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Insight: What’s next for PE?

Christopher Masek has been the CEO of IK Partners for more than a decade and has worked in the private equity industry (“PE”) for over 30 years. Despite persistent economic uncertainty and an inhospitable interest rate environment, Christopher believes that opportunities for growth remain, but only for firms with truly sustainable business models.

The invasion of Ukraine marked a clear moment of change for the world economy in general and PE in particular. Crises converged to create a perfect storm: supply chain bottlenecks, labour shortages, energy constraints and mounting inflation on the micro front; and a sharp shift in monetary policy, characterised by an end to quantitative easing and rising interest rates at the macro level. While this watershed had long been predicted, it made for a rude awakening.

PE handled the micro side of the equation pretty well. Price rises were passed on, strategic stocks were shored up, employee churn was overcome and energy needs were hedged. The macro side has, altogether, been more challenging — particularly the limited supply and rising cost of capital.

This environment has dramatically changed the PE landscape. General partners, limited partners and lenders are in a period of doubt, evidenced by a sharp slowdown in new deals, fewer exits and a reduction in funds available to make new investments. Successful navigation in this climate is not about managing the micro crises, it is about overcoming capital constraints.

Reality Check

The first consideration is what not to do, in particular, continuing to pay high multiples on non-cash generating metrics and thereby ignoring the present reality. Such investments are less prevalent today, not least because lenders are no longer willing to support them. Nonetheless, concerns persist around deals of this nature, particularly those completed between 2019 and 2022. With this vintage period under significant scrutiny, investors will not accept waffling or delusional valuations.

Instead, practitioners need to demonstrate a track record of consistently returning capital with a low loss ratio, coupled with a wariness for excessive financial creativity. Crucially too, firms need a well-articulated and meaningful raison d’être, positioning themselves beyond the habitual mishmash of: “We only do proprietary deals”, “We are top quartile” and “We create value,” too often fed to highly experienced investors. Finally, access to well-priced capital requires a large, well-organised and dedicated team of Investor Relations professionals, who are on a par (at least) with Investment teams. As one of my partners put it recently: “How many car manufacturers were there at the beginning of the last century? Hundreds. How many are there today? Closer to a dozen. Were these businesses the most creative in the industry? No. But they consistently adapted to market constraints and demands.”

A Robust Model

So how should IK adapt to and manage our activity in the current environment, which, we contend, is here to stay? Our belief is that we have long been equipped for it; in the way we invest, the way we monitor our investments and the way we communicate with stakeholders.

We have established a rigorous investment process to select high-quality, cash-generating assets with strategic logic, operational runway and talented management. We pioneered the development of a substantial and effective in-house Operations team to ‘beat’ the micro and generate alpha. And our work yields demonstrable results. Our loss ratio is among the lowest in the industry, we annually return more capital to our investors than we deploy and we produce consistent and predictable levels of exit proceeds.

Our investment formula is based on a time-proven model, which we continuously upgrade and enhance. We stick to the lower-mid market space and focus on traditional economy companies with a particular roadmap for strategic and operational improvement. We value investments fairly, based on properly baselined cash metrics. We avoid over-leverage and creative financial engineering. And we provide companies with the requisite support to grow, develop and achieve a successful exit.

Today, we are regarded as the institutional reference in the European lower-mid market space and this, coupled with our reputation as a trusted partner by opinion-leading investors, provides our firm with a hard-won ‘right to exist’.

But we also need to ensure that our path is aligned with the demands of our investors and other stakeholders. Their first ask is clear: to continue generating strong, predictable and consistent returns. Here, we have detected a real shift in how performance is measured, from self-promoting arbitrary valuation metrics to unadulterated cash-on-cash returned to investors. To ensure that we deliver against this expectation, we devote time and resource into building and developing our team of Investment Professionals and our Operations and Capital Markets teams. These individuals are widely considered to be at the top of their game.

Investing for Good

Our next priority relates to our values and our role in society. Just as the industry has set high standards for financial performance and accountability, the same is required when it comes to environmental and social progress; from initiatives to reduce emissions and work towards net zero, to the promotion of diversity and inclusion in our ranks, as well as support for health and wellbeing in the communities where we work. IK has been at the forefront of this responsible investment movement, rigorously incorporating ESG considerations into our investment process, actively managing our portfolio companies for good, supporting our local communities and undertaking standalone initiatives that reflect our ‘people-first’ agenda. Most importantly, while technological risks have traditionally been a key due diligence item in anticipating how a company may perform and be perceived by future buyers, possible future ESG trends and their potential impacts on an investment have become at least as critical.

Finally, our investors expect full transparency and genuine engagement. To that end, we have grown our Investor Relations team. We have also invested substantial resources into our team of 27 individuals responsible for reporting, compliance and interaction in Luxembourg, complemented by a range of IT tools to ensure that we offer our investors complete transparency and ongoing dialogue. We recognise that our relationship with investors is more critical than ever and we are committed to providing them with active and professional support.

We believe that deep-rooted, lasting change is underway across our market. That means the environment of tomorrow will be markedly different from what we once knew. Long prepared for this new era, we at IK expect to thrive in the future as positive outliers. Of course, true success takes time but we have certainly made a strong start and are excited to be at the forefront of change, seeking, like those top-rated carmakers, to be among the winners in an industry marked by challenge, evolution and rationalisation.

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2022 Highlights: Responsibility

Jovana Stopic, ESG Director at IK Partners discusses the Firm’s sustainability achievements in 2022.

Against the backdrop of broader macro events in 2022, we remained resolute in our commitment to placing continued emphasis on ESG practices and initiatives and taking decisive steps to reinforce our strategic focus on sustainability. At IK, we are proud to have been among the earliest adopters of integrating material ESG considerations throughout the entire investment lifecycle and we believe that prioritising ESG in this way, creates fundamentally better companies. Our activities over the last couple of years reflect this belief and in December we were proud to publish our 2021-2022 Sustainability Report “Unleashing Potential, a comprehensive document which outlines the activities and initiatives we execute to further advance our progress along our ESG journey.


As a global financial risk, climate change is one of our most prioritised areas of focus. Most notably in 2022, we were pleased to have our greenhouse gas (“GHG”) emissions reduction targets approved by the Science-Based Targets initiative. The objectives we set cover both IK’s own emissions and our PCs’ where we hold a majority stake. During the course of the year, we supported many of our PCs in the measurement of their GHG emissions and subsequently produced our annual IK GHG Emissions Report which now includes financed emissions. We also became a formal supporter of the Task Force on Climate-Related Financial Disclosures framework. In addition, 2022 saw us invest in carbon credits which support projects engaged in ocean and soil carbon sequestration as well as purchase Solvatten solar water purifying devices in Kenya.


We believe that our colleagues are our greatest assets and we understand that the continued success of IK is highly dependent on the collective efforts of a range of diverse individuals. We are proud to be working towards gender parity with women accounting for more than 50% of new hires, 33% of internal promotions and 40% of all partner promotions in 2022. Continuing to support initiatives such as 10,000 Black Interns, offering paid work experience to members of the Black community, has allowed us to work with highly talented individuals who, in a short period of time, added great value to the business. In 2022, we also took steps to prioritise colleague wellbeing and engagement, introducing supportive parental policies and a flexible approach to working patterns.


When it came to our PCs, we continued to encourage them to adopt a similar mindset and supported them in their efforts to increase diversity within their firm and board of directors. At the end of 2022, we achieved our ambition of having, on average, women making up 30% of Non-Executive Directors across all IK Mid Cap and Small Cap Funds.

We recognise that both our firm and the wider PE industry have a long journey ahead and therefore we actively engage with various initiatives to help drive positive change.


Over the course of 2022, we worked hard to institute and maintain high standards of governance and business ethics, through the introduction and revision of various policies covering the Firm, the IK Funds and our PCs.

IK in the Community

Outside of our sustainable practices, we continued to support projects as part of IKARE, our venture philanthropy operated charity across three key projects and were proud to have each office dedicate time and resources to local charities to tackle various initiatives in their community.

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Winner’s Q&A: IK Partners

IK’s CEO Chris Masek, discusses how long-standing initiatives at the firm led to impressive achievements in 2022, and have also prepared it well for the years to come. 

What achievements are you proudest of from the past year?

Winning Pan-European House of the Year at the Private Equity Awards 2022 and being recognised by our industry was such a proud moment for us. Beyond a prestigious trophy, last year was the culmination of an outstanding period covering many important milestones. We had a record year of fundraising, portfolio performance and returns to investors, and expanded internationally, opening our New York office for IR and fundraising and launching our UK mid cap strategy.

We also rebranded to IK Partners, a subtle name change that better reflects our current momentum and strategy of pursuing “People-First Private Equity”. I could not have been prouder of our own people and the immense talent IK boasts. We were also honoured to promote five colleagues to the partnership recently, some of whom started their private equity careers with us and are a testament to how investing in your own teams can add value to the wider group.

What has set you apart from your competitors over the past year?

The last year has seen us bearing the fruits of our unique approach that we have been fine-tuning for over 30 years, partnering with growing companies and supporting them as they scale up and expand into new markets by combining proactive buy-and-build strategies with operational improvements.

We focus on businesses in Benelux, DACH, France, Nordics and the UK, concentrating on business services, healthcare, consumer and industrial sectors. Typically we will have already identified a series of strategic add-ons before a new investment is even signed, giving us an edge with competitive deals and enabling us to accelerate companies’ growth strategies and our exit opportunities.

Our seven European offices are all supported by IK’s capital markets, operations and ESG teams so while our platform investments are sourced through our experts in local markets, the portfolio benefits from the combined resources available across IK. This makes life easier for management teams and helps us drive superior returns as we take advantage of the collective skills across the group.

How have you maintained strong investment and exit activity over the past year despite the ongoing challenges of the pandemic?

Our people-centred approach and clear investment strategy helped drive strong investment returns. The priority at the time was safeguarding the health and welfare of our employees and the 35,000 people across the portfolio. Our operations team really came to the fore and worked tirelessly to mitigate the impact – from making initial impact assessments to the development and implementation of recovery plans. IK’s long-standing and disciplined investment criteria ensured a resilient portfolio capable of operating through economic turbulence. We continued the planned exits on our original timetable and were well placed to execute on several exciting investment opportunities that became available.

IK also conducted an impressive fundraising round. How did you manage this?

Throughout all the disruption, we have raised over €4.3bn since the first lockdown across our mid cap, partnership and small cap strategies. We held fully virtual fundraising processes, with our IR team building strong relationships with both new and existing LPs.

Our track record of delivering impressive returns is clearly an important factor, but so too is maintaining the “client experience” to ensure that existing LPs feel confident in returning to us for future funds. This is where our IR and communications teams come in, as their ability to articulate our strategy, respond to investors’ needs, and update on developments helps build the confidence among LPs to continue investing with IK.

What single deal from the past year best sums up your particular approach and its strengths?

BST, the fire protection services provider, is a great example of what IK does best. We first invested in 2019 when the company only had a presence in Sweden. By the time we exited in 2021 the company had expanded to Denmark and Norway, built out new finance, HR and sales functions with the support of our operations team, and grown revenues threefold. In just three years, BST went from an entrepreneurial small cap player in Sweden to a market-leading mid cap champion across Europe.

What are your predictions for the coming year?

We are clearly in a changing environment with inflationary and supply chain pressures increasing, to which labour churn, wage inflation and social unrest should be added, with the backdrop of rising interest rates and increased difficulty to access new capital. We believe demonstrating liquidity will be key with Jerry Maguire’s proverbial “show me the money” taking the lead over the hubris of paper valuations. We equally believe that focusing on developing portfolio companies, securing conservative balance sheets, and keeping an eye on churn and inflation to deliver growth will be tantamount to delivering further liquidity. 

We believe there will be attractive investment opportunities at more reasonable multiples using more rational baseline metrics (cash EBITDA rather than multiples of ARR) with conservative financing. Finally, the most determining change in our industry will be accessing new capital. Investors will be taking their time to consider which strategies are the winning ones in this new environment where we see a move towards quality and tangible performance as the key differentiator. We believe our firm has long been prepared for this and will thrive in this new paradigm. 

This article was first published in Real Deals on 30 June 2022 and was written by Hannah Langworth.

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GP Workshop: How to successfully engage in a cross-border transaction

Simon Finn, Managing Partner at Intriva Capital discusses how to diligence and enter cross-border transactions, while IK Partners CEO Christopher Masek, discusses post-deal navigation.

Simon Finn, Managing Partner, Intriva Capital

I would rank the areas that funds should consider when embarking on cross-border deals in two main categories: pre-deal and post-deal. It’s no good being the victor of making an investment in a jurisdiction if ultimately the execution and the asset management turns out to be much more complicated or if there are issues after signing the deal.

Key Considerations

I would put regulation as the number one factor to be considered when it comes to cross-border deals. That dovetails into what you can and can’t do in an investment and with an asset post-acquisition.

The second key consideration is tax as the landscape is constantly moving. So, even if you think you had all of the facts at one stage, when it comes to considering the same type of deal 12 months later, you cannot just pull out the same playbook from the last deal.

Legal requirements differ by country and must be fully understood to ensure a deal can proceed. As with regulatory and tax issues, you should also examine legal constraints at the opportunity stage, when considering if a deal is viable.

After legal, we look at the management style of each company and the nuances of the country’s culture. It is important to recognise that while the senior leadership of most mid-market companies across our target geographies can converse in English, that doesn’t always mean that they’re on the same page culturally. This is why having a local presence is incredibly important, ensuring that the deal team has an appreciation and understanding of cultural nuances and communication styles. This should come into consideration both pre- and post-deal, to mitigate risks. At Intriva, we have a team coach that gets involved in some of our transactions when we want an assessment of certain personalities and management teams.

Finally, the availability of finance needs to be considered. Different jurisdictions can differ considerably on this. So, having a really strong understanding of debt capital markets is very important as that is at the heart of commercial assumptions on a deal.

Advisory DD

When you are not too familiar with a certain jurisdiction, there is also a requirement to diligence the types of advisors and advice that you partner with. The answer isn’t simply the same law firm that you use in your home country, especially if the deal requires diving into a niche industry-specific advice. It’s much more than a beauty parade; you are almost diligencing and referencing advisors before engaging with them. This can take some more time in terms of getting the wheels in motion to be able to start evaluating an opportunity, but it really pays off in the long term.

Christopher Masek, Chief Executive Officer, IK Partners

Cross-border deals are really one of IK Partners’ strengths and a key element in our toolkit. When we are dealing with portfolio companies, it’s [cross border deals] where the private equity professional has a lot of legitimacy.


What we do systematically in all of our platform deals is that we identify upfront, on average, at least 13 add-ons. For us, it’s an important component because it’s a very tangible means of accelerating a company’s strategic repositioning. When you’re doing a deal, you seldom come across a management team that doesn’t want to do that, particularly where they’re moving from Small Cap to Mid Cap.

It’s a very competitive market out there and we find ourselves when we are competing with peers who are often national funds. In many cases, we have had situations where we’ve said: “We’ve met with management of these targets and they want to transact. If you do the deal with us, we will do that immediately.” Then, you have a very powerful and compelling argument in your favour.

Cultural Nuance

We have seven European offices. So, when we’re meeting with a company based in the UK, where it’s confronted with Brexit for example, they’re saying, well, we want to make sure that we have a partner that’s credible; one that can help us develop successfully on the continent. This is where we’re able to go through that whole list before we do the deal.

What you have to consider when you’re doing this [a cross border add-on] is how you’re going to incorporate the team. You’ll have cultural challenges to consider, where, for example, you may have a family-owned business to navigate and integrate. Often, you may want to reserve some equity for partners that you intend to add, so that they can have an aligned interest with the business, as well as be added onto the board.


When you’re transacting in this way, you also want to get your financing right. When you’re doing your deal originally, if you say we’re going to do a buy-and-build, what we will typically do is over-equitise the deal and incorporate specific financing facilities to help execute this. The better and more sophisticated you are in doing this, you will have terms which, for instance, allow you to do things pretty automatically. For example, just a simple due diligence report, where you can even do pro formas and add synergies into it and really build your case around having automatic adaptive financing for it.


“When negotiating with international counterparties, it’s especially worthwhile pausing to consider both the form and channel of deal communications, particularly in light of cultural and/or language differences. Formally recognising the status that certain individuals hold in the discussions (and any other local customers or protocols) can be an important first step in building trust between the parties and ultimately drive a successful outcome. We increasingly see bidders make greater use of shared IT platforms to move through the initial commercial and documentation stages more efficiently. Whilst this has real benefits in terms of speed of execution, buyers in particular need to be mindful that some points are still best aired in private on a one-to-one basis.” Ben Shribman, London Partner, Cooley

“You need to get local advice on the ground and to be fully aware of the regulatory and legal environment that you’re dealing with. If you assume that the same regulatory and legal systems will apply, then you’re likely to undergo a challenging process. GPs need to understand this very early on and be in close conversation with the target’s management team and advisors. Not planning can lead to significant issues later on. In addition, you will need to have a really good grasp of the personalities involved, because, inevitably, it could be that some targets may not be familiar with a deal from the jurisdiction that you are in. Where we see most deals fail is actually where there is a lack of understanding around the personalities involved and what is needed for the deal to successfully close.” Gareth Davies, Private Equity Partner, Browne Jacobson

“Political and regulatory strategic planning is increasingly central. Understanding nuance and complexity is vital in road testing the viability of existing business models and future proofing assets to capitalise on change. Risks that look disparate and unrelated now will often overlap in the future: we can think for instance of logistical costs, the net zero agenda, and nationalistic attempts to impose new barriers on foreign trade. There are few sectors that are insulated from these questions, and many – from industrials to TMT to healthcare – that can only secure commercial stability through such strategic foresight.” Tom King Practice Lead, Global Counsel

“The key for success in cross-border transactions is thinking ahead and proper communication with the international deal team. It is important to give clear instructions and detailed guidance about what is required and expected from each jurisdiction as early as possible. This includes setting up and coordinating appropriate workstreams. Every member of the international deal team should know from the outset what has to be delivered by when and who the contact is with the home team for any questions and comments. Further, reasonable costs are a key factor for successful transaction management. The best practice to achieve effective cost control is to provide weekly time reports which keep the client up-to-date and avoid surprises when it comes to billing.” Ralf Kurney, Co-Head of the CMS Private Equity Group

“There is increased regulation worldwide – including foreign direct investment (FDI) regimes in Western and Eastern Europe, the Nordics and in the UK.  These regimes are still being tested and can meaningfully impact deal timetables.[…]Knowing the local market can make a big difference when preparing a competitive offer. Bidders want to work with local advisers who not only know the local law, but also how their local market works and how a bid will be received. That means appointing the right advisers early in the process, including local counsel where needed, to make sure that they’re on our tree and we’re aware of all relevant issues.” Dan Graham, Private Equity Partner, Sidley Austin

This article was first published in Real Deals on 30 September 2021 and was written by Talya Misiri.

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Data and due diligence to help GPs thrive

IK Investment Partners: Best Fundraising Firm, Mid-Cap Buyout (fund size >USD3 billion)

Compiling disparate forms of data to provide a clear picture of fund performance and offer information of value to those who require it will be key to succeeding in the 2021 private equity (“PE”) market. Also, in an environment of remote working, general partners (“GPs”) need to facilitate comprehensive virtual due diligence exercises to help limited partners (“LPs”) navigate the uncertainty.

“The Coronavirus pandemic (Covid-19) highlighted the importance of GPs having deep sector knowledge, expertise and awareness in the sectors they invest in,” Alice Langley, Partner, Investor Relations, IK Investment Partners comments. “With significant uncertainty around the long-term effects of the pandemic on the global economy and businesses alike, having a comprehensive understanding of what recovery might look like for businesses within a specific sector, will stand GPs in good stead.

“Having this level of data and insight enables firms to utilise any opportunities as well as mitigate risks by building this into their value creation plans. At IK, we invest across four main sectors; Business Services, Healthcare, Consumer and Industrials. Having deemed this as a sensible approach for many years, Covid-19 simply supported our thesis of investing in businesses within non-cyclical industries.”

The pandemic also forced an acceleration of digitisation as the new normal saw GPs and LPs move to remote working and virtual due diligence. Langley notes: “I anticipate digitalisation to be high on the priority list for PE firms with the aim of harnessing technology to streamline operations for themselves and their portfolio companies. At IK, we adopted the use of platforms such as Microsoft Teams, Zoom and other video conferencing software to keep in contact with our employees, investors and portfolio companies. For the first time in IK’s history, we held our Annual Investor Meeting and conducted fundraising virtually. We are also placing increased importance on digital marketing activities.”

Conducting due diligence virtually has been one of the primary challenges for both GPs and LPs. Langley discusses the implications of this development: “Historically, conducting due diligence, for the most part, has been done face-to-face as it allows for more transparency, authenticity and the increased ability for LPs to understand the dynamics of the team in which they are putting their trust. This determination is more difficult to do virtually.

“As GPs, we have seen a rise in existing investors making decisions to strengthen existing relationships by investing more and staying away from those they’ve not yet met. Despite the efficiency virtual due diligence brings, it still remains a challenge for new investors to become comfortable with a fund manager unless they are able to meet in-person or on-site at least once.

“To tackle this, it’s important that GPs provide a safe way for LPs to carry out comprehensive due diligence whilst there is still significant uncertainty surrounding when we might return to some kind of normality that resembles the past. Being available to help and providing accurate information as well as detailed reporting will stand all GPs in good stead.” 

This article was first published in Private Equity Wire on 6 February 2021.

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