Deals, Value and Growth Strategy The Evolution of Private Equity

Um Sarah's set the scene really nicely there. We have seen a massive surge in private equity in deals in in money being deployed. But as she said, we are hitting something of a sandbank. I've got 30 minutes on the clock. We are going to have a very realistic conversation about where we are now, how things need to change, where we're going next.

Let's start with where we are now. Andrea, I'm just going to pick on you first because I want you to give me the landscape that we are in today with private equity. Well, uh, private equity, we just come off a phenomenal, uh, decade. And when you come off of a great decade for private equity, uh, people get a little bit loose, if you want. So, the last Duel deals obviously are too much.

We raised too much money and the industry is having a moment and it's diverging. there is the winners and the losers and uh and it's very clear if you want what needs to be done uh for this industry to evolve to the next stage and then have another another good wave which I think it's operational improvement it's uh it's what has divided is dividing the the winning firms and the and the firms which are having a moment they will reorganize but there will be a moment before that happens

okay I want to ask how private equity needs to change. We've heard a lot about innovation over the last 36 hours. What needs to happen next? Anyone?

Rishi?

Oh, okay. Um, so listen, I you know, like pretty much everything else in life, private equity as an asset class, as an industry is evolving and it is evolving in in two two ways. One is that it is going deeper into specialization and the second is that it is embracing you know the external stimuli that is being provided to us by all of the technical innovation uh that is happening all around us. So what how is private equity going to change from here? I I would say two things.

One is domain expertise is going to become a much bigger driver of excess returns and alpha within private equity going forward than it has been historically in the past. And the second is the use of modern digital tools in particular AI is going to become an important element of the entire value chain of private equity from origination to ongoing management to increasing the value of portfolio companies and obviously all the way through to to monetization. Okay, David Bane, one of the biggest names. What does evolution need to look like? What does innovation need to look like right now?

So, so I agree with uh the framing which is that um you know, private equity in some ways need to get back to the basics of of driving operational value. We've had a lot of macroeconomic pressures. uh the industry did get a bit ahead of itself in terms of the kind of 2021 period when there was a when there was a big peak. Um but in many ways I look at it as uh finding ways to bring new capabilities to this question of of value creation. A big piece of this in our view is uh being global.

we see you know very similar big thematic trends that are occurring across geography and so the ability to have that lens uh to see these early technology trends United States then come to Europe uh and Asia um other big trends we see in aviation defense it's something that countries around the world are focused on there are a lot of learnings that you can take share these best practices to help get you a little bit ahead of the curve in investing in different geographies the second piece is really this operational value creation. Um, you know, I think we used to be generalists in going and supporting our companies. Now we have big, you know, deep teams uh with people with significant specialist capabilities that can help reorient supply chains that may now have to move from Asia to the west to help set up domestic manufacturing facilities that are best-in-class that leverage automation, robotics and the like. really just a different level of specialist capability that you need to bring to bear that has to do with having teams of people that can jump in in a lot of these areas of expertise. I think that's kind of where the industry has to go.

We have to become domain experts that have big corporate capabilities that can support our companies.

Do we Andrea or do we just need to get back to basics?

You know, I think it's I think the industry does it well in some some cases. You know, the the basics are that ultimately we invest through cycles. We're long-term investors. If we choose the right industries, um there might be a point in the cycle where you have to kind of hunker down, but you you want to participate in the long-term growth. And so really, it's about driving operational value through the cycle.

Um and that's always been the challenge of private equity. think it's just there are more variables that we have to contend with as we take on much larger investments that you know the companies themselves are global uh they have technology trends that they need to adapt to and so it's just really more disciplines that you need to master but I think it is really the the same core core you know opportunity for us

Khaled you're nodding what's the Abu Dhabi what's the Alpha Dabby view on that

well Brandy as you know Alpha Dabby we're We're platform builders here. Um we were relatively young uh concern compared to our peers here, but we've been growing phenomenally in the last few years. uh basically building platforms taking advantage of the step change that has uh um uh fallen upon the UAE in terms of regulatory changes, FDI, population increase and then obviously in our core sectors, real estate, construction, uh infrastructure, a significant inflow of capital into our region that allows us to not just monetize some of our positions but also reinvest with strategic partners and create long-term value for our shareholders in key sectors where we operate.

Has PE got away from some of those basics? I've heard a lot of phrases over the last day and a half um at ADFW. People are talking about long-term partnerships. People are talking about aligned capital, building strong platforms in it for the long-term relationships, not just being transactional. Da da da da.

What does it actually mean in practice? It sounds like the words that you write on a press release. How do you do it in real life? And are we doing it in real life?

Um, the successful firms do it. I mean, for instance, in our case, we do two transactions a month for as adult add-ons. The world is becoming complicated. You need relationships. You need to understand the US.

You need to understand geopolitics. You need to understand globalization. you need nine offices to support a successful companies like like like we do. So it's uh it's a completely different world. If I go back 30 years, you know, you could have a deal team and you were smart if you did a deal.

Today you need a very large operation improvement team. You need, you know, knowledge of global of global markets and people on the ground. It is very very complex. So the firms have grown from you know 10 to 20 people to hundreds you know in our case we're 250 it's a it's it's a completely different environment that uh than it used to be if you want to b build a company and in a world which is becoming consistently more difficult you you must not so much uh guess where the world is going but you must be very fast at reacting. So the teams are different the way you you you you address issues are different it's you cannot predict the issues that come out but you can move very very quickly and the important thing and private equity when you mentioned before going back to basics.

Private equity was created to be faster smarter than than than what the environment gave to you in good old days. If you're a smart deal doer, that was enough. Now you have to have a smart deal doer, have a machine, have a culture, and have the capital also because you mentioned permanent capital or except the capital to do it. It's a it's a it's a it's a complete new world.

Do we have a mic that works for

Can you hear me?

Yep. So if I can add then uh to your point uh Andrea for us the capital allows us to be very flexible in creating and ideulating new platforms and new ideas which we've done very successfully over the last four years. We've actually seeded and or combined four platforms. We've recent we actually announced today the expansion of one of them which was the private credit JVA just closed a uh an acquisition that increases its AUM from 1.1 to 1.

7 billion just announced a few minutes ago and that is an idea of taking advantage of the trends and that's across asset classes not just on on the private equity side on the FNB side we took advantage again and seeded and bought and built several brands and that is again with the expectation of one day potentially listing this business. And lastly, we tied up with adnog drilling um about two years ago. Actually, we started this investment uh theme by going contrarian um to oil and gas. Um everyone was talking to ESG um while oil was going to peak and we took the opposite view. Abu Dhabi has the cheapest, cleanest barrel of oil on the planet and we were going to be long oil and gas.

So we bought two companies, convinced ADNO to join hands and now Inner Soul has now deployed 700 million out of the $ 1.5 billion committed capital. We look forward to grow that with our partners and again long-term fungeible nimble money but with a strategic purpose. That's exactly what I was saying. Permanent capital did not exist 30 years ago and smart permanent capital definitely didn't exist.

Now with permanent capital as a partner as a as a counterpart sometimes it's a whole new world. Rishi,

no I was I was going to go back also to the reference that you made earlier to to platforms, right? So this the word platform means different things to different people within private equity. It actually start you know think of it more in the context of laying down the strongest possible foundation that you can with an investy company so that you give it all of the levers that it needs to grow organically as well as inorganically into adjacencies into new markets into its core business whatever the case might be. But the starting point always is identifying the right markets first of all, right? That are businessfriendly.

For instance, the region is increasingly attractive now for deployment of investment capital within those right markets, the right sectors, the industries that have a secular long-term tailwind. You know, we are not traders. We are not even five year cycles. We think in terms of 10, 15 years. and then behind those industries identifying the right companies with the right management teams that have what it takes to deliver that expansion journey.

Right now the whole idea of permanent capital or temporary capital again is a little you know kind of binary almost. What we really need is to match the duration of the capital to the value creation cycle of the underlying asset. Right? Whether it is done through a fund that has a longer life horizon to it, whether it's done in an evergreen structure, whether it's done on a deal-by-deal basis as we do at Invest Corpor, that's up to the, you know, to individual providers and individual uh investors. But I think the the whole model of private equity is about capturing the long-term illquidity premium that invests in private markets.

And to capture that, we should give ourselves all of the flexibility that is needed to deliver that alpha.

You, someone mentioned AI earlier. I can't remember who. I don't think I've had a conversation this week that hasn't had the AI question in there and it comes from two angles. How is AI changing how you're working? And how is it changing the value that you are taking out of the the assets that you are backing?

Can

can I say one thing? The two are the same. You know, my job is to create value in the assets that I invest into. So, you know, I I kind of combine them into one thing. And the the feedback loop of AI within private investing in particular starts all the way back to the sourcing engine.

you know, the better you are at identifying attractive investment opportunities in a proactive manner well in advance of when they come to the market. You know, if if if you're responding to a book that's been sent to you by a banker, you're already behind, right? You have to have known the assets that you want to track and invest behind. And AI can help you with that. The better you are at modeling out what the likely trajectory of this asset is going forward, AI will help you with that.

the better you are enabling the underlying company and the management teams of the company to improve their go-to market strategy, their sales effort, their productivity and efficiency, the better value creation opportunities that will exist. So, it's all along the value chain and it's an enabler.

David, you're quiet. Stop being quiet.

Um, well, I was Thank you. I was going to uh pick up on your point and why this has been such a a hot topic this year. I think 2025 was an inflection point. Clearly there was all this you know capital spend into data centers and the technology infrastructure which has been significant and is ongoing but I I think this was the year when you started to see real adoption and significant productivity increase in companies that are using AI. We see it just within our own firm.

We're a very data and knowledge intensive business that invests behind years of cumulative experience invest behind pattern recognition. And so the ability to leverage AI to help us look objectively uh and much more quickly at data patterns so we can arrive at better decisions is critical. There's not one business process within our organization that we're not taking a look at and saying how can we deploy this technology to make it more efficient or to get our team members focused on the more you know value added aspects of work. And that's exactly the parallel for what we see in our our companies which is we're now this is really 25 is the first year we're seeing enterprisewide implementations of AI. It's starting in the more manual intensive businesses that have a lot of repeated processes but they're not already captured in some type of software system.

And you're seeing enormous productivity, you know, leaps, not the typical incremental 5 10 percent, but 50 60 70% that have the potential to change uh business models. I think that's the less talked about aspect of AI. a lot of attention on hyperscalers and and big capital going into AI which is critical but it's really this productivity surge that's going to be the thing that chess justifies the ROI and I think will change private equity in the next 5 to 10 years because it will be the primary tool of driving transformations at companies um but it will also make investing uh trickier because now you're trying to take a call on the pace of adoption of this technology, how it's going to change business and pricing models. Um, who is going to be the winner and loser in that? Um, I think that can be good if you can get advanced views of those technologies, but it could also set up much greater dispersion as as technology comes into uh the more established industries that we're we're used to investing in.

Khaled, what AI related discussions are you having internally and externally at the moment? Well, Randy, I think it impacts um multiple angles from us at the holding level. Obviously, deal cycles will shorten obviously with the technological improvements across diligence and uh and execution obviously on the legal uh documentation side as well. Um but mostly I think the value will come from the portfolio management and that is going to be critical. Um, as Alpha Dabby, we have in excess of 95,000 people working for the group.

Um, extended to probably closer to 200,000 people if you include the the wider associates and joint ventures. So, there's significant automation and value to be created from AI to really drive cost synergies and EBIDA uplift. And the way we look at it is not just going to be uh AI but also robotics. And that's going to be the next trend that comes um as we look to potentially replace humans with you know longer term investments. So you move from cap opex to capex and we're seeing not two to three years from now it probably the equation will be very compelling uh for large businesses.

As you know, we have a very large construction empire and that's going to be uh significantly disrupted with robotics as well as AI. Um, so we're we're open. We're looking out to innovate across all our portfolio companies to drive real EBA uplift and value to our shareholders.

What does risk look like now with all the the change that we've discussed on this panel? If we look at the deal that everyone's been talking about in the last 24 hours, if we take Warner Brothers, Paramount, Netflix, we've got a potential hostile takeover. We have a president that's getting involved. We have a president's son-in-law who's whose name is on on some of the money there. We potentially have some golf money um that is involved there.

We have antitrust, regulatory, streaming, technology, all of it in one basket. I mean it is a Netflix series ready to be made in itself.

What does that tell us? What does that teach us about where we are at the moment and the way that we need to look at all of these factors differently that we need to to evaluate risk maybe differently? Andrea,

we're looking at complexity uh increasing in every transaction whether how you finance the deals, how you operate the deals, how the geopolitics are involved in deals. The example you gave has has almost everything and the last turns have not been played out yet. So it's uh it's uh it's a world where you need a multifaceted ability to deal with risk. some of the risk you can't predict. That's so it re reunited also with AI all the data predicting if the hoodies do this if the hoodies do that if the supply chain does this or supply chain does that amount of data and amount of risk requires apart from intelligent large teams requires AI you cannot predict all the all the permutation of a deal and um you know and we're talking about you know some a lot of people you mentioned scale you know everybody on this on this side has hundreds of thousands of employees directly or indirectly.

So we have also responsibility which then encompasses ESG behavioral patterns investors etc. So it's a very it's a complex world and the the winners of tomorrow are organized to deal with this and you cannot replicate it. You cannot build it in a minute this you know every crisis you learn something. So there's a lot of risk out there

and I think just just to pick on that you know that is precise because of this complexity that's precisely where the need for domain expertise becomes so much more needed and transparent right because including political complexity right so there are some players within private equity that have genuine domain expertise in navigating political geopolitical complexity that's their expertise all the more power to them that's not our expert expertise. Our expertise lies much more in understanding, you know, what are the levers that we can pull to to help a company grow into adjacent markets and and new products and, you know, we lean on that.

I think you know some context around what you mentioned is really old economy meeting new economy. Certainly in the case of Netflix, Warner Music and that's always been an industry where there's been political interest in terms of who's controlling the content. But if you look at what's happening in the pharmaceutical landscape, tremendous amount of M&A that's happening between large scale pharma companies and biotech consolidating, you're going to see this with the data center, you know, landscape now in the United States. You know, there there's more capital going into data center construction to house machines than there is capital going into commercial real estate to house humans who are working. And so this clash of new economy and old economy is still in early innings.

And I think it's going to shape big large scale M&A. It's going to ultimately have impact in the businesses that that we invest in. And this is, you know, the latest I think dramatic example.

Khaled complexity.

Well, I mean, every single transaction we look at is extremely complex just because of who we are and where we sit and the fact that Abu Dhabi and we invest and obviously Abu Dhabi Alpha is a a co-investor with Adno Mubadala ADQ. So our partners themselves are very complex as government you know owned entities. So antitrust is a very interesting adventure every time we embark on a transaction especially in this complex environment now that we face um in terms of uh the polarization of of uh of the different geographies where we invest. So if you look at it the other way, the UAE has um entered into several comprehensive economic partnerships agreements and these are avenues for us as an UAE based firm to choose where we invest and how we invest as well to take advantage of the ever shifting landscape with respect to the tariffs and and and the economies around us. Um, so we're always looking at that very dynamically and as you know, we're very nimble and agile as a firm and are able to pivot u quite quickly.

I've got one minute left for each of you and I'm very scared of what happens if we don't stick to time. We have been warned. Give me your outlook for 2026 and how it's going to shape your strategy. Let's move down the line.

I think 2026 will be an acceleration of global buy and build and complex transactions. You can have 30 seconds more if you want to tell me what you're going to do with that.

And Abu Dhabi will play an important part as being in the middle of the two of the two sides of this. So many people are putting real deal teams here like us.

Okay.

I think it'll be a a good a good year from an economic setup perspective. I think you have a lot of interesting tailwinds that are driving global growth and so we're probably a bit more optimistic but I think you will start to see this impact of dislocation from AI. It's going to disrupt what we thought to be stable industries. You're going to see some aspect of labor dislocation that we'll all have to look at and and and kind of deal with and and Kil mentioned some aspects of that before. And so we're going to see the beginning of what's a I think a 10-year technology cycle that's going to have tremendous impact uh to the global economy.

And how's that going to impact what you do?

We all have to uh think from our our technology uh lens whether we're technologists or not. Technology is not a vertical. It's something that is going to impact all industries and all geographies. And I think we're all going to have to really step up our game in terms of our literacy and our capabilities in terms of adapting and deploying the technology.

Rishi, the investor outlook.

Yeah. So, I'm going to nuance my view uh and split it across markets and and asset classes. So, within private equity and focusing on North America, I think it's a relatively constructive backdrop. We should see an improved exit environment, a greater churn of capital, recycling of proceeds back from LPS because the underlying economic backdrop is relatively constructed in particular supported by an expectation of some continued reduction in interest rates which kind of leads me to the next asset class which is real estate. We see it as an inflection point.

Real estate has been a little under the weather of late mainly because of the higher interest rate environment. As interest rates stabilize close to neutral and are expected to stay stable for the longer run, real estate particularly in the US but developed markets should bounce back. Credit is a relatively constructive environment as well as you know the 3% 3 and a half% base rates you're earning high single digits. In terms of markets, we see a particular emphasis on the corridor that is now clearly getting established between Asia including the economies in Japan, Southeast Asia, China, India and the Middle East. And we see that corridor becoming much more significant in the in the coming year both in terms of sourcing of capital but also in terms of deployment of capital because there are growth engines you know long-term demographic supportive uh engines you know uh backing those up and last but not least I think there is an element of Europe is oversold and you know there is some merit to the idea that American exceptionalism that persists persists ed in the last decade will now slowly diversify to a more global base.

I'll take the Abu Dhabi angle since uh you know I'm going last. Um for us obviously you've seen the the announcement yesterday from Aldar the 60 billion um expansion of Mari Island. We see real estate that's continuing to to to have significant pays behind it. Our construction assets are still benefiting from very solid backlogs that are continuing to rise. And as such, I think from a UEE and Abu Dhabi perspective, we're seeing real estate infrastructure, especially now as well with AI and Stargate and all the digital infrastructure coming into play being very buoyant uh for all our businesses.

Um the only I would say headwind going into 2026 is uh what happens to oil prices and as it relates to the impact on our businesses specifically um the ones that have peripheral um uh exposure to Saudi Arabia and how we can both take advantage of these opportunities by again pivoting or um you know being a little bit more prudent with our deployment uh in those sectors. generally very positive on the outlook um for the UEE and the region.

Yeah, thank you for that. That's one of the first mentions I've heard in anything I've been involved in of the oil price, but you're right, we're below 60 for WTI and it does still matter. Gentlemen, thank you very much. Andrea, David, Rishi, Khaled, fast talking. So much information.

Appreciate your time.

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