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Private Equity For All But Not For The Faint Hearted
‘I had to hear my share of inappropriate comments along the way’ Sunaina Sinha Haldea
Topics: Private Equity, glass ceiling, thoma bravo, nasdaq, women in finance, Stanford, Raymond James, Sunaina Sinha Haldea
Anthony Noto , Benzinga Editor
Featured Guest:
Sunaina Sinha Haldea Global Head of Private Capital Advisory, Raymond James
Transcript:
Tony: There was a big private equity deal this week, and those are few and far between. Nasdaq agreed to buy Thoma Bravo-owned software firm Adenza for $10.5 billion. That's not small change.
Sunaina: That's not small change. It's a huge exit for this environment, and a huge congrats to the deal team there.
I think that we have to look at it in the context of where we've been for the last nine months, which has been in a bit of winter for M&A activity, both exits ie sales, coming out of private equity portfolios, but also private equity buying assets. I think I'm hoping that this Thoma Bravo deal is a sign of things to come.
Now here's why. My hope is an educated hope. Most of M&A deal volume is driven by private equity, right? Private equity holds companies that need to sell and private equity runs on a clock. Right now, if you look at total private equity, Undrawn commitments.
So these are funds that are waiting to be called to be put into companies. That stands at over 3.5 trillion dollars. You just look at the capital that sits with buyout funds that can do large transactions in profitable companies. That's over $1.1 trillion. So that's a lot of overhang.
And one thing that people forget is that private equity runs on a clock and the clock doesn't stop ticking. Doesn't stop ticking for you, me, or anything. And that clock basically states the following four years or five years of deployment followed by four or five years of exiting. And the more you run down the clock without doing any of the above, ie doing new good deals, buying companies or selling companies, the clock then works against you.
Your net returns to investors suffer. If you don't put money in the ground and buy companies fast enough your net Internal Rate of Return (IRR) will suffer if you don't sell companies according to the right time to sell it which is generally 3, 4, 5, or 6 years after buying them. Your Distributed to Paid-In Capital (DPI) numbers suffer, and you need both those things to be very standoutish to be able to raise capital these days. Raising capital is hard for everybody. So private equity can go on pause for three months, six months, nine months, 12 months, but it cannot go on hold forever because investors then say, well, I'm paying you 2% management fee to put money in the ground. Why aren't you doing so?
And I think that we're now starting to see the wheels turning. if you ask my M&A colleagues, they will say that May was one of the highest months for signed sell-side engagements that they've seen in recent years.
So I think it's a sign of things to come that the M&A markets will open up and deal activity will pick up. Of course, the big unknown is the debt markets, but we can talk about that, a little bit later in the conversation. But for right now, we're seeing a lot of green shoots in private equity firms wanting to buy and sell companies.
Tony: Definitely. And it's reminding me of a lot of the conversations I had with PE Pros, 10 years ago. When there was a lull in deal-making as well, and they were talking about holding onto these portfolio companies a little too long and what to do with them and, and how their investors would react to that.
And they did sort of express optimism last year and they thought that maybe the tide would turn in Q1 of this year. But that wasn't the case. And then it kind of lines up that it was the lowest M&A volume for a quarter, since 2013.
what could we expect in the second half of this year?
Sunaina: I think we can expect to see a lot more dynamism in the m and markets in the lower mid-market and mid-market of PRI private equity. What does that mean? That means companies sub $50 million of EBITDA, they don't require the syndicated loan market to get the deal done.
Those companies will have a receptive audience. Why? Because leverage is available through direct lenders, the private credit markets are open for business. Those folks also have a clock. If you have a private credit fund, you are also running on a clock. You also need to put money to work. Structured credit funds are all seeing attractive deals come their way and they're doing those deals. They're underwriting those deals. So if you are operating in that sub $50 million EBITDA range, you're going to see a lot more transactions, both M&A processes where you can cherry-pick your spots. or you may be saying, okay, I'm gonna take my own companies out for sale because I need to return capital to my investors, otherwise I'm gonna fall behind in the Distributed to Paid-In Capital (DPI), which is the most important metric, some would argue to investors, you'll find fall behind that curve. And you don't wanna do that. You don't wanna be fundraising with that fact pattern. So in that end of the market, we're gonna see transactions coming to market.
Over $50 million ie the bigger deals you do need the, you know, bank debt, right? You do, you need the syndicate loan market function, or you need banks to provide you with leverage. And that is still, that is, that is a tale of idiosyncrasy. Right now, the, the markets are not functioning, let's say one once used to, but the green shoot there is, we're starting to see, uh, a pricing in of terminal rates. Right. So we, we all expect now, given the inflation print this morning, that the Fed will take a, what is they're calling it, the Fed skip. The Fed will take a pause rate. I. And folks expect Okay. Maybe there might be one more hike after that. But that's it. We're near the end of the hiking cycle such that banks can then underwrite risk. So with that, we'll start to see more functioning of the debt markets for larger deals. But certainly in the $50 million and south EBITDA range, we'll start to see deals come to market.
Tony: Just before we wrap up this topic, I want talk about the type of deal we saw. what does it say about PE, Thoma Bravo specifically did a deal with Nasdaq. And they sold a large portion of their portfolio company, Adenza, but they kept about a 15% stake. And this is not the first billion-dollar plus deal that they did with a stock exchange.
They did one with the New York Stock Exchange, back in 2020, what does it say about that part, this particular type of deal? what's the strategy here?
Sunaina: I think the strategy here is two-fold. It is, and again, the ultimate viewpoint on this has to come from Thoma Bravo, but when you're reading what was announced and had the playbook that's being deployed here is that strategic buyers will always pay up for strategic assets and that's what you have here. You have NASDAQ, a strategic buyer. They will always pay more for companies and especially strategically oriented companies than private equity buyers. So good for Thoma Bravo for finding a strategic buyer for the asset. So that's fantastic. and I think that you are seeing a leaning into businesses with predictable revenue, right? So you think about why did NASDAQ do this from their perspective? Why does this make sense? It really is about building up a software business with a recurring revenue business model in this market environment and this macro that we are live in.People will pay up for annualized recurring revenues and which this deal very much brought to the table for NASDAQ. Now, NASDAQ stock didn't react very well, was down quite a bit yesterday. But that's a one-day event. I think over time when you hear NASDAQ talk about its rationale for the sale, it really is the predictability of the revenue stream that was attractive to them.
Tony: I did, I did see that about the stock, but, and, and with all the stripe powder, you still not seeing PE sponsor come in and be like, well, we can pay north of $10.5B?
Sunaina: Well, the, the PE buyer needs to enter at a price where it can make two and a half times. So, yes, of course they can put any number out there, but they got, they gotta make, they have to make money. They have to make a return on that. And so generally when you put pit a private equity buyer, head to head with the strategic, the strategic can pay more because the private equity investor, has to. price in its own fees. Remember, there's fees on the capital that goes in.The capital considerations are different for a private equity sponsored buyer than for strategic buyer, number one.
And number two, the strategic buyer has synergies, that they can price in which the sponsor usually cannot.
Tony: So I wanted to bring up a little bit about the image of private equity. it's an industry that you are a top player in. And I know from experience there arent too many women in it inking deals. It's predominantly men. II read something that you had written. You wrote it for https://www.penews.com/
Sunaina Sinha Haldea: ‘I had to hear my share of inappropriate comments along the way’
and I wanted to get your thoughts on private equity as an industry. I think, it still struggles with this image problem of settling companies with debt and perhaps, too much so because a lot of them are going into bankruptcy. And I wanted to get your thoughts on one, what it's like being, oa young, mover and shaker in this industry. two being, a woman in this space and if representation is improving, and three, what folks like you are doing to make sure that maybe PE gets the makeover that it, it.It needs to appeal to the, the average consumer?
Sunaina: So let me start in reverse chronological order and talk about the industry and its reputation and its contributions to society, if you will. What is the value of private equity in the world today? And then we'll move backwards into the you know, probably more disappointing territory, which is representation of women and women of color and, and, you know, lots of -isms that come with it.
Often also, some of it's stereotyped, but some of it very legitimate. So when it comes to private equity and image problem, it is so easy to say, Hey, they saddle companies with debt, and then they go bankrupt. But remember, the, the incentives are not aligned for that to happen. Because with private equity is a long only model.
Private equity buys. It doesn't short. It goes long, number one, right? And it buys low and sells high. That's the model. Buy a company of this size. And sell a bigger company three to five years later. It's very simple. And now the question is how do you make that company bigger? How do you finance the acquisition and how do you finance the growth of the business?
So you adding value on the way out. Because it has to create a more valuable business. That was, it can't sell it for more than it bought it. It has to make the business stronger, more efficient, more operationally resilient, and a better economic contributor. To society and to the economy around it. In order for that to happen often means way more jobs growth because the business is growing, the business goes to international expansion, business goes to acquiring new companies.
It often means that the, the companies are left much larger, more scale players. And so whenever you have private equity inflows into countries, if you look at emerging marketing and economies, if you look at parts of the United States, for example, where. Capital has not flown to more,naturally ie the Midwest, etc. You see that every time you have private equity in flow. It creates a thriving entrepreneurial community because that private equity is designed the way it's engineered to build better companies, build bigger, healthier companies, because that's the only way you get someone new to come in and buy that business for you.
If you create value, if you create something more valuable, hundred percent that if you cannot do that, if you are one of those. Uh, in those unfortunate moments in your portfolio as a private equity fund, and almost every private equity fund has one or two of these stories of, Hey, I tried. I couldn't get there.
I have 10 or 15 portfolio companies in this fund, and one of them didn't make it. I couldn't turn it into what I thought I would turn it into. So either I sell it at the loss or in the Armageddon scenario, I lost the business in its entirety. If you look at the loss ratio in private equity, which means a total wipeout, it's incredibly low.
It's, it's one of the lowest in any market. So private equity does not wanna lose, have a complete wipe, because that's terrible to their own fundraising, prospects out there because it's so rare to have a complete loss. Yeah, you can lose money, but to have a complete wipe out a bankruptcy pretty low.
And what you are seeing right now in the last nine months is that debt hasn't been so available. So the companies are buying, certainly in this cycle, are not over-levered. They can't be because there isn't that much debt available. In fact, it's the opposite. It's a slight over equitization of deals.
So that's the private equity perception issue. I think it comes from all the, all the stories of the heyday that took the industry, by storm and its reputation for being like barbarians of the gate and whatnot. But I think if anyone actually studies the business model who looks under the hood and especially the private sponsors that play in the mid-market, Mid-market, all they're doing is buying, creating value, making bigger, healthier businesses and selling 'em on. That's the model. That's how they're incentivized.
Tony: But do you think that over the past 10 years they've gotten better at bringing that message out there and changing the narrative in a way for better?
Sunaina: I think that it, it's a question of who you ask, right. So they've done a great job of doing that in their ecosystem ie doing that amongst. Advisors, the investors, the players that they deal with all understand how it works, but they haven't been asked.
So the industry at large has not been so good at getting the message out to people outside of the PE ecosystem. There is still wood to chop, but they've made some good steps in organizing themselves better. There are associations such as the Institution Limited Partner Association (ILPA) and so we are doing a better job of telling the story.
But we're still not there yet. We still have a lot of evangelism to do.I think it's important that they do so. Private equity touches everything. The mic you are on was probably made by a company that is backed by private equity. The water you drink, The roads you're traveling on. The airport you're taking off from or landing into. It's all owned by a private sponsor in one way, shape, or form. It is unbelievable that the things on your desk, what percentage of it will be owned by a private equity back company? Quite a lot.
To your point on representations, I think that's where the industry has done a very disappointing job. It is still far too low. We're still in the single digits for female representation and private equity in general, but when it comes to senior women, It's sub 5%. And when it comes to women leading businesses, folks who are in my chair, Sub 1%.
It's very low when it comes to both on the buy side of private equity on the sell side. Dismal, numbers. Is there a lot of talk behind it? Yes. Now just keep in mind, we've gone through a macrocycle where they were able to fundraise very quickly. That tide has just turned and, but by just turned, I mean only just in the last six, seven months, it's become difficult to do so, which puts the investor in the driving driver's seat. And my, certainly, my hope and expectation is that these investors will now start asking tough questions.
If I have, if I only have limited capital, I need to commit to it. One of two funds, maybe I will commit to the one that has better diversity policies. Maybe I will commit to the one with better Environmental Social & Governance (ESG) policies. This is where you drive change in this environment, right? This is the silver lining of a more stressed mark Macroeconomic backdrop for fundraising is that you can drive change with responses saying, Hey, unless you fix this female representation issue, it's gonna be difficult for us to invest with you.
That's when you'll get the behavior change. Otherwise, it's been unfortunately not very acceptable or not very helpful in terms of what's happened with the numbers. Then your final question is, what's it like been like for me, I'd say peaks and troughs. There've been many, many moments where I've had to raise eyebrows at my colleagues in the industry because of things that are said or the way things are put across.
That's because they're just not used to dealing with a lot of senior women. By and large, the industry has warmly accepted me. It was hard in the beginning, no question about it. When I started, when I started my own business, which was now 13 years ago it was not easy at all. They didn't understand who I was, what I was building.
My firm is a 100% female led when I had it myself. And then also in Raymond James. I run the business globally for them. We're hundred percent female led and we're over 60% female and minorities when you combine the two together now. So we look very different.
Tony: And just so our listeners know you were essentially an acqui-hire. Is that a fair way to put it? you had a firm and Raymond James was like, I want you and your whole team
Sunaina: So they bought the whole business and they've been great to us. You know, I'd say Raymond James's culture has been a pleasant surprise. We did the deal because we believed in the culture at Raymond James, and I'm pleased to say it's almost two years in. So the honeymoon's definitely over. This is not honeymoon speak.
Yeah, it's real speak, which is, they've been really good to us, I think culture is set at the top by leadership and James Bunn who runs the investment banking division of Raymond James has been a terrific, supporter of the type of business we've built. We've built differently. We've built diversely.
He's backed that all the way and it understands that that may mean certain compromises. We may not rush to make a hire just because we need to get on with it. We'll wait to get the right diversity in the candidate pool before making that decision. So he gets that we will build a little differently to many other businesses he has under his wings, but we will do so for the right reasons.
Tony: Now you have a pretty cool backstory on how you inked that deal with your firm. It wasnt done on a golf course.
Sunaina: Life does these things to you to show people who they are. I love the Maya Angelou quote, “when people tell you who they are, believe them.” Right? And for me it was, the pandemic that made it happen this way. Firstly, I'm useless on a golf course.
most full-time working moms of three kids would, would probably say they're useless on a golf course. I certainly am. It's definitely on a wishlist of something I'll pick up when my kids are off to college, but, but not today. So that would've been lost on me. And in the pandemic, this was in the throes of the pandemic.
Remember this is early to mid-2021. The Raymond James folks in headquarters could not visit me and I was in London. At the time, they couldn't visit me because of quarantine requirements without spending 14 days in quarantine. And I couldn't get into the United States because Trump had a travel ban on.
so we're like, well, where do we meet? There's no way we're inking this deal. They're not going to buy the business and I'm not gonna sell it to them without meeting in person. And so we looked at a number of Caribbean islands and settled on Antigua as a place where we could both fly in and out of and just the way the flights worked.
We couldn't, there were no daily flights because it was the middle of the pandemic. There were lockdowns and so we kind of all had to fly in and spend three days together. And that was such a blessing because as you rightfully said, Tony, you can pretend in a conference room setting, you can even pretend over one dinner and then fly back out.
That's right. So it's really hard to make up pretenses for three, four days when you're swimming together and going snorkeling and figuring out how to spend time. Yes. Because your flight's not until two days later. So that was a great blessing for us, and I'm very glad I did it because it made me very comfortable selling the business.
Tony: I, I know you wear a lot of hats, professionally, but you also, as you mentioned, uh, mom of three kids, uh, what's the balance like, and do you have any advice?
Sunaina: I think most days the advice is tape and staples pick your tool and make it all work together. But I joke, I think, for me, the pivot to my life came from finding my own mental balance every day.
Once I was able to achieve that centricity on a daily basis, everything else. Stop feeling like work. otherwise, the rate of burnout for working moms, in particular in finance is very high in private equity It's sky high. I got into meditation about a dozen years ago and held onto it, and now it's part of my daily practice and has been for over half a dozen years.
Come what may rain or shine, sick kids or deals that are on fire, I will meditate. I'll do it for full hour now. Most people find that daunting, and so I tell them start with five or 10 minutes and then build the muscle. It's, it's a muscle, like anything else in your body takes time to build. And for me, that's been a game changer.
It means that whatever life throws me that day, I'll take it, I'll deal with it. I'll be able to reset from it and move on. It doesn't, things don't sway me the good or the bad as, as much as, as they once used to. It's like your sine curve of life. Stops being so deep and high, both on the peaks and the troughs. It's a much narrower band, and therefore you live a more balanced and happier life. And that's been a game changer for me.
Tony: what's like the first step to someone who has never done it or maybe sees an ad on Instagram or something like that about meditation, but they want you to pay a certain amount of money to get started and maybe someone just needs, uh, you know, that, just that first step to just.
Try it out for maybe, like you said, five or 10 minutes, and then maybe invest more time. What's your advice? How do what? What do you do? Is it just a matter of sitting and and letting a candle and doing nothing, or just clearing your mind? What is it?
Sunaina: I would say if you're brand new to meditation, Pick your favorite app.It doesn't matter. Hit play and start. You have to start somewhere. There's many different types of meditation out there. Get on, get going, right? Don't be so picky on which app and which type and, and this and that. Just get started because any moments of stillness you can get, give your brain is a moment of healing, is a moment where you are letting go and not adding that's, that's a moment extra of peace in that day that you would not have had.
So my first recommendation is get started once you've been. In your journey and you're now finding yourself doing guided meditations. You know, once a day for a few minutes each day, then say, okay, now I wanna take a deeper step. And that deeper step to really train that muscle is to attend a meditation course.
The course I go to every year, in fact I'm going in a couple of weeks, and I've done it every year for over a dozen years now, is the Vipassana Meditation. It's free. There are many centers across the US I think about 20 centers across the United States, many centers across Europe as well. you sign up and you go and you sit and you, they teach it to you and you leave everything behind. And that's a form of immersion. If you think about, you're trying to reset your body. You take yourself to a health retreat or a, or a yoga course, or you take yourself into bootcamp, right? and you put yourself through a full cleanse. This is a mental cleanse, right? It's a full mental reset. Where they really teach you how to meditate and you just practice it continuously for a number of days and you come out of a course going, now I know how to meditate.
And that's the full immersion that you can then take with you throughout the course of the next year until you feel like you need a new reset and you need a new sort of jolt to the system to get your mind into, the mode of meditating. So that's how I would say, I'd say just get started guys.
Just get, get going. Your favorite app, whatever you like. Do it for a few months and you'll find, okay, now I'm seeing some benefits from this. What's next? How can I take the next step? And then think about going to a course.
Tony: And what was the name of that course?
Sunaina: Vipassana Meditation And there's a wonderful website that links to centers around the world. https://www.dhamma.org/
Tony: Who has been an inspiration for you, either personally or in the business world?
Sunaina: I would say there's, there's a number of folks that are higher on my list. but if I had to pick one person whom I have always admired personally and professionally, it would be Oprah Winfrey. It's a little cliche to hear a woman say that but she's been a tremendous service to women around the world through her message, and also what she's done and with respect to spreading the word of spirituality towards women. Think about what is your spiritual path and follow it. But she's done it in the domain of a terrific media empire that she's built. so nothing but tremendous respect. If I had to pick one woman, it would be her.
Tony: She was also a journalist.
Sunaina: She was also a journalist.
Tony: She also comes up every now and then from folks that we interview at Benzinga. When she plugs a brand or a company, That is like a golden ticket for some entrepreneurs.
Sunaina: She's the original influencer. now we've got so many, but she's the original.
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By Benzinga‘I had to hear my share of inappropriate comments along the way’ Sunaina Sinha Haldea
Topics: Private Equity, glass ceiling, thoma bravo, nasdaq, women in finance, Stanford, Raymond James, Sunaina Sinha Haldea
Anthony Noto , Benzinga Editor
Featured Guest:
Sunaina Sinha Haldea Global Head of Private Capital Advisory, Raymond James
Transcript:
Tony: There was a big private equity deal this week, and those are few and far between. Nasdaq agreed to buy Thoma Bravo-owned software firm Adenza for $10.5 billion. That's not small change.
Sunaina: That's not small change. It's a huge exit for this environment, and a huge congrats to the deal team there.
I think that we have to look at it in the context of where we've been for the last nine months, which has been in a bit of winter for M&A activity, both exits ie sales, coming out of private equity portfolios, but also private equity buying assets. I think I'm hoping that this Thoma Bravo deal is a sign of things to come.
Now here's why. My hope is an educated hope. Most of M&A deal volume is driven by private equity, right? Private equity holds companies that need to sell and private equity runs on a clock. Right now, if you look at total private equity, Undrawn commitments.
So these are funds that are waiting to be called to be put into companies. That stands at over 3.5 trillion dollars. You just look at the capital that sits with buyout funds that can do large transactions in profitable companies. That's over $1.1 trillion. So that's a lot of overhang.
And one thing that people forget is that private equity runs on a clock and the clock doesn't stop ticking. Doesn't stop ticking for you, me, or anything. And that clock basically states the following four years or five years of deployment followed by four or five years of exiting. And the more you run down the clock without doing any of the above, ie doing new good deals, buying companies or selling companies, the clock then works against you.
Your net returns to investors suffer. If you don't put money in the ground and buy companies fast enough your net Internal Rate of Return (IRR) will suffer if you don't sell companies according to the right time to sell it which is generally 3, 4, 5, or 6 years after buying them. Your Distributed to Paid-In Capital (DPI) numbers suffer, and you need both those things to be very standoutish to be able to raise capital these days. Raising capital is hard for everybody. So private equity can go on pause for three months, six months, nine months, 12 months, but it cannot go on hold forever because investors then say, well, I'm paying you 2% management fee to put money in the ground. Why aren't you doing so?
And I think that we're now starting to see the wheels turning. if you ask my M&A colleagues, they will say that May was one of the highest months for signed sell-side engagements that they've seen in recent years.
So I think it's a sign of things to come that the M&A markets will open up and deal activity will pick up. Of course, the big unknown is the debt markets, but we can talk about that, a little bit later in the conversation. But for right now, we're seeing a lot of green shoots in private equity firms wanting to buy and sell companies.
Tony: Definitely. And it's reminding me of a lot of the conversations I had with PE Pros, 10 years ago. When there was a lull in deal-making as well, and they were talking about holding onto these portfolio companies a little too long and what to do with them and, and how their investors would react to that.
And they did sort of express optimism last year and they thought that maybe the tide would turn in Q1 of this year. But that wasn't the case. And then it kind of lines up that it was the lowest M&A volume for a quarter, since 2013.
what could we expect in the second half of this year?
Sunaina: I think we can expect to see a lot more dynamism in the m and markets in the lower mid-market and mid-market of PRI private equity. What does that mean? That means companies sub $50 million of EBITDA, they don't require the syndicated loan market to get the deal done.
Those companies will have a receptive audience. Why? Because leverage is available through direct lenders, the private credit markets are open for business. Those folks also have a clock. If you have a private credit fund, you are also running on a clock. You also need to put money to work. Structured credit funds are all seeing attractive deals come their way and they're doing those deals. They're underwriting those deals. So if you are operating in that sub $50 million EBITDA range, you're going to see a lot more transactions, both M&A processes where you can cherry-pick your spots. or you may be saying, okay, I'm gonna take my own companies out for sale because I need to return capital to my investors, otherwise I'm gonna fall behind in the Distributed to Paid-In Capital (DPI), which is the most important metric, some would argue to investors, you'll find fall behind that curve. And you don't wanna do that. You don't wanna be fundraising with that fact pattern. So in that end of the market, we're gonna see transactions coming to market.
Over $50 million ie the bigger deals you do need the, you know, bank debt, right? You do, you need the syndicate loan market function, or you need banks to provide you with leverage. And that is still, that is, that is a tale of idiosyncrasy. Right now, the, the markets are not functioning, let's say one once used to, but the green shoot there is, we're starting to see, uh, a pricing in of terminal rates. Right. So we, we all expect now, given the inflation print this morning, that the Fed will take a, what is they're calling it, the Fed skip. The Fed will take a pause rate. I. And folks expect Okay. Maybe there might be one more hike after that. But that's it. We're near the end of the hiking cycle such that banks can then underwrite risk. So with that, we'll start to see more functioning of the debt markets for larger deals. But certainly in the $50 million and south EBITDA range, we'll start to see deals come to market.
Tony: Just before we wrap up this topic, I want talk about the type of deal we saw. what does it say about PE, Thoma Bravo specifically did a deal with Nasdaq. And they sold a large portion of their portfolio company, Adenza, but they kept about a 15% stake. And this is not the first billion-dollar plus deal that they did with a stock exchange.
They did one with the New York Stock Exchange, back in 2020, what does it say about that part, this particular type of deal? what's the strategy here?
Sunaina: I think the strategy here is two-fold. It is, and again, the ultimate viewpoint on this has to come from Thoma Bravo, but when you're reading what was announced and had the playbook that's being deployed here is that strategic buyers will always pay up for strategic assets and that's what you have here. You have NASDAQ, a strategic buyer. They will always pay more for companies and especially strategically oriented companies than private equity buyers. So good for Thoma Bravo for finding a strategic buyer for the asset. So that's fantastic. and I think that you are seeing a leaning into businesses with predictable revenue, right? So you think about why did NASDAQ do this from their perspective? Why does this make sense? It really is about building up a software business with a recurring revenue business model in this market environment and this macro that we are live in.People will pay up for annualized recurring revenues and which this deal very much brought to the table for NASDAQ. Now, NASDAQ stock didn't react very well, was down quite a bit yesterday. But that's a one-day event. I think over time when you hear NASDAQ talk about its rationale for the sale, it really is the predictability of the revenue stream that was attractive to them.
Tony: I did, I did see that about the stock, but, and, and with all the stripe powder, you still not seeing PE sponsor come in and be like, well, we can pay north of $10.5B?
Sunaina: Well, the, the PE buyer needs to enter at a price where it can make two and a half times. So, yes, of course they can put any number out there, but they got, they gotta make, they have to make money. They have to make a return on that. And so generally when you put pit a private equity buyer, head to head with the strategic, the strategic can pay more because the private equity investor, has to. price in its own fees. Remember, there's fees on the capital that goes in.The capital considerations are different for a private equity sponsored buyer than for strategic buyer, number one.
And number two, the strategic buyer has synergies, that they can price in which the sponsor usually cannot.
Tony: So I wanted to bring up a little bit about the image of private equity. it's an industry that you are a top player in. And I know from experience there arent too many women in it inking deals. It's predominantly men. II read something that you had written. You wrote it for https://www.penews.com/
Sunaina Sinha Haldea: ‘I had to hear my share of inappropriate comments along the way’
and I wanted to get your thoughts on private equity as an industry. I think, it still struggles with this image problem of settling companies with debt and perhaps, too much so because a lot of them are going into bankruptcy. And I wanted to get your thoughts on one, what it's like being, oa young, mover and shaker in this industry. two being, a woman in this space and if representation is improving, and three, what folks like you are doing to make sure that maybe PE gets the makeover that it, it.It needs to appeal to the, the average consumer?
Sunaina: So let me start in reverse chronological order and talk about the industry and its reputation and its contributions to society, if you will. What is the value of private equity in the world today? And then we'll move backwards into the you know, probably more disappointing territory, which is representation of women and women of color and, and, you know, lots of -isms that come with it.
Often also, some of it's stereotyped, but some of it very legitimate. So when it comes to private equity and image problem, it is so easy to say, Hey, they saddle companies with debt, and then they go bankrupt. But remember, the, the incentives are not aligned for that to happen. Because with private equity is a long only model.
Private equity buys. It doesn't short. It goes long, number one, right? And it buys low and sells high. That's the model. Buy a company of this size. And sell a bigger company three to five years later. It's very simple. And now the question is how do you make that company bigger? How do you finance the acquisition and how do you finance the growth of the business?
So you adding value on the way out. Because it has to create a more valuable business. That was, it can't sell it for more than it bought it. It has to make the business stronger, more efficient, more operationally resilient, and a better economic contributor. To society and to the economy around it. In order for that to happen often means way more jobs growth because the business is growing, the business goes to international expansion, business goes to acquiring new companies.
It often means that the, the companies are left much larger, more scale players. And so whenever you have private equity inflows into countries, if you look at emerging marketing and economies, if you look at parts of the United States, for example, where. Capital has not flown to more,naturally ie the Midwest, etc. You see that every time you have private equity in flow. It creates a thriving entrepreneurial community because that private equity is designed the way it's engineered to build better companies, build bigger, healthier companies, because that's the only way you get someone new to come in and buy that business for you.
If you create value, if you create something more valuable, hundred percent that if you cannot do that, if you are one of those. Uh, in those unfortunate moments in your portfolio as a private equity fund, and almost every private equity fund has one or two of these stories of, Hey, I tried. I couldn't get there.
I have 10 or 15 portfolio companies in this fund, and one of them didn't make it. I couldn't turn it into what I thought I would turn it into. So either I sell it at the loss or in the Armageddon scenario, I lost the business in its entirety. If you look at the loss ratio in private equity, which means a total wipeout, it's incredibly low.
It's, it's one of the lowest in any market. So private equity does not wanna lose, have a complete wipe, because that's terrible to their own fundraising, prospects out there because it's so rare to have a complete loss. Yeah, you can lose money, but to have a complete wipe out a bankruptcy pretty low.
And what you are seeing right now in the last nine months is that debt hasn't been so available. So the companies are buying, certainly in this cycle, are not over-levered. They can't be because there isn't that much debt available. In fact, it's the opposite. It's a slight over equitization of deals.
So that's the private equity perception issue. I think it comes from all the, all the stories of the heyday that took the industry, by storm and its reputation for being like barbarians of the gate and whatnot. But I think if anyone actually studies the business model who looks under the hood and especially the private sponsors that play in the mid-market, Mid-market, all they're doing is buying, creating value, making bigger, healthier businesses and selling 'em on. That's the model. That's how they're incentivized.
Tony: But do you think that over the past 10 years they've gotten better at bringing that message out there and changing the narrative in a way for better?
Sunaina: I think that it, it's a question of who you ask, right. So they've done a great job of doing that in their ecosystem ie doing that amongst. Advisors, the investors, the players that they deal with all understand how it works, but they haven't been asked.
So the industry at large has not been so good at getting the message out to people outside of the PE ecosystem. There is still wood to chop, but they've made some good steps in organizing themselves better. There are associations such as the Institution Limited Partner Association (ILPA) and so we are doing a better job of telling the story.
But we're still not there yet. We still have a lot of evangelism to do.I think it's important that they do so. Private equity touches everything. The mic you are on was probably made by a company that is backed by private equity. The water you drink, The roads you're traveling on. The airport you're taking off from or landing into. It's all owned by a private sponsor in one way, shape, or form. It is unbelievable that the things on your desk, what percentage of it will be owned by a private equity back company? Quite a lot.
To your point on representations, I think that's where the industry has done a very disappointing job. It is still far too low. We're still in the single digits for female representation and private equity in general, but when it comes to senior women, It's sub 5%. And when it comes to women leading businesses, folks who are in my chair, Sub 1%.
It's very low when it comes to both on the buy side of private equity on the sell side. Dismal, numbers. Is there a lot of talk behind it? Yes. Now just keep in mind, we've gone through a macrocycle where they were able to fundraise very quickly. That tide has just turned and, but by just turned, I mean only just in the last six, seven months, it's become difficult to do so, which puts the investor in the driving driver's seat. And my, certainly, my hope and expectation is that these investors will now start asking tough questions.
If I have, if I only have limited capital, I need to commit to it. One of two funds, maybe I will commit to the one that has better diversity policies. Maybe I will commit to the one with better Environmental Social & Governance (ESG) policies. This is where you drive change in this environment, right? This is the silver lining of a more stressed mark Macroeconomic backdrop for fundraising is that you can drive change with responses saying, Hey, unless you fix this female representation issue, it's gonna be difficult for us to invest with you.
That's when you'll get the behavior change. Otherwise, it's been unfortunately not very acceptable or not very helpful in terms of what's happened with the numbers. Then your final question is, what's it like been like for me, I'd say peaks and troughs. There've been many, many moments where I've had to raise eyebrows at my colleagues in the industry because of things that are said or the way things are put across.
That's because they're just not used to dealing with a lot of senior women. By and large, the industry has warmly accepted me. It was hard in the beginning, no question about it. When I started, when I started my own business, which was now 13 years ago it was not easy at all. They didn't understand who I was, what I was building.
My firm is a 100% female led when I had it myself. And then also in Raymond James. I run the business globally for them. We're hundred percent female led and we're over 60% female and minorities when you combine the two together now. So we look very different.
Tony: And just so our listeners know you were essentially an acqui-hire. Is that a fair way to put it? you had a firm and Raymond James was like, I want you and your whole team
Sunaina: So they bought the whole business and they've been great to us. You know, I'd say Raymond James's culture has been a pleasant surprise. We did the deal because we believed in the culture at Raymond James, and I'm pleased to say it's almost two years in. So the honeymoon's definitely over. This is not honeymoon speak.
Yeah, it's real speak, which is, they've been really good to us, I think culture is set at the top by leadership and James Bunn who runs the investment banking division of Raymond James has been a terrific, supporter of the type of business we've built. We've built differently. We've built diversely.
He's backed that all the way and it understands that that may mean certain compromises. We may not rush to make a hire just because we need to get on with it. We'll wait to get the right diversity in the candidate pool before making that decision. So he gets that we will build a little differently to many other businesses he has under his wings, but we will do so for the right reasons.
Tony: Now you have a pretty cool backstory on how you inked that deal with your firm. It wasnt done on a golf course.
Sunaina: Life does these things to you to show people who they are. I love the Maya Angelou quote, “when people tell you who they are, believe them.” Right? And for me it was, the pandemic that made it happen this way. Firstly, I'm useless on a golf course.
most full-time working moms of three kids would, would probably say they're useless on a golf course. I certainly am. It's definitely on a wishlist of something I'll pick up when my kids are off to college, but, but not today. So that would've been lost on me. And in the pandemic, this was in the throes of the pandemic.
Remember this is early to mid-2021. The Raymond James folks in headquarters could not visit me and I was in London. At the time, they couldn't visit me because of quarantine requirements without spending 14 days in quarantine. And I couldn't get into the United States because Trump had a travel ban on.
so we're like, well, where do we meet? There's no way we're inking this deal. They're not going to buy the business and I'm not gonna sell it to them without meeting in person. And so we looked at a number of Caribbean islands and settled on Antigua as a place where we could both fly in and out of and just the way the flights worked.
We couldn't, there were no daily flights because it was the middle of the pandemic. There were lockdowns and so we kind of all had to fly in and spend three days together. And that was such a blessing because as you rightfully said, Tony, you can pretend in a conference room setting, you can even pretend over one dinner and then fly back out.
That's right. So it's really hard to make up pretenses for three, four days when you're swimming together and going snorkeling and figuring out how to spend time. Yes. Because your flight's not until two days later. So that was a great blessing for us, and I'm very glad I did it because it made me very comfortable selling the business.
Tony: I, I know you wear a lot of hats, professionally, but you also, as you mentioned, uh, mom of three kids, uh, what's the balance like, and do you have any advice?
Sunaina: I think most days the advice is tape and staples pick your tool and make it all work together. But I joke, I think, for me, the pivot to my life came from finding my own mental balance every day.
Once I was able to achieve that centricity on a daily basis, everything else. Stop feeling like work. otherwise, the rate of burnout for working moms, in particular in finance is very high in private equity It's sky high. I got into meditation about a dozen years ago and held onto it, and now it's part of my daily practice and has been for over half a dozen years.
Come what may rain or shine, sick kids or deals that are on fire, I will meditate. I'll do it for full hour now. Most people find that daunting, and so I tell them start with five or 10 minutes and then build the muscle. It's, it's a muscle, like anything else in your body takes time to build. And for me, that's been a game changer.
It means that whatever life throws me that day, I'll take it, I'll deal with it. I'll be able to reset from it and move on. It doesn't, things don't sway me the good or the bad as, as much as, as they once used to. It's like your sine curve of life. Stops being so deep and high, both on the peaks and the troughs. It's a much narrower band, and therefore you live a more balanced and happier life. And that's been a game changer for me.
Tony: what's like the first step to someone who has never done it or maybe sees an ad on Instagram or something like that about meditation, but they want you to pay a certain amount of money to get started and maybe someone just needs, uh, you know, that, just that first step to just.
Try it out for maybe, like you said, five or 10 minutes, and then maybe invest more time. What's your advice? How do what? What do you do? Is it just a matter of sitting and and letting a candle and doing nothing, or just clearing your mind? What is it?
Sunaina: I would say if you're brand new to meditation, Pick your favorite app.It doesn't matter. Hit play and start. You have to start somewhere. There's many different types of meditation out there. Get on, get going, right? Don't be so picky on which app and which type and, and this and that. Just get started because any moments of stillness you can get, give your brain is a moment of healing, is a moment where you are letting go and not adding that's, that's a moment extra of peace in that day that you would not have had.
So my first recommendation is get started once you've been. In your journey and you're now finding yourself doing guided meditations. You know, once a day for a few minutes each day, then say, okay, now I wanna take a deeper step. And that deeper step to really train that muscle is to attend a meditation course.
The course I go to every year, in fact I'm going in a couple of weeks, and I've done it every year for over a dozen years now, is the Vipassana Meditation. It's free. There are many centers across the US I think about 20 centers across the United States, many centers across Europe as well. you sign up and you go and you sit and you, they teach it to you and you leave everything behind. And that's a form of immersion. If you think about, you're trying to reset your body. You take yourself to a health retreat or a, or a yoga course, or you take yourself into bootcamp, right? and you put yourself through a full cleanse. This is a mental cleanse, right? It's a full mental reset. Where they really teach you how to meditate and you just practice it continuously for a number of days and you come out of a course going, now I know how to meditate.
And that's the full immersion that you can then take with you throughout the course of the next year until you feel like you need a new reset and you need a new sort of jolt to the system to get your mind into, the mode of meditating. So that's how I would say, I'd say just get started guys.
Just get, get going. Your favorite app, whatever you like. Do it for a few months and you'll find, okay, now I'm seeing some benefits from this. What's next? How can I take the next step? And then think about going to a course.
Tony: And what was the name of that course?
Sunaina: Vipassana Meditation And there's a wonderful website that links to centers around the world. https://www.dhamma.org/
Tony: Who has been an inspiration for you, either personally or in the business world?
Sunaina: I would say there's, there's a number of folks that are higher on my list. but if I had to pick one person whom I have always admired personally and professionally, it would be Oprah Winfrey. It's a little cliche to hear a woman say that but she's been a tremendous service to women around the world through her message, and also what she's done and with respect to spreading the word of spirituality towards women. Think about what is your spiritual path and follow it. But she's done it in the domain of a terrific media empire that she's built. so nothing but tremendous respect. If I had to pick one woman, it would be her.
Tony: She was also a journalist.
Sunaina: She was also a journalist.
Tony: She also comes up every now and then from folks that we interview at Benzinga. When she plugs a brand or a company, That is like a golden ticket for some entrepreneurs.
Sunaina: She's the original influencer. now we've got so many, but she's the original.