Trends Watch: July 6, 2017

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks to Mike DiPiano, Managing General Partner, NewSpring Capital.

What is your outlook for private equity?

From our perspective, the private equity industry is a little more temperate than it was a year ago, but it’s still a challenging environment from a valuation perspective. There continues to be a tremendous amount of capital available, however, the highest bidder does not always offer the most value to a company seeking funding. We believe it is essential to differentiate ourselves by adding exceptional value to our transactions through operational expertise. This approach allows us to be competitive, while still remaining selective and disciplined, especially as valuations continue to remain high.

What is your outlook for the economy?

We partner with companies that are defensible in all economic cycles, regardless of what the outlook might be.  We seek to invest in companies with operating models and cost structures that are nimble enough to weather a downturn and whose services can thrive in any economic environment.  As to the economy, we all know that we are effectively running at full employment, yet inflation remains low.  We expect the Fed to continue to raise rates, but in a measured manner.  We also expect the growth of GDP to be in the 2 to 2.5% range for the next 2 or 3 years.  Our strategy is to invest in solid, growing companies.

What keeps you up at night?

Our biggest concern is making sure we are being appropriate stewards of our investors’ capital.  Years of proven results have earned us trust, and we work tirelessly to keep that trust. I always say that our 2 biggest assets are our time and our investors’ capital – you can never get those back. Therefore, it’s our duty to operate efficiently while also doing our due diligence to ensure we are making the right decisions for our investors. Another concern that is always top-of-mind is execution risk.  We provide a platform of strategies, 2 of which focus on late-stage growth; when you’re bringing companies to scale, it always comes down to execution.  As we manage and mitigate these risks, we seek to take advantage of our value proposition as former operators in order to truly take advantage of a specific market opportunity.