PE - Industry Consolidation - Views?

Wondered if anyone else had read the below over the last couple of days, and had any thoughts? 

Private equity M&A set to whittle sector down to 100 ‘next-generation’ firms | Financial Times (ft.com)

The number of private market fund managers will shrink to as few as 100 over the next decade as higher interest rates, fundraising challenges and increasing regulatory costs drive a massive wave of consolidation, according to a leading European private equity firm. David Layton, chief executive of Partners Group which oversees assets of $142bn, said private markets had entered a “new phase of maturation and consolidation”. Managers responding to fundraising pressures in more difficult economic conditions and shifting towards wealthy individual clients as a driver of new asset growth, would drive a significant rise in mergers and acquisition activity, he said in an interview. “It is really only the large players that can withstand the forces reshaping the private markets industry. We could see the current 11,000 or so industry participants shrink to as few as 100 next-generation platforms that matter over the next decade,” said Layton.

Obviously, some bias given the proponent, but others have suggested similar: 

Private Equity Heads Toward Consolidation - WSJ

EQT Chief Predicts Major Private Equity Consolidation Wave - Bloomberg

My view: 

  • Will be two 'types' of PE fund - the 'asset manager' type, think: KKR, Carlyle, CVC etc. who offer every product in various markets (perhaps a bit like Citi, JPM etc.) and then the boutique types who may be specialised in local / sector niches
  • 'JAMBOG' type funds will be most impacted - one sees this in other markets. Consider, 'mid-market' consumer brands / restaurants where you end up with the 'stuck in the middle' problem (i.e., not enough scale, but also not focused enough to focus on certain niches) and you end up catering to nobody
  • To an extent, the next few years might see some natural attrition; funds who overpaid in the 'ZIRP' era may not be able to exit / realise good returns and thus can't raise future funds - although, I think this will take a while to shake out

Questions: 

  • Depending on your view, what or how would you do to change your career / maximise defensibility? 
  • If there are any LPs here, what's your view?

Sorry if this has been touched on in another thread, thought worth asking specifically to discuss and focus on

1 Comments
 

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