Interview by Duke Magazine.
Stéphane Pesch succeeds Rajaa Mekouar as CEO of LPEA.
He unveils the objectives of his new mandate, which is focused on growing the organisation and multiplying synergies between various players of the financial centre. Interview.
What goals have you set for your term?
First of all, I would like to emphasize once again that it is a great honour for me to take over from Rajaa, who has done a superb job and has throughout his tenure continuously promoted the LPEA and allowed it to move forward. My mandate as CEO began on September 1st, after almost a year with the company as Director of Strategy, a position that has allowed me to familiarise myself with the inner workings and running of our association. This has allowed me in particular to focus on the important tasks that will be an integral part of my mandate, i.e. “thought leadership” (informed and specialized content), “public advocacy” (representation and promotion of the industry) and attracting, training and developing talent, through the LPEA Training Academy and other partnerships. Initially I will be fully dedicated to the implementation of the strategic plan for 2020-2025, as defined by our Executive Committee, which includes ambitious projects on, for instance, the growth of the association, increased synergies with other players in the financial centre and greater visibility for the industry. Then I would like to go on to develop new complementary initiatives. I also aspire to maintain the dynamic, entrepreneurial and passionate spirit of our team, which has enabled us to reinvent ourselves and to deal with the current situation.
“I aspire to maintain the dynamic, entrepreneurial and passionate spirit of our team, which has allowed us to reinvent ourselves and to deal with the current situation.”
How does the Covid-19 crisis affect private equity?
Private Equity is a rather “non-cyclic” type of asset, which aims to create value for unlisted companies over the long term and not on a quarterly basis. PE funds, or investment vehicles, are normally closed to buy-outs, and thus allow GPs, or managers, to fully dedicate themselves to the selection of target companies, which will then follow operational, technological, strategic and commercial optimization programmes in order to increase their value and then be sold after a few years. The PMs thus are totally committed to the various companies acquired, which remain limited in number, and bring to bear their experience, expertise and the necessary improvements in a focused and practical manner. Covid-19 has obviously spared no one and has had/will have an impact on all the economic players, including those in the Private Equity world. The picture in the world of technology is more contrasted, with some companies doing very well. Indeed, some companies owned by PE funds will also be confronted with the impacts of the pandemic, which may have disrupted some of their customers, suppliers, service providers or partners. These effects will obviously need to be analysed in detail, and any temporary cash flow concerns will be addressed by managers in order to preserve the value and investments already made. In other words, some valuations of the portfolio companies may be adjusted and will possibly have an impact on managers’ views on their preferred sectors. However, there will always be many opportunities, since many PE funds nowadays have a war chest: capital which is committed but not used, and which can now be used to acquire new interesting and compatible markets at any time.
What challenges and opportunities do you identify for private equity in the next 5 years?
Private equity, like other asset classes and economic players, will certainly bear the scars of the C-19 pandemic, but has already begun its transformation, which will most likely accelerate in the coming years. Indeed, it is no longer necessary to prove the economies of scale provided by the various communication platforms, which are profoundly transforming the way we work, do business and have meetings with each other. This example is only the tip of more advanced digitalization, which will bring huge opportunities, but also its share of challenges, if we are not to forget the human aspect! New technologies such as the “blockchain” could eventually transform “Registry and Transfer Agent” activities, for example – in the investment fund industry the Registry and Transfer Agent performs AML/KYC checks on clients and investors, among other things. The implementation of automated and robotized processes or even artificial intelligence are clearly in vogue, and will allow managers and their teams to process an exponential amount of information, deals and decisions even more efficiently and even clinically. It is essential to note that with growing “substance” in Luxembourg, the teams and entities located here are also changing in size (becoming larger), in profile (back and middle office in addition to new roles) and in specializations, which require a large pool of available and well-trained talent, who already have significant experience in the world of Private Equity. Therefore, it is essential to attract and develop this kind of candidate in Luxembourg, to offer them adequate training (e.g. via the LPEA Training Academy) and to facilitate their entry into our exciting, entrepreneurial industry, where possible. Finally, it is very important for our company and our industry to systematically pursue efforts to promote, demystify and explain the positive and beneficial effects of Private Equity for the real economy, for corporate finance (mostly SMEs) and portfolio diversification.