Spotlight On with Bridget Walsh, Global Head of Private Equity at EY

Welcome to Spotlight on the Muscleist and Podcast series where vision-related global executives, 12 lasing entrepreneurs and top tier experts come together to share their inspiring stories and tackle the hottest issues facing businesses today. Broadshew by the Barton Partnership, an award-winning global talent solution organisation, we specialise in executive search, independent consulting and consulting solutions from strashing through to execution. Now mission, to help businesses accelerate their growth by connecting them with world-class strategy and transformation talent. Tune in and join us as we shine a spotlight on the game changes and thought leaders who are shaping the future of business. Joining me today I've got Bridget Walsh. Bridget Walsh is the Ys global head of private equity where she leads a team of P professionals across 45 countries advising on the most prominent global P deals. She is widely recognised and respected across the P industry as commercial and influential leader. Since joining EY 25 years ago, Bridget has developed and grown several successful businesses. Currently incubating a sports PE offering and a PE Global Gen AI practice. Bridget sits on the board of British American Business and chair of their Remco committee. She's chair of the Ireland Funds of Great Britain, a prestigious global philanthropic network that raises funds to support Irish communities around the world and is deeply engaged in promoting international business and she is the host of EY's next wave PE Podcast series. Bridget, great to have you here. Thank you for joining me today. I'm really looking forward to this discussion. How are things with you? Thank you very much Nick. It's lovely to be here with you. Let's start with you. Let's talk about you. Tell us about your career history today. I've been really fortunate. I've had a really entrepreneurial career under a great brand at EY. You know, I joined EY over 25 years ago and my career has always been in private equity. Right. From day one. From day one. Wow. Yeah. And private equity was just in its hey day back then. So I've seen this industry develop and grow. And also as you and I've talked about before, the amount of change we've seen in the last 20 years. I've gone from having the most important team being the team sitting around me in London to, you know, it's now serving some of our global clients. Yeah. It's just making sure you've got teams everywhere around the globe to serve them. So phenomenal change, phenomenal growth, but within professional services and EY, but also in the private equity industry. And you still feel that EY is in it. I mean, we'll go into this in a lot more, but EY is continuing to evolve its proposition to serve that market well in that time. You look back 25 years to today. It must be night and day. It is night and day. You know, 25 years ago, the industry was just starting off here in London. Yeah. And you know, they were coming to us at the start looking for financial diligence as they were doing deals and the deal sizes. Do you remember when we moved from millions to billions? Crazy. So, you know, we had them coming to us back in the day. We were really working hand in glove with the industry as it's evolved. And I think again, that's been the beauty of these roles. Because we've evolved with our clients. And we've saw the industry move from, you know, small industry in London, London having a key role globally. The US funds coming in. And for me, personally, then I had a role with the Canadian funds going over to Canada on a regular basis. And then watching those clients as they came in and established their base in London, I'm doing a similar thing with Middle Eastern funds at the moment. So you are global head of PE for EY. What does that actually mean? What is your role? So in terms of my role, that really involves leading a team of private equity professionals across 45 countries to advise on the most prominent private equity deals. So in essence, if you think of all the big global funds, Nick, it's making sure we have the right teams firstly to advise them on the deal. So everything from financial diligence, tax, operational diligence, strategy, and then increasingly now in this era of value creation, the post-steel. As you know, once private equity buys a business, today, they'd be very lucky if they get a high multiple on exit without being very interventionist. And the opportunities you and I have talked about is that value creation plan, everything around that. We've been building out our teams globally to support our clients on that and staying with them all the way through to exit. And as you say, that value creation aspect is again a new evolution of the private equity market. But you fell into private equity 25 years ago or it wasn't something you would have opted for in necessary, which you know about. Very good questions, though. I had trained in tax. And I always say tax was a great seat at the table because the importance of structuring deals. And then within tax, I'd moved to help entrepreneurial companies. As the compliance trade was building, what I love doing for those entrepreneurial clients was deals. So then EY was setting up a transaction tax business in the late 90s. And I joined that team when there was 12 people in it. It did a mix of corporate deals. It started doing some big corporate deals. And then as private equity was taking off. And I started to meet the funds here about their plans and started to really work on EY's relationships from a very early stage in my career. I suppose there's always a bit of a lot. And that was a great place to be. And I just love those clients. They were doing really interesting things, groundbreaking things as they have been ultra my career. So I started working in private equity as I say, providing some of the basic services. And then that evolved to a lot of different parts of the private equity toolkit. So for example, in EY, I discovered we had a hundred million pound in solvency business that sort of picked up the phone to the last person in tax. And then very quickly working with them, I built a ten million pound tax business serving the insolvency market. And that evolved into a distressed business. So in 2009 when the cycle changed, I worked with a lot of the distressed funds here in London and in the US and helped EY build out that business. And actually tax was an interesting part of that toolkit for them because when some of the debt was released, it created major tax exposures. Actually, the tax side of our business and as it has always been for private equity has been really interesting. I took that specialism, but always had a private equity relationship focus. And then over time, I've had different leadership roles with any way. My client base has always been private equity. And as you know, that's a fascinating world to operate in. And now as you say, your role is to sit across all the areas, making sure that there is alignment and a service offering that supports all of your clients needs across all the areas globally. Correct. So you must be traveling a lot. There is there is a lot of travel there, Nick. If I look at the last two weeks, it's probably a representative sample. I was in the Middle East. I visited four cities in five days there. And then I was in the West Coast in Beverly Hills at the milk and conference where once a year, that is a fantastic conference. I'm moderated to panel there. And that's the largest part of the conference. Global age. Yeah. And all of our funds and the CEOs of the funds tend to be represented alongside government and a lot of other great thinkers. So it tends to be a fantastic event and we find a very valuable. What's the sentiment there? What were people saying? Was it positive? Is there optimism? What did you take away from it? I think there was a little bit of muted optimism, particularly around the US market because it was before the trade deal with China was announced last week. But overall, you know, when I think of my panel, there was a lot of optimism around the opportunities. I feel that the IPO market is going to come back. Nobody quite was willing to place their hands on the crystal bowl there. Talk about corporates coming back in and having a lot of interest in the portfolio. Some of the funds seen it as a real buying opportunity, you know, on that side of it. And some of the stock markets had came down. They saw a lot of opportunity for public to private. And then I would say the theme of the conference, the sessions that were packed out were around Gen AI. And, you know, I have hypothesis on this Nick. And I'm seeing it in the firm, the P because of their interventionist nature and the three to five year old period will move faster than normal corporates on this. And that was definitely the mood music. They want to accelerate it, don't they? Correct. You know, again, the essence is particularly within the portfolio. If you can eke out those productivity savings in particular. And also maybe some top line announcements with using Gen AI technology and realize that multiple on exit. And I've sat at another conference where I've had some chief operating officers say, once someone does that and we see a sale go and it's really been Gen AI has driven those multiples to pressure that's going to come across. The whole industry is going to be huge around this true. As you know, Nick, some of our big clients, even for the last two years, have had Stanford professors having weekly calls for them on this, you know, our clients by nature, they seem what the opportunity is. And I really feel it within Gen AI. And that's why we've really been building out our service offering around Gen AI, finding some tangible products that will really make a difference. And it's exciting to think about the art of the possible, but they're still that question mark around what is possible, isn't there? We are seeing a lot of very tangible solutions now. You know, it's gone from the hypothetical to the real, you know, whether that's great call center technology that we've already introduced in the insurance sector to some good reporting technology, starting to become very real. And then of course, at EY, we call it client zero, as we're disrupting ourselves and bringing Gen AI into our own business. Our private equity lines are very interested in hearing that story. And I think that's what people want to see is more use cases where actually you can see a definitive impact rather than the theoretical. This is what it could do. Our clients tend not to be very theoretical. The equity industry is very real, very focused on exit and the outcome. Let's talk about current exit environment. And how really we're seeing that shape future strategies in 2025, particularly for aging portfolio companies. EY's reports have gone into some detail around this, but what are you seeing then? What are you seeing as how the current exit environment is shaping future strategies? Private equity funds are laser focused on returning capital to their investors, and our private equity readiness survey finds that 78% of private equity firms report holding assets beyond their typical investment horizon. And we're working very closely with funds to really get their portfolio companies ready, and to make sure that they've got a clear exit roadmap. They're getting data in order. They're preparing their management teams. And more than 90% of the firms we surveyed said that taking these kind of steps lead to better exit valuation. So huge focus in the industry on exit at the moment. You're saying 78% now are really sort of extending that whole period beyond that. Do you know from everything you read and and speaking to your clients Nick, we do have a pent up wall of exits. We need the IPO market to reopen, which it will do. And I think once that starts to happen, we're going to see a lot of exit activity. Now the report that EY produces also highlights growing competition from private credit. How are traditional PE firms adapting to that shift? As you know, the private credit industry has grown tremendously with assets under management of about 1.8 trillion today, like at three time in Greece. And you know, a lot of our private equity funds have built their own credit arms now. And we're just seeing that in the market. Many of the largest PEs are in a PE funds are now the largest credit providers. It's a very complimentary asset class. And it provides a flexible source of funding for a wide variety of use cases. We're also seeing private credit firms partnering with traditional lenders to create new lending pools. City, for example, just partnered with Apollo on a $25 billion direct lending platform. So again, the creativity and flexibility of this industry as the market evolves to respond has been huge. And how are LP's expectations evolving, especially around value creation in ESG? Yeah, how is that influencing what we're seeing? Limited partners know that private equity's better place to deliver good returns when societal and shareholder values are aligned. And you know, a lot of the LPs when you come from the base of their pensioners and the pension funds that they're representing. This is a genuine key objective for them. And it is increasingly, you know, a big part of what they're monitoring as they invest in funds. And one of our recently EY studies showed that funds that are excellently positioned on the ESG map can't realize in turn rates of returns of up to 8% higher than their competitors. This has gone from something that's nice to have to something that's a business imperative. Yes, for some of the portfolio companies, their customers are demanding it. Their LPs are demanding it. So I think again, it's front and center. As we had he wire advising on deals, again, some of our funds want to see a red flag report on ESG before they even take it to investment committee because of it's not going to pass. Yeah. And some of those hurdles, it's just not investable. So, you know, it's gone right up the agenda, Nick. And what about sectors that are unexpectedly resilient or attracted to PE in this macro environment? What are you seeing from that perspective? When you look at all the change that's happening in the world, you'll always find hot spots. And again, it was interesting on the panel. I hosted at Milliken. We had investors across numbers of different asset classes and within those funds, again, and that's what we see with our client base. You get lots of activity even when other parts may be more muted. And some of those at the moment, I would say, are aerospace and defense, especially in Europe, given everything that's happening. Yes. We're seeing increasing number of funds. I don't know if you've noticed this launch mid market funds. Yes. Technology. I mean, with all the disruption that's happening, tech remains really hot for us as does healthcare. It feels like healthcare has dropped off a little bit post COVID, but you still thought that's coming back or we'll start to see a little bit of life back there again. Yeah. And again, within all these sectors, it's which subsectors are hot, elderly care, different diagnostics, care at home, even while some parts of a subsector, and I think it's a good point, Nick, you know, might be a little bit more muted. You'll find other trends within the same sector. And increasingly, I don't know if you've been doing the same, which is are building out more sector and subsector expertise with any why. It's that combination private equity is looking for off the skill set off financial DDR tax, but that coupled with our sector expertise, because that's where you bring the real insights and on the valuation upside. Well, I think client needs becoming more sophisticated in the fact that they're not just looking for to talk it. They're looking for the experience. Yes. They're compliments the toolkit and bringing that together as we say, it's quite a powerful myth. It's too experienced individuals. Yeah. As we increase with years, it gives us some hope. Absolutely. But let's talk about that. As you and I have talked about, we've seen a big focus in operational value creation. I mean, that really has been at the heart of what the Bart Partnership has been focused on within the private equity world. What are you seeing from your perspective at the moment in terms of specific capabilities or models that funds are using? Yeah, if you remember, if we go back 10 or 15 years, there was a few funds who were seeing as quite operationally focused on that operating partners. I remember doing a deal about 15 years ago when the normal private equity guys were driving the deal and there was this real tension between them and the operating partners, whereas it's just come full circle, I think, where operating partners are now a key part of the investment committee decision, the hypothesis, and seeing as central to delivering the returns. Again, if I come back to one of our recent surveys, we find that firms with more operating partners tend to hit their return targets more consistently, 77% at the time. But I don't think that comes as a surprise. I think most funds now are focused on that. We've seen a shift away and I'd be interested if you've seen the same from hiring ex CEOs and just generalists to much more functionally orientated resources. Is that what you're saying? Yeah, exactly. I think then the alignment between those functions and the CEO or the CFO is increasingly important. Then you mentioned CTOs. This is an increasingly important skill set. We talked about Gen AI, we talked about the importance of tech in so many businesses now. I mean, one of the first questions we often get is, will this business be disrupted by Gen AI? Or is this a huge upside forward? Yes. That's almost the first question. It is almost the first question. That's built into the diligence. That's built into the valuation plan. Then you need good CTOs to deliver that. As we were talking about, and I know you're building that party, your business as well, that we're building those skill sets increasingly in our valuation teams, any why around the globe. And as you say, the whole concept of having a portfolio team, a value creation team has certainly grown the last few years. Are there any funds that you've seen that are doing it really well? What does good look like, I guess? Or is it specific to individual funds and their needs and their portfolio? I think that all was an individual element because different funds have their own focus. But I think in terms of what good looks like, and this has been an evolution, it hasn't necessarily been an easy thing for some funds to get right. But I think what good looks like is where the operating partner teams have a real seat at the table, where they are genuinely involved at the deal. I think if they're sitting to one side and maybe there's a question about whether they get carried on the deal or don't, I think that lack of alignment can be a challenge. So I think when you've got alignment around incentivization, around the business plan for the portfolio company, where the operating partners are involved in all the decision making from day one on the deal, and taking that value creation hypothesis to investment committee with the deal duo, hand in love. I think that's where it works best. One of the pieces of research we've recently completed showed that the alignment between the team and the CEO is perhaps more important than the alignment between the team and the CEO. I don't know if you agree with that, if you've seen any examples of that, but the CEO role has become again not more prominent, but is seen as being key to success in value creation, more so than seafoot at the moment. You know that it's always been a balance between the private equity fund and portfolio company management. You know, was the fund will agree the business plan and the plan for the business. They often want to leave the management team autonomous to run the business. It's always a fine balance between how value creation and consultants can work with the CEO and the leadership team. So therefore, I think to your point, it's not surprising that it's important that the CEO really buys into the value creation team, what they're doing, the individuals, etc. And that relationship is key because ultimately if that doesn't work, it all falls apart. So I'm not surprised by your research. Let's talk about regions or markets that Pee found to prioritize in 2025. What are you saying from that perspective? What's otherwise beyond that right now? Why? I visited Japan quite recently and it was just phenomenal to see the pace of change in private equity. It shouldn't be surprising. Funds focused there raised about $9 billion last year just to focus on Japan. We're seeing that demand on the ground. We've really built out our teams there and almost camped them out fast enough to meet the demand from our global funds. That's a really interesting spot for us at the moment. India, we've got a very strong team there and India's to seize new opportunities and partnership amid a changing geopolitical landscape. And then, as I mentioned, I'm just back from Mina and Nick, I know you've been doing some work there as well. - Absolutely. - I mean, the pace of change there is phenomenal. So we're working very closely with our team and again, we built out our EY team in Mina. Firstly, on the ground, to serve as the funds there in terms of what they are doing in the region. But also, as they deploy capital globally, you know, I think one of the funds in particular, they built a strong operating partner bench in New York. So it's important then that we have the teams there to face. So I think the Mina opportunity is both within the region, but also their outbound capital. And I think Nick, we talked about this before. I sometimes come back from one of these trips and want to draw a spider diagram on a board because I'll go and meet a sovereign wealth fund. They're invested in the GP here of one of my clients in London. At the same time, they're competing for assets directly here. And it's just such a web now, inter-connectivity of capital. And it's so important for us to be engaged at every level of that ecosystem because that's how we bring the best advice to our clients at all levels. - You still love it? - Oh, absolutely. I mean, there's no better environment, you know, private equity clients demanding, but intellectually so interesting, the pace to change, the dynamism. It's just phenomenal. And the goal, dust, is when we spot a deal opportunity and we're able to take a back, that reciprocity and we've been building out our origination teams as well to be very relevant. - Side question, how do you switch off? Do you switch off? Because your role is global. You could almost argue it's 24/7 given the different regions you work in. How do you switch off? Well, I have a great team. I have a fantastic team around the globe. And a lot of us like minded, who have grown up in the business and then as we brought other people in, there tends to be that real passion for private equity. - Yeah. - And we get to do some really fun stuff within that business. Like recently we've incubated a sports team. So as the opportunities arise, you find them. And as you can imagine, lots of people in EY want to work in that sports team. And in fact, it was on a call with our EY athletes team yesterday where we have ex-alimpians in the business. And of course, that really brings something different to our clients. And the mother of two teenage girls, that definitely keeps me busy. So when I'm not busy at work, I'm ferrying them around North London. Sometimes, you know, sitting on the grass and high-parking concert, they keep me very young Nick. - And you keep the phone away from you? - I keep the phone away from you. Yeah. How is dry powder influencing deal discipline in 2025 then? Is it still a pressure point or becoming more for strategic reserve? Private equity funds have about 1.6 trillion in tripoder. I would say it's not a lack of dry powder. A lot of our firms, you know, they're disciplined and sensible. So it's home they deploy that dry powder. You know, they've seen what's happened maybe in some other cycles. The dry powder is not an issue. It is there. It's more firms deciding when is the optimum time to deploy it. The other thing I would say is this opportunity around the retail market is huge. You know, there's trillions of dollars sitting in people's own pension funds in their own ices and savings accounts. And we're seeing the industry now find technological and other solutions to be able to access that over time. Just going to multiply the dry powder that's going to be available to this industry. Well, look, final question. Looking ahead, what do you believe will define the winners in period in the next 12, 18 months, based on this year's findings? Will you why? Again, I believe P will continue to win. Yeah. It's a very resilient industry. I think maybe what will differentiate one front from another is probably the willingness to lean in amid the uncertainty, you know, who's going to step in because there will be opportunities there. Again, when I come back to our survey, nearly three quarters of firms reported that their firms risk tolerance is higher than average, suggesting that many will use the market dislocation to capitalize on potential mispriceings and other opportunities. So I think we will see an uptake and deal activity. People have been cautious. It's been muted. I think though it will be in certain sectors, as I mentioned, and with a lot of analysis underpinning it. Bridget Walsh, thank you for coming in. Look forward to the year ahead. Look forward to supporting it working with the world as well. Thank you, Nick. I'm really appreciate you inviting me to join. It has been a great pleasure. Thanks very much. Pleasure.