Connect with us

Wealth Management

PRIVATE EQUITY – RESILIENCE LEADS TO OPPORTUNITY

Published

on

Philip Dakin (Managing Director) Restructuring advisory, Kroll.

 

As the UK enters the summer months and certainly at the time of writing, the vaccine roll-out looks to have had the impact needed to push COVID-19 off the news agenda and get the economy moving once more, the private equity market remains strong.

The core fundamentals that power the market remain. Not only is there a huge pent-up demand but also debt markets remain positive in terms of both leverage and the cost of financing.

According to Preqin’s 2021 Global Private Equity and Venture Capital Report, the global private equity market is now worth over $4 trillion1 . The UK, long the most developed private equity sector in Europe, remains at the centre of this trend. However, as we come out of lockdown there are two sides to this picture—the dry powder available to private businesses, and the impact the pandemic has had on private equity vehicles.

 

Philip Dakin

When Supply Meets Demand

COVID-19 has been without a doubt one of the biggest challenges ever to confront the economy. No more so than for the private sector. However, for businesses, both large and small, government support has been available in the form of loan schemes, the job retention scheme (aka furlough) and moratoriums on rent and HMRC liabilities.

While cash flow may look strong today, the rollback of government support will start within months, and for some, pressure on balance sheets will follow soon after. This is not to say that the financial pressures facing businesses will drive many into insolvency but dealing with an increase in working capital requirements is a challenge facing many business owners in the short term.

Potential changes to capital gains tax are also beginning to focus the minds of many business owners who may now see this as a time to invest or indeed sell.

For many, public ownership has fallen out of favour as an exit strategy, and selling to a competitor, especially in the current circumstances, can have its own business risks. The private equity market has been the beneficiary of a trend that has been happening for over a decade following the last great economic shock of 2008.

With the supply of investment opportunities looking healthy, what does the demand curve look like?

As mentioned previously, there remains a high level of market liquidity and a strong desire from funders to invest in quality businesses, with private equity funds—a continued firm favourite route—to market for institutions, family offices and high-net-worth individuals. In other words, there is lots of opportunity for investment and acquisition. This has already been demonstrated, with global M&A activity in Q1 2021 being at its highest for over a decade.

However, whilst there is plenty of dry powder, the stage at which a private equity fund was in the normal fund lifecycle when the pandemic hit, will have a potential impact on the success of that fund and its ability to raise its next fund. How the portfolio of investments within a fund have been managed through the pandemic and how they recover post-pandemic will be crucial.

 

Portfolio Resilience

PE firms themselves have faced their own unique issues as a result of the pandemic. Funds briefly stopped active transactions back in March 2020 as economies closed and people were ordered to stay home. All attention was instead focused towards an almost A&E “triage” assessment of their portfolio companies at the start of the pandemic, with origination and portfolio teams working together to support the management teams of their portfolios.

Many sponsor-backed companies struggled to access government-supported loan schemes, such as CLBILS and CBILS, ironically due to EU laws on state aid for “undertakings in distress.”

The typical private equity investment structure using quasi-equity debt instruments to fund investments being the root cause. However, most have taken advantage of the job retention scheme by furloughing employees and sought access to grants and the deferral of accrued HMRC liabilities to weather the storm. Needless to say, in some instances, this has resulted in a squeeze on working capital, and any top-up funding has had to come from existing lenders and/or equity injections from the PE houses themselves. The question now is how much of that dry powder has been utilised in supporting their portfolios to maintain a status quo for 12 months, and what impact does that have on their ability to make new investments.

But despite the uncertainty, many PE firms are adapting and keen to point to their funders’ patience and understanding in what has been a difficult period for the business world. Equally, there will undoubtedly be opportunities to acquire some assets cheaply as some corporates fail in the post-pandemic market. These may provide bolt-on opportunities for existing portfolio investments or create a new platform investment.

We are without a doubt entering uncharted territory, and unlike previous recessions, the pandemic may have long-term effects on consumer behaviour and business models.

Like all other markets, private equity needs to negotiate the current COVID-19-induced economic crisis. But the sector is immensely well placed to weather the storm because one of the key characteristics of PE is its ability to be nimble and respond quickly to changing trends.

 

Top 10

IF IT’S A LOSS, YOU’RE TOO LATE – WHY THE INSURANCE INDUSTRY NEEDS TO FOCUS ON FIRST NOTIFICATION OF RISK

Published

on

By

Simon Dicks, Insurance Channel Manager EMEA, Lytx

 

Insuring commercial fleets can be an expensive business. Average repair costs have increased by up to 40% in the past 8 years and disputes about who was responsible can drive up expenditure for both fleets and insurers.

Part of the problem is that the insurance industry hasn’t had the tools to forecast costs and premiums accurately enough in this sector. Underwriting decisions are still made in the same way they always have been, by looking back at historical data from previous years. This approach simply isn’t giving insurance companies an accurate indication of potential risk – or a proper indication of the impact of driver behaviour.

Technology is helping insurers to an extent by providing information about First Notification of Loss (FNOL) – automatically sending notifications when unusual G-force readings are captured within a black box tracking device as a result of sudden braking or impact. This is good, but far better is the ability to use proactive technology to detect when an incident is at risk of occurring and when a driver is distracted.

The only way to address this is to put a highly accurate level of camera technology both inside and outside cabs, supported by sophisticated technologies such as Machine Vision (ML) and Artificial Intelligence (AI). This way, we can see not just that an incident has happened, but why it happened. What’s more, we can assess risk before an accident happens at all and prevent it happening in the first place. We call this First Notification of Risk (FNOR) – and it’s a whole step up from FNOL.

Machine Vision scans the internal and external environment of the vehicle to identify distracted driving behaviours such as mobile phone use, eating, drinking, smoking, inattentive behaviour or failure to wear a seatbelt. AI, comparing the behaviour against a vast bank of accumulated data, is then able to determine the riskiness of that situation and whether it needs to be flagged to the fleet manager, driver, or insurer via a short video clip. The big difference in this approach is that it’s proactive, not reactive. For the first time, fleets and insurers can identify adverse driving and distracted driving in real-time for the first time.

This includes the ability to alert drivers of any momentary slip-ups or distracted behaviours. Using the same technology, drivers will receive an audio or visual alert to help keep them on track and to lessen the likelihood of a moment’s distraction becoming anything more.

When insurers have access to these insights, they can also start to see patterns from the data over time. For example, a fleet manager might start to see that there’s a peak in risky driving behaviours on a Friday afternoon when lots of drivers are rushing to finish for the weekend. As a result, they may decide to spread the shifts differently so as to avoid that pattern of behaviour.

When insurers are only looking at FNOL, it’s already too late. A driver could be unthinkingly driving whilst smoking, on their phone, and nobody would never know. Whereas with FNOR, both managers and insurers are provided with insights that remove the guesswork, and underwriters have the information they need to assess risk with far greater precision.

There’s still a long way to go in making the move towards FNOR. With so many different companies selling cameras and telematics systems and producing information in hundreds of different formats, claims data will have to be standardised before the sector can really transform. However, by starting to embrace ideas like FNOR, the industry can move towards a solution that saves them time, money and lives.

To find out more, visit  www.lytx.com/FNOR

Continue Reading

Top 10

THE DIGITAL WEALTH, ASSET MANAGER AND FINANCIAL BROKER OF THE FUTURE: TRANSFORMING CLIENT COMMUNICATIONS

Published

on

By

By Christina Di Nolfo, Head of Solutions at Delta Capita

 

More than in any other profession in financial services, wealth managers and financial brokers are heavily dependent on personal interaction with their clients. While digital transformation has been on the agenda of many individual advisors for years, the pandemic revealed the painful inefficiencies of legacy communication models.

Studies from YChart mirrored the communication gap just a year prior to the lockdown. 75% of clients want proactive communication from their wealth manager or advisor. But nearly half of clients with over $500,000 or more in AUM said they received infrequent communications, with those with less than $500,000 invested, receiving even less of their advisor’s time.

Consequently, finance professionals have been quick to try out any communication software from Zoom to Slack to WhatsApp. However, these programs were not made for financial advisors, making adhering to compliance standards more complicated than ever and raising security concerns.

Christina Di Nolfo

Let’s take Zoom as a quick example. Whilst Zoom is a great communication tool and one which many of us are all too familiar with, it is only meant for video calls and is not a comprehensive communication platform. The Federal Trade Commission discovered that Zoom’s end-to-end encrypted (E2EE) wasn’t what it appeared to be. Instead of calls being E2EE between participants, the data was only encrypted between each meeting participant and Zoom’s servers – meaning it was not truly end-to-end encrypted.

But it’s not just Zoom. Any application not built with compliance in mind is a risk for your business and your customer.

A customisable, compliant, and fully interactive client portal for the digital wealth advisor or financial broker is essential to streamline communications and maintain compliance. But what does that look like?

 

The Wealth Manager of the Future

Customer experience is everything, and the wealth manager of the future can already benefit from an end to end digital customer journey platform. Imagine if you could:

  1. Onboard new clients in minutes
  2. Push secure content to your client on their chosen device
  3. Record every minute of your meeting, even as you switch between video, chat, screen shares, and more
  4. Collect signatures and obtain consent instantaneously
  5. Accept PCI compliant payments directly from your portal
  6. Provide disclosures and other vital documentation for clients
  7. Collect customer documentation in real time such as ID and proof of address

All of this is possible through Klarion, our end-to-end engagement portal. Completely customisable, Klarion offers an entirely digital process designed for the optimal user experience. Clients are not required to download complex software. Instead, they only need to click on a secure link that you send to them via email or SMS.

Klarion enables you to verify identities in real-time, manage essential sensitive data, accept payments, engage in a video call and more. And you don’t need to worry about compliance. Not only does our solution log every interaction and timestamp it within an end-to-end encrypted environment, but you can also benefit from PCI-DSS Level 1 and KYC/AML compliance features.

You no longer need to go back and forth with your clients over email or other communication channels, as you attempt to resolve issues or complete tasks. And you also do not need to invest time and resources in tracking down every slip of paper. Instead, you can focus on what matters: Keeping your client informed about their assets and providing value.

Financial managers using Klarion have shifted their self-service offering from 13% to 30%, and reduced call volumes by 2.2x without sacrificing customer experience or compliance regulations.

 

The Future Won’t Wait

Through the proliferation of technology, more and more customers will demand a comprehensive and cohesive user experience. To create a sustainable, client-focused financial management practice today, integrating technology with human sensibilities is critical.

But waiting to reinvent your customer interaction process means that instead of focusing on growth, you may well end up running after the competition.

Klarion makes it easy to get up and running. There is no need to worry about costly, complicated, or time-consuming system consolidations, as Klarion integrates seamlessly with current infrastructure as a white label front-end solution, while ensuring your brand is front and centre. Klarion sends information directly to your CRM (or other systems), saving you from data entry duplication and is customisable to whatever workflow is required.

 

Continue Reading

Magazine

Trending

Business21 mins ago

IS SCARCITY OF TALENT THREATENING THE UK’S FINTECH CROWN?

To be attributed to Rafa Plantier, Head of UK and Ireland at Tink   From the Square Mile to Canary...

SET YOUR BUSINESS UP FOR SALES SUCCESS IN A POST-PANDEMIC WORLD SET YOUR BUSINESS UP FOR SALES SUCCESS IN A POST-PANDEMIC WORLD
Business2 days ago

SET YOUR BUSINESS UP FOR SALES SUCCESS IN A POST-PANDEMIC WORLD

Dean Fiveash, Head of FinTech Sales, IFX Without doubt the Coronavirus pandemic impacted every aspect of our lives and fundamentally...

THE EVOLVING TECHNOLOGY NEEDS OF THE FINANCE DEPARTMENT THE EVOLVING TECHNOLOGY NEEDS OF THE FINANCE DEPARTMENT
Business2 days ago

THE EVOLVING TECHNOLOGY NEEDS OF THE FINANCE DEPARTMENT

Jennifer Sims, Senior Consultant at Xledger   The world of finance software is evolving quickly, but with many new software...

HOW RETURNS ABUSE AFFECTS RETAILERS HOW RETURNS ABUSE AFFECTS RETAILERS
Business2 days ago

HOW RETURNS ABUSE AFFECTS RETAILERS

By Aaron Begner, EMEA GM at Forter   Accompanying the significant growth in ecommerce over the past 12 months, is the...

TINTRA PLC FINALISES JOINT VENTURE WITH ARTIFICIAL INTELLIGENCE PARTNER TINTRA PLC FINALISES JOINT VENTURE WITH ARTIFICIAL INTELLIGENCE PARTNER
News2 days ago

TINTRA PLC FINALISES JOINT VENTURE WITH ARTIFICIAL INTELLIGENCE PARTNER TO BUILD INDUSTRY CHANGING REGULATORY TECHNOLOGY

Innovative fintech company, Tintra PLC(https://tintra.com/), has formed a joint venture with award-winning Artificial Intelligence and Machine Learning business, TMC2, via...

CELLPOINT DIGITAL PARTNERS WITH VYNE TO ENABLE INSTANT OPEN BANKING PAYMENTS FOR MERCHANTS CELLPOINT DIGITAL PARTNERS WITH VYNE TO ENABLE INSTANT OPEN BANKING PAYMENTS FOR MERCHANTS
News2 days ago

CELLPOINT DIGITAL PARTNERS WITH VYNE TO ENABLE INSTANT OPEN BANKING PAYMENTS FOR MERCHANTS

The partnership will allow CellPoint Digital customers to incorporate Vyne into its payment ecosystem and access instant payments without a...

WHY A MULTI-ACQUIRER STRATEGY IS KEY TO GLOBAL GROWTH WHY A MULTI-ACQUIRER STRATEGY IS KEY TO GLOBAL GROWTH
Business5 days ago

WHY A MULTI-ACQUIRER STRATEGY IS KEY TO GLOBAL GROWTH

As online business grows exponentially, finally fulfilling the internet’s promise of a ‘global village’ in which anyone can buy and...

Business5 days ago

TAKE THE NO-CODE LEAP TO DIGITAL INNOVATION WITH A FUSION TEAM

Chris Obdam, CEO, Betty Blocks   In the last couple of years, a new sector has emerged alongside enterprise financial...

Finance5 days ago

HOW FINANCIAL ORGANIZATIONS CAN PROTECT THEIR DATA

Yuval Wollman, President, CyberProof and Chief Cyber Officer, UST   Top executives from Wall Street’s largest banks pinpointed cybersecurity as the...

Top 105 days ago

IF IT’S A LOSS, YOU’RE TOO LATE – WHY THE INSURANCE INDUSTRY NEEDS TO FOCUS ON FIRST NOTIFICATION OF RISK

Simon Dicks, Insurance Channel Manager EMEA, Lytx   Insuring commercial fleets can be an expensive business. Average repair costs have...

Business5 days ago

IDENTITY SECURITY IN THE ERA OF SOX

By Steve Bradford, Senior Vice President, EMEA, SailPoint   The Sarbanes-Oxley Act (SOX) is a federal law that mandates practices...

News5 days ago

EXPERIAN LAUNCHES VERIFICATION SERVICE TO SUPPORT FASTER, MORE ACCURATE LENDING DECISIONS

Work Report™ is the UK’s first service that automates the digital sharing of payroll information on behalf of the consumer...

News6 days ago

TENUREX AND ELUCIDATE PARTNER TO INCREASE FINANCIAL INCLUSION WORLDWIDE

TenureX and Elucidate have announced a strategic partnership with a mission to increase financial inclusion worldwide and tackle the laborious...

Banking6 days ago

WHY THE TIME IS NOW TO BANK BEYOND BORDERS

by Lili Metodieva, MD of Monneo   As our world becomes more interconnected, so too does the need for banking...

News6 days ago

PAYCAST PARTNERS WITH MARQETA AND MASTERCARD FOR NEW MARKETPLACE PAYMENT SOLUTION

Paycast will leverage Marqeta’s modern card issuing platform and the Mastercard network to empower marketplaces with payment solutions that help...

Finance1 week ago

HOW FS ORGANISATIONS CAN USE API-DRIVEN DATA AUTOMATION TO JOIN THE OPEN BANKING REVOLUTION

By Steve Barrett, Senior Vice President, International Operations at Delphix    Technology is rapidly transforming all industries across the world. However, for the...

Banking1 week ago

IT’S TIME FOR BANKS TO SIT THEIR CUSTOMERS DOWN AND TALK OPEN BANKING

Eugene Danilkis, CEO at Mambu   We are living in an experience economy, and banking is no different. Customers need...

Banking1 week ago

WILL CHALLENGER OR TRADITIONAL BANKS WIN THE SECURE CARD PAYMENTS BATTLE?

By Vince Graziani, CEO, IDEX Biometrics ASA   Challenger banks have shaken up the payment ecosystem in the last decade....

Banking1 week ago

TOP ITALIAN BANK ROLLS OUT FIRST OF ITS FULLY DIGITAL BRANCHES WITH AURIGA

Banca Carige Smart, the new intelligent branch model enabled by Auriga #NextGenBranch solutions , combines digitalisation with a human touch...

Banking1 week ago

HOW BANKS CAN PROTECT THEMSELVES AGAINST RANSOMWARE

Jay Ralph, Managed Cloud Global Sales Lead at SoftwareONE   We’ve seen a slew of high-profile ransomware attacks in 2021. From hackers...

Trending