Private Equity Eyes Infrastructure, Talent in Demand
Investors around the world are turning to infrastructure to add stability and security to their portfolios. Infrastructure is considered by most investors to be long-term, inflation proof, and run contrary to business cycles. So, despite offering lower growth than traditional private equity deals, infrastructure assets are attractive due to their stable cash flow. Right now, the critical need for new and updated infrastructure…coupled with continuing volatility in other asset classes…is opening the door to private investment in public infrastructure - or public-private partnerships (P3). In fact, right now a record number of private equity funds are embracing infrastructure assets, according to the Globe and Mail. The report states that funds are “scouring markets around the world for buyout targets and new sources of capital.”
Amid the growing trend, executive search firm, A.E. Feldman, says infrastructure finance jobs are opening up for candidates with backgrounds in investment banking as well as experience in analyzing and executing structured financings. The most sought after candidates are those with experience in infrastructure transactions and civic engineering. Additionally, legal jobs are opening up for attorneys with expertise in global project development and complex financial transactions.
Private Equity Funds Embracing Infrastructure
Last month, two private U.S. funds, LS Power Equity Partners and Global Infrastructure Partners (GIP), announced a proposed $7.6 billion takeover of the Canadian electricity generator, TransAlta Corp. In a statement, LS Power and GIP explain why they are the right partners for TransAlta. “LS Power is an experienced owner and operator of power generation assets throughout the United States. GIP is an organization that invests in infrastructure companies and assets worldwide. In a private company structure, with owners taking a long-term view, TransAlta and its leadership would have significant flexibility in making strategic investments and plans that benefit stakeholders.”
“We are convinced that we are the right partners for TransAlta, as management would have enhanced flexibility to execute longer-term strategies for growth,” said James Bartlett, President of LS Power Equity Advisors.
According to the Globe and Mail, the deal would be the latest in a soaring number of takeovers during the past three years of infrastructure assets, including roads, airports and utilities. The report states that there were four infrastructure-focused private equity firms in the market looking to raise $1.8 billion in 2005, citing research from British-based Private Equity Intelligence. In sharp contrast, this year, a record 71 such funds seeking $90.8-billion in new capital are being marketed to investors around the globe.
Unlisted Infrastructure Market Surging
The unlisted infrastructure market has grown by a staggering 429% percent in two years, according to London-based Private Equity Intelligence Ltd (Preqin). In a recent publication, the group finds that last year, a total of $34.9 billion was raised by 18 funds, up from $6.6 billion raised in 2005 by 11 funds. So far this year, unlisted infrastructure has already raised $13.2 billion in six funds.
“The unlisted infrastructure market has grown from being a niche sector of the private equity industry into being what many now regard as a separate asset class,” reports Preqin. “Many investors now treat the sector completely independently to other private equity and unlisted fund investments, with a significant 47% of active investors in the asset class establishing a separate allocation for infrastructure, while 43% include infrastructure funds in their private equity portfolio and 10% include it in their real assets portfolio.”
Many factors have contributed to the increase in capital raised by unlisted infrastructure funds in recent years, according to Preqin. Most notable, however, is the growing acceptance of private and foreign investment in public infrastructure assets by U.S. authorities.
Twenty funds primarily focused on North America have closed since 2004 raising $41.5 billion, with an additional 17 funds currently seeking to raise a total of $27.3 billion.
“There have been concerns from some commentators that fund-raising for the unlisted infrastructure market has left the industry awash with surplus capital, and that current levels of fund-raising are unsustainable in the long term,” the report states. “However, with significant new markets opening up in America, plus other emerging markets such as India, we expect to see more opportunities available to fund managers than ever before. With uncertainties continuing to surround financial markets worldwide, many investors are turning to infrastructure in order to add stability and security to their portfolios.”
Talent in Demand
The growth of infrastructure as an asset class has increased demand for talent, reports A.E Feldman.
Most recently, U.S. buyout firm, Kohlberg Kravis Roberts (KKR) hired a new senior advisor to its infrastructure team as it prepares to venture into the sector, according to Dow Jones Private Equity News. The report states the firm has appointed John Bryson as a senior advisor and is expected to take up his new position in October. Bryson has 30 years of experience on the industry side and regulatory side of the energy sector.
Back in May, KKR announced plans to begin a new initiative to invest in infrastructure assets on a global basis. The initiative is led by George Bilicic, KKR’s Managing Director and Head of Infrastructure. Now based in KKR’s New York office, Bilicic was formerly a Managing Director at Lazard and head of the firm’s global efforts in the power, energy and infrastructure sectors.
KKR said it is building an investment team to focus specifically on global infrastructure opportunities and will work to identify highly experienced investment and operating executives in support of the initiative. The team, which will have a presence in Europe, Asia, and the U.S., will collaborate with KKR’s other industry groups, capitalizing on the firm’s considerable experience strengthening the operations of companies and investing in complex and regulated businesses.
In a statement, Henry R. Kravis and George R. Roberts, Co-Founders of KKR, said, “Infrastructure is a multi-trillion dollar global marketplace with enormous need for private investment. KKR recognizes the important role infrastructure investing plays in the growth of both developed and developing economies. This new initiative is a logical extension of our business, building on the significant expertise we have established by investing in large, complex and regulated businesses and our record of driving operational improvements in a wide range of industries.”
A.E. Feldman has a specialized team of recruiters dedicated to infrastructure and project finance. To learn more about these relevant issues or inquire about existing and future infrastructure finance opportunities, contact A.E. Feldman’s President, Mitch Feldman and the firm’s specialized recruiting team here.
