Asked how his firm was coping in “hyper-competitive” market conditions, PDI New York Forum keynote speaker Lawrence Golub said things could be a lot worse. “Imagine what it would be like if [Senator] Warren gets her way and the private equity industry is squashed,” he said.
He added that a Democratic president and Senate could bring a “significant” increase in tax rates and said “I think you have to worry” with an impeachment process against the President having been launched. “Anyone who thinks Warren or Sanders could not possibly be a nominee is wrong,” he said.
But far from having a downbeat view of current conditions, Golub provided the Forum with an early view of his firm’s third-quarter survey of portfolio company performance. This showed Golub’s companies delivering a revenue increase of more than 10 percent and EBITDA increase of more than 13 percent during the quarter – the highest rate of EBITDA since the survey was first conducted.
He said healthcare companies in particular had shown outperformance over the last three quarters relative to the previous four years. However, he put this down to the prior underperformance of healthcare businesses as they struggled to keep costs under control. There was some “catch up” going on, he said. Industrial companies, meanwhile, have been having a hard time due to labour cost increases.
Golub said diversification was key to avoiding downside risk and said it was important to diversify in all sorts of ways including by industry and private equity manager. However, the firm intends to retain its focus on North America as “so much of Europe is controlled by banks and ultimately by sovereign governments”.
As a leading protagonist of unitranche deals, Golub was asked whether the size of individual deals would continue to grow. He said the limiting factor would be the point at which these deals needed to be syndicated – at which point the value of negotiating with just one or a small number of parties would be lost.