millions to billions yes, crazy, so you know we had them coming to us back in the day.
Speaker 2:We were really working hand in glove with the industry as it's evolved and I think, again, that's been the beauty of these roles, because we've evolved with our clients and we saw the industry move from, you know, small industry in London, london having a key role globally, the US funds coming in, and for me personally then I had a role with the Canadian funds, going over to Canada on a regular basis and then watching those clients as they came in and established their base in London. I'm doing a similar thing with Middle Eastern funds at the moment.
Speaker 1:So you are global head of PE for EY. What does that actually mean? What is your role? So you are global head of PE for EY. What does that actually mean? What is your role?
Speaker 2:So in terms of my role, that really involves leading a team of private equity professionals across 45 countries to advise on the most prominent private equity deals. So in essence, if you think of all the big global funds, nick, it's making sure we have the right teams, firstly to advise them on the deal. So everything from financial diligence, tax, operational diligence, strategy and then increasingly now in this era of value creation, the post deal. As you know, once private equity buys a business today, they'd be very lucky if they get a high multiple on exit without being very interventionist. And the opportunities you and I have talked about is that value creation plan, everything around that. We've been building out our teams globally to support our clients on that and staying with them all the way through to exit.
Speaker 1:And, as you say, that value creation aspect is again a new evolution of the private equity market. But you fell into private equity 25 years ago or you. It wasn't something you would have opted for necessarily would you have known about it?
Speaker 2:very good question, so I had um trained in tax right um, and I always say tax was a great seat at the table. Yeah, because the importance of structuring deals. And then within tax, I'd moved to help entrepreneurial companies as the compliance trade was building. What I loved doing for those entrepreneurial clients was deals. So then EY was setting up a transaction tax business in the late 90s and I joined that team when there was 12 people in it. It did a mix of corporate deals.
Speaker 2:I started doing some big corporate deals and then, as private equity was taking off and I started to meet the funds, hear about their plans and started to really work on EY's relationships from a very early stage in my career. I suppose there's always a bit of a lull and that was a great place to be and I just love those clients. They were doing really interesting things, groundbreaking things, as they have been all throughout my career. So I started working in private equity, as I say, providing some of the basic services, and then that evolved to a lot of different parts of the private equity toolkit. So, for example, in EY, I discovered we had a hundred million pound insolvency business that sort of picked up the phone to the last person in tax and then, very quickly, working with them, I built a 10 million pound tax business serving the insolvency market and that evolved into a distressed business.
Speaker 2:So in 2009, when the cycle changed, I worked with a lot of the distressed funds here in London and in the US and helped EY build out that business, and actually tax was an interesting part of that toolkit for them because when some of the debt was released it created major tax exposures. Actually, the tax side of our business and as it has always been for private equity has been really interesting. I took that specialism but always had a private equity relationship focus and then over time, as I've had different leadership roles within EY, my client base has always been private equity and, as you know, that's a fascinating world to operate in?
Speaker 1:Yeah, completely. And now, as you say, your role is to sit across all the areas, making sure that there is alignment and a service offering that supports all of your clients' needs across all the areas, globally, correct, so you must be traveling a lot.
Speaker 2:There is a lot of travel there, Nick. If I look at the last two weeks and it's probably you know a representative sample I was in the Middle East. I visited four cities in five days there. And then I was in the West Coast, in Beverly Hills, at the Milken Conference, where once a year that is a fantastic conference, you know.
Speaker 2:Right, Okay, yeah, and all of our funds and the CEOs of the funds tend to be represented alongside government and a lot of other great thinkers, so it tends to be a fantastic event and we find it very valuable at EY.
Speaker 1:What was the sentiment there? What were people saying? Was it positive? Is there optimism? What did you take away from it?
Speaker 2:I think there was a little bit of muted optimism, particularly around the US market, because it was before the trade deal with China was announced last week. But overall, you know when I think of my panel, there was a lot of optimism around the opportunities. I feel that the IPO market is going to come back. Nobody quite was willing to place their hands on the crystal ball there. Talk about corporates coming back in and having a lot of interest in the portfolio, some of the funds seeing it as a real buying opportunity. You know, on that side of it, as some of the stock markets had came down, they saw a lot of opportunity for public to private. And then I would say the theme of the conference. The sessions that were packed out were around Gen AI and you know I have a hypothesis on this, nick, and I'm seeing it in the firm that PE, because of their interventionist nature and the three to five year hold period, will move faster than normal corporates on this and that was definitely the mood music.
Speaker 1:They want to accelerate it, don't they Correct?
Speaker 2:You know, again, the essence is particularly within the portfolio, if you can eke out those productivity savings in particular, and also maybe some top line enhancements with using Gen AI technology and realize that multiple on exit. And I've sat at another conference where I've had some chief operating officers say once someone does that and we see a sale go. And it's really been. Gen AI has driven those multiples. The pressure that's going to come across the whole industry is going to be huge around this. As you'll know, nick, some of our big clients, even for the last two years, have had Stanford professors having weekly calls with them on this. You know our clients by nature. They've seen what the opportunity is and I really feel it within Gen AI and that's why at EY we've really been building out our service offering around Gen AI, finding some tangible products that will really make a difference.
Speaker 1:It's exciting to think about the art of the possible, but there's still that question mark around what is possible, isn't there?
Speaker 2:We are seeing a lot of very tangible solutions. Now you know it's gone from the hypothetical to the real. You know whether that's great call center technology that we've already introduced in the insurance sector to some good reporting technology. It's starting to become very real. And then, of course, at EY, we call it client zero, as we're disrupting ourselves and bringing Gen AI into our own business. Our private equity clients are very interested in hearing that story.
Speaker 1:How they're leveraging themselves. Yes, exactly, and I think that's what people want to see.
Speaker 2:Our clients tend not to be very theoretical. The private equity industry is very real, very focused on exit and the outcome.
Speaker 1:Let's talk about the current exit environment and how really we're seeing that shape future strategies in 2025, particularly for aging portfolio companies. Ey's reports have gone into some detail around this, but what are you seeing there? What are you seeing as how the current exit environment is shaping future strategies?
Speaker 2:Private equity funds are laser focused on returning capital to their investors, and our private equity readiness survey finds that 78% of private equity firms report holding assets beyond their typical investment horizon. And we're working very closely with funds to really get their portfolio companies ready and to make sure that they've got a clear exit roadmap. They're getting data in order, they're preparing their management teams and more than 90% of the firms we surveyed said that taking these kind of steps lead to better exit valuation. So huge focus in the industry on exit at the moment.
Speaker 1:You're saying 78% now are really sort of extending that hold period beyond that.
Speaker 2:You know from everything you read and speaking to your clients, Nick, we do have a pent up wall of exits. We need the IPO market to reopen, which it will do, and I think once that starts to happen, we're going to see a lot of exit activity.
Speaker 1:Now the report that EY produces also highlights growing competition from private credit. How are traditional PE firms adapting to that shift?
Speaker 2:As you know, the private credit industry is growing tremendously, with assets under management of about 1.8 trillion today like a three-time increase and a lot of our private equity funds have built their own credit arms now and we're just seeing that in the market. Many of the largest PEs PE funds are now the largest credit providers. It's a very complementary asset class and it provides a flexible source of funding for a wide variety of use cases. We're also seeing private credit firms partnering with traditional lenders to create new lending pools. Firms partnering with traditional lenders to create new lending pools.
Speaker 2:Citi for example, just partnered with Apollo on a $25 billion direct lending platform. So again, the creativity and flexibility of this industry, as the market evolves, to respond has been huge.
Speaker 1:And how are LP's expectations evolving, especially around value creation in ESG? How is that influencing what we're seeing?
Speaker 2:Limited partners know that private equity is a better place to deliver good returns when societal and shareholder values are aligned and a lot of the.
Speaker 2:LPs. When you come from the base of their pensioners and the pension funds that they're representing, this is a genuine key objective for them and is increasingly a big part of what they're monitoring as they invest in funds. One of our recent EY studies showed that funds that are excellently positioned on the ESG map can realise internal rates of returns of up to 8% higher than their competitors. This has gone from something that's a nice to have to something that's a business imperative Again for some of the portfolio companies. Their customers are demanding it, their LPs are demanding it. So I think again it's front and center. As we at EY are advising on deals, again some of our funds want to see a red flag report on ESG before they even take it to investment committee, because if it's not going to pass some of those hurdles it's just not investable. So you know it's gone right up the agenda, nick.
Speaker 1:And what about sectors that are unexpectedly resilient or attracted to PE in this macro environment? What are you seeing from that perspective?
Speaker 2:When you look at all the change that's happening in the world, you'll always find hot spots and again it was interesting. On the panel I hosted at Milken you had investors across numbers of different asset classes and within those funds again, and that's what we see with our client base you get lots of activity, even when other parts may be more muted, and some of those at the moment I would say are aerospace and defence, especially in Europe, given everything that's happening.
Speaker 1:Yes.
Speaker 2:We're seeing increasing number of funds. I don't know if you've noticed this launch mid-market fund.
Speaker 1:Yes.
Speaker 2:Technology, I mean, with all the disruption that's happening, tech remains really hot for us, as does health care.
Speaker 1:It feels like health care has dropped off a little bit post-COVID, but you still feel that that's coming back or we'll start to see a little bit of life back there again.
Speaker 2:Yeah, and again, in all these sectors, it's which sub-sectors are hot Elderly care, different diagnostics, care at home, even while some parts of a sub-sector and I think it's a good point, nick, you know might be a little bit more muted, you'll find other trends within the same sector. A little bit more muted, you'll find other trends within the same sector. And increasingly I don't know if you've been doing the same we just are building out more sector and sub-sector expertise within EY. It's that combination private equity is looking for of the skill set of financial DD or tax, but that coupled with our sector expertise, because that's where you bring the real insights and on the value creation upside.
Speaker 1:Well, I think client needs becoming more sophisticated in the fact that they're not just looking for the toolkit, they're looking for the experience that complements the toolkit, and bringing that together, as we say, is quite a powerful mix.
Speaker 2:As two experienced individuals as we increase with years. It gives us some hope, doesn't it? Yeah, absolutely.
Speaker 1:But let's talk about that. As you and I have talked about, we've seen a big focus in operational value creation. I mean that really has been at the heart of what the Barton Partnership has been focused on. Within the private equity world, what are you seeing from your perspective at the moment in terms of specific capabilities or models that funds are using?
Speaker 2:Yeah, and if you remember, you know, if we go back 10 or 15 years, there was a few funds who were seen as quite operationally focused and had operating partners. You know, I remember doing a deal gosh about 15 years ago when the normal private equity guys were driving the deal and there was this real tension between them and the operating partners, whereas you know, it's just come full circle, I think, where operating partners are now a key part of the investment committee decision, the hypothesis, and seen as central to delivering the returns. And again, you know, if I come back to one of our recent surveys, we found that firms with more operating partners tend to hit their return targets more consistently 77% of the time In fact. I don't think that comes as a surprise. I think most funds now are focused on that. I don't think that comes as a surprise. I think most funds now are focused on that. We've seen a shift away and it'd be interesting if you've seen the same from hiring ex-CEOs and just generalists to much more functionally orientated resources. Is that what you're saying?
Speaker 1:Yeah, exactly, and I think then the alignment between those functions and the CEO or the CFO Is increasingly important, and then you mentioned CTOs.
Speaker 2:This is an increasingly important skill set. We talked about Gen AI. We talked about the importance of tech in so many businesses now. I mean, one of the first questions we often get is will this business be disrupted by Gen AI, or is this a huge upside for it?
Speaker 1:Yes, and that's just that's almost the first question, it is almost the first question.
Speaker 2:It is almost the first question that's built into the diligence, that's built into the value creation plan. So then you need good CTOs to deliver that, as we were talking about and I know you're building that part of your business as well. We're building those skill sets increasingly in our value creation teams and EY around the globe.
Speaker 1:And, as you say, the whole concept of having a portfolio team, a value creation team, has certainly grown in the last few years. Are there any funds that you've seen that are doing it really well? What does good look like, I guess? Or is it specific to individual funds and their needs and their portfolio?
Speaker 2:I think there's always an individual element, because different funds have their own focus, but I think, in terms of what good looks like and this has been an evolution it hasn't necessarily been an easy thing for some funds to get right.
Speaker 2:But I think what good looks like is where the operating partner teams have a real seat at the table where they are genuinely involved in the deal. I think if they're sitting to one side and maybe there's a question about whether they get carry on the deal or don't, I think that lack of alignment can be a challenge. So I think when you've got alignment around incentivization, around the business plan for the portfolio company, where the operating partners are involved in all the decision making from day one on the deal and taking that value creation hypothesis to investment committee with the deal doer's hand in love, I think that's where it works best.
Speaker 1:One of the pieces of research we've recently completed showed that the alignment between the team and the CEO is perhaps more important than the alignment between the team and the CFO. I don't know if you agree with that or if you've seen any examples of that, but the CEO role has become, again, not more prominent but is seen as being key to success in value creation, more so than CFO at the moment.
Speaker 2:You know that it's always been a balance between the private equity fund and portfolio company management.
Speaker 2:You know, whilst the fund will agree the business plan and the plan for the business, they often want to leave the management team autonomous to run the business. It's always a fine balance between how value creation and consultants can work with the CEO and the leadership team. So therefore, I think to your point. It's not surprising that it's important that the CEO really buys into the value creation team what they're doing, the individuals etc. And that relationship is key because ultimately, if that doesn't work, it all falls apart. So I'm not surprised by your research.
Speaker 1:Let's talk about regions or markets that PE firms are prioritising in 2025. What are you seeing from that perspective? What's EY's view on that right now, and why?
Speaker 2:I visited Japan quite recently and it was just phenomenal to see the pace of change in private equity. It shouldn't be surprising. Funds focused there raised about $9 billion last year. Just to focus on Japan. We're seeing that demand on the ground. We've really built out our teams there and almost can't build them out fast enough to meet the demand from our global funds. That's a really interesting spot for us at the moment. India we've got a very strong team there and India's poised to seize new opportunities and partnership amid a changing geopolitical landscape. And then, as I mentioned, I'm just back from MENA and, nick, I know you've been doing some work there as well.
Speaker 2:The pace of change there is phenomenal. So we're working very closely with our team and, again, we built out our EY team in MENA, firstly on the ground to serve as the funds there in terms of what they are doing in the region, but also as they deploy capital globally. You know, if I think of one of the funds in particular, they've built a strong operating partner bench in New York. So it's important, then, that we have the teams there to face off. So I think the MENA opportunity is both within the region but also their outbound capital. And I think, nick, we talked about this before.
Speaker 2:I sometimes come back from one of these trips and want to draw a spider diagram on a board, because I'll go and meet a sovereign wealth fund. They're invested in the GP here of one of my clients in London. At the same time, they're competing for assets directly here and it's just such a web now, interconnectivity of capital, and it's so important for us to be engaged at every level of that ecosystem, because that's how we bring the best advice to our clients at all levels. You still love it, oh, absolutely.
Speaker 2:I mean, there's no better environment you know private equity clients. Ecosystem, because that's how we bring the best advice to our clients at all levels. You still love it. Oh, absolutely. I mean, there's no better environment. You know, private equity clients, demanding, but intellectually so interesting. The pace of change, the dynamism, it's just phenomenal. And the gold dust is when we spot a deal, opportunity and we're able to take it back, that reciprocity and we've been building out our origination teams as well to be very relevant.
Speaker 1:Side question how do you switch off? Do you switch off Because your role is global. You could almost argue it's 24-7, given the different regions you work in. How do you switch off?
Speaker 2:Well, I have a great team. I have a fantastic team around the globe and a lot of us like-minded who've grown up in the business and then, as we brought other people in, there tends to be that real passion for private equity and we get to do some really fun stuff within that business. Like recently we've incubated a sports team. So as the opportunities arise you find them and, as you can imagine, lots of people in EY want to work in that sports team and in fact I was on a call with our EY athletes team yesterday where we have ex-Olympians in the business and of course that really brings something different to our clients. I'm the mother of two teenage girls. That definitely keeps me busy. So when I'm not busy at work I'm ferrying them around North London, sometimes, you know, sitting on the grass in Hyde Park at concerts. They keep me very young, nick.
Speaker 1:And you keep the phone away from you. I keep the phone away from me. Yeah, how is dry powder influencing deal discipline in 2025? Then? Is it still a pressure point or becoming more for strategic reserve?
Speaker 2:Private equity funds have about 1.6 trillion in dry powder. I would say it's not a lack of dry powder. A lot of our firms, you know they're disciplined and sensible, so it's how they deploy that dry powder. You know they've seen what's happened, maybe in some other cycles. The dry powder is not an issue, it is there. It's more firms deciding when is the optimum time to deploy it. The other thing I would say is this opportunity around the retail market is huge. You know, thing I would say is this opportunity around the retail market is huge. You know there's trillions of dollars sitting in people's own pension funds, in their own ISAs and savings accounts, and we're seeing the industry now find technological and other solutions to be able to access that over time, just going to multiply the dry powder that's going to be available to this industry.
Speaker 1:Well, look. Final question, looking ahead, what do you believe will define the winners in PE over the next 12, 18 months, based on this year's findings with EY?
Speaker 2:Again, I believe PE will continue to win. It's a very resilient industry. I think maybe what will differentiate one front from another is probably the willingness to lean in amid the uncertainty.
Speaker 2:Who's going to step in, because there will be opportunities there. Again, when I come back to our survey, nearly three quarters of firms reported that their firm's risk tolerance is higher than average, suggesting that many will use the market dislocation to capitalise on potential mispricings and other opportunities. So I think we will see an uptake and deal activity. People have been cautious. It's been muted. I think, though, it will be in certain sectors, as I mentioned, and with a lot of analysis underpinning it.
Speaker 1:Bridget Walsh, thank you for coming in. Look forward to the year ahead. Look forward to supporting and working with EY as well.
Speaker 2:Thank you, Nick. Really appreciate you inviting me to join. It's been a great pleasure. Thanks very much you inviting me to join. It's been a great pleasure. Thanks very much.