Thomas H. Lee Partners’ Scott Sperling said the Boston-based buyout firm has zeroed in on secular-growth drivers to help circumvent a downturn even if its portfolio companies take a revenue hit in a looming recession.
(Bloomberg) — Thomas H. Lee Partners’ Scott Sperling said the Boston-based buyout firm has zeroed in on secular-growth drivers to help circumvent a downturn even if its portfolio companies take a revenue hit in a looming recession.
“One of the things that I think you see across all industries today is declining bookings, but not yet declining revenues necessarily,” Sperling, co-chief executive officer at THL, said in an interview with Bloomberg Television at the SuperReturn International conference in Berlin last week. “So people are expressing their uncertainty by booking a lot closer to when they’re actually going to buy as opposed to more in advance. And we’re certainly seeing that in certain places.”
Backers of private equity firms have generally looked to private markets to offset slower growth in public equities, but weariness among limited partners has steadily grown amid uncertainty about the health of the global economy. Still, Sperling said THL’s focus on its portfolio work has been positive even as deal volume has slowed.
“Right now, revenues have been holding up and a lot of the work that we do to improve the revenue generating capability of our companies has led to actual growth,” Sperling said. “But I think we have to be very careful about how we manage our companies, making sure that we’re taking the right approach in terms of CapEx, hiring and really trying to invest for the long term.”
While there remains a disconnect in valuations between buyers and sellers, the firm is looking at situations where it may acquire majority stakes of 50% to 60%, while existing owners retain the rest, Sperling said.
“We’re looking at lots of different ways to find the right asset at the right price,” he said.
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