“We found as we moved from a general private equity business to a more specific private equity business that there were more opportunities than we could fit within the narrow perimeters of a PE deal. Rethinking the firm’s business model required a “mindset change,” Goltz added. We have moved from what was a pretty opportunistic model to where we have a very focused, proactive effort to win a particular industry group within a particular geography,” said Goltz, who served on the panel along with Sun Josh Harris, founding senior partner at Apollo Management in New York and Octavio Lopes, a partner with GP Investments in Sao Paulo, Brazil. We have been forced to rethink the way we’ve done business. Other firms have expanded in a similar way. Today, there are 14 offices across four continents and more than 300 employees managing myriad products that are separate from the firm’s private equity business. When Frederick Goltz, a San Francisco-based partner at KKR, joined the firm in 1995, the company had 22 executives, one fund and two offices. Private equity firms are close behind, changing their business models to respond to worldwide growth in competition and a new, post-financial crisis investment climate. As economies in Europe and the United States continue to struggle, the flow of wealth is moving east to China and India, and south to Latin America. Stories like this are indicative of the great opportunity - and potential peril - that exists in today’s global private equity landscape. At a panel on private equity at the recent Wharton Global Alumni Forum in San Francisco, Sun recalled a trip for a haircut when “my barber told me that he was investing in private equity and that he expected to get 20-times return on his low capital contribution to a little-known local PE firm with a total history of about 30 days.” Today, Chang Sun, Hong Kong-based managing partner of Warburg Pincus, has heard stories of firms raising “billion-dollar funds” in several months as opposed to the more standard year and a half.Īnd it’s not just the upper echelon of Chinese wealth that is getting in on the act. Ten years ago, private equity was a nonentity in China.
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