Maria Sanz Garcia, Co-Head of PE and a member of the Management Board at YIELCO Investments, on trends in value creation
In a recent ION Influencers fireside chat hosted by Giovanni Amodeo, Maria Sanz Garcia, Co-Head of Private Equity and Member of the Management Board at YIELCO Investments, shared her insights on the evolving landscape of private equity and the importance of value creation. Here are the key topics discussed:
Background and Evolution of YIELCO Investments: Maria Sanz Garcia began by outlining her extensive 20-year career in private equity, starting from her early days investing from a bank’s balance sheet to her current role at YIELCO Investments. She highlighted the firm’s journey from focusing on yielding assets like private debt and infrastructure to expanding into private equity in 2016.
The Concept of Value Private Equity: Maria introduced the concept of “value private equity,” which emphasizes transforming companies rather than merely growing them. She explained that this approach is akin to the strategies used in public markets by investors like Warren Buffett but applied to private equity. The focus is on working with managers who can transform companies, often those that are not market leaders but have significant potential for improvement.
Lessons from Past Crises: Reflecting on past financial crises, Maria emphasized the importance of avoiding over-leveraging companies. She noted that many private equity losses were due to excessive leverage rather than poor business fundamentals. This experience has shaped YIELCO’s strategy to focus on sustainable value creation without relying heavily on debt.
Importance of Experienced Managers: Maria stressed the value of partnering with managers who have lived through multiple market cycles, particularly the global financial crisis. Such experience is crucial for navigating challenging market conditions and making informed investment decisions.
Identifying Genuine Value Creators: Maria discussed the criteria for identifying genuine value creators among private equity managers. She highlighted the importance of operational expertise and the ability to transform companies’ processes and margins. YIELCO looks for managers who are deeply involved in the operational aspects of their portfolio companies, not just financial engineering.
Differences Between US and European Markets: Maria compared the private equity landscapes in the US and Europe, noting that while the US market is more dynamic and has more developed tools, the fragmented nature of the European market offers unique opportunities. She pointed out that European managers tend to be more conservative, but the lower competition in complex deals can lead to attractive valuations.
Future of Value Creation in Private Equity: Looking ahead, Maria predicted that the focus on value creation would continue to grow, especially if market conditions remain challenging. She also mentioned the increasing role of co-investments and the need for private equity firms to adapt to changing market dynamics.
Conclusion: Maria Sanz Garcia’s insights provide a comprehensive overview of the current trends and future directions in private equity. Her emphasis on value creation, operational expertise, and the lessons learned from past crises offer valuable guidance for investors navigating the evolving landscape of private equity.
Key timestamps:
00:09 Introduction to ION Influencers Fireside Chats
01:36 The Evolution of YIELCO Investments
02:17 Defining Value Private Equity
03:24 Lessons Learned from Investment Transitions
05:33 Importance of Experienced Managers
06:54 Identifying Genuine Value Creation
09:13 Focus on Margin Expansion
10:25 Key Characteristics of Value Creation Managers
13:04 Incentivizing Operational Partners
15:50 Comparing Value Creation in Europe and the US
18:45 Legislative Differences Impacting Value Creation
20:49 Market Size and Investment Strategies
23:08 The Evolution of Co-Investment Practices
24:49 Consolidation Trends in Private Equity
25:46 Future Role of Value Investing in Portfolios