Tuck Center for Private Equity & Venture Capital 2024 Conference

The February sun was shining, temperatures in the mid-forties as I arrived at the Hanover Inn. Back in town for the 2024 Tuck Center for Private Equity and Venture Capital Conference. My midday arrival allowed me to take a few laps around Occum Pond and the campus. Sadly, most of the snow had melted and the prospects for Carnival ice sculptures were dim. I’m sure the students were ready to revel in their long winter weekend. I know I did “back in the day”.
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The conference kicked off with a reception and dinner at The Inn featuring an hour-long interview of Silver Lake Partners co-founder, Jim Davidson, by Tuck Dean, Matthew Slaughter. Jim was a last-minute pinch hit and I thoroughly enjoyed the interview and discussion which included topics such as

• Build an opinion through research, reading, intuition and creative thinking. Share that opinion and invest toward it. Invest in a theme that you are passionate about (Jim does not have a lack of opinions and guess his track record speaks for itself.)
• Near the anniversary of SVB, small banks hold a substantial amount of commercial real estate debt and this is an area of concern.
• WFH is bad for career entries and development (Google programmers were found to be 180% more productive in Mountain View than at home) Collaboration matters and so does building personal networks.
• AI will take out 20-30% of back-office processing and we’re just beginning to understand how it will change the world (think Internet in the early 90’s)
• People misunderstand the energy sector. Movement to clean energy is happening and it will take longer to move off oil and gas. Venezuela is currently the country with the largest proven oil reserves in the world, with an estimated 300 billion barrels of oil.
• Geopolitics and global trade dynamics are changing. US, Mexico LATAM and South America are seeing the benefits of onshoring / friend-shoring 

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We kicked off Friday with a fireside chat with Nancy Lotane T’92, Chief HR Officer & Managing Director at Bain Capital. An underlying current I heard throughout the conference was – people and Nancy drove that message home. She discussed

How did she get into Private Equity? She started her career in strategic consulting. Later when life happened and twins arrived, she turned to high impact internal roles that required less travel and more balance.

Where does she focus Day to Day? Nancy brings strategic consulting and business management tools to bear in HR. Bain Capital is focused on attracting, retaining and engaging talented people as well as managing growth. As COO of Private Equity business, she stated that people are at the center of investment strategy and they think about how all people have a life beyond work.

What does the Deal journey look like? Start with a theme (I’m seeing a theme about themes at PEVC), companies that meet that theme, go out and close the deal, realize the deal, operationalize the deal, optimize the deal.

What are roles in PE beyond “investing”? There are opportunities for well-rounded profiles as well as specialized roles (CFO, CHRO, CTO, etc.). Small and big firms need infrastructure, HR, finance, compliance, IT as firms get more sophisticated. There are entire ecosystems in supporting roles such legal, fundraising, consulting, transaction support, portfolio support to name a few.
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She spends lots of time on Bain Capital’s culture. They assess recruits on analytical thinking, quantitative thinking, conceptual thinking (creative, open minded), leadership skills and communication skills. Mental health and wellbeing are priorities and not necessarily driven by the business. It’s being driven by demographics and work life balance. Work is a big % of peoples’ days and they strive to balance sprints with downtime. 

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I then attended my first panel – Nuts and Bolts: The Broader PE Ecosystem with Paul Mahoney D’89, Brian Fleming (D’98 / T’08 and Kaitie Donovan T’13 moderated by Tobe Okpala T’24. Kaitie is with Mason Wells and they focus on the mid-market – manufacturers and business services with market tailwinds, competitive advantages and under managed parts of the firm. Paul discussed the PE investment lifecycle and how lawyers help client win deals, sometimes participating in auctions, debt financing and more. Brian commented on the due diligence process describing PE as the general contractor and a host of subcontractors depending on market size, segmentation, growth, competition etc. They agreed on the increasing importance of game planning to create value and not strictly transactional flow. Supporting service provider relationships are sticky and they look for firms that are detail oriented and provide proactive / relevant experiences.

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​A Deep Dive on Energy & Climate was next up with Jeph Shaw T’15, Andrew Lackner (D’97 / TH’98) and April Salas, Executive Director, The Arthur L. Irving Institute for Energy and Society at Dartmouth moderated by Jordan Swett T’25. Overall investment in clean tech was $32B in 2023 down from $45B in 2022 and up from $1.2B in 2010. There is a need to deploy $33T in next 10 years to make the transition to cleaner tech. The Energy sector is largely risk adverse due to regulatory constraints and capital structures. De-risking through tax credits could bring more capital into the markets from risk averse capital sources.

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During lunch, we were entreated to a lively discussion about AI from Drayton Wade T’23 and Graham Brooks T’02 moderated by Conference Chair Devin Casey T’24. I haven’t heard much about this “AI thing” and I surmise it’s kind of a big deal. In all seriousness, they covered the gamut from growth of ChatGPT, to current / planned use cases to predictions / projections. No technology has been adopted or evolved as quickly as ChatGPT. Large Language Model and AI bots will be near real-time soon. In November 2022, ChatGPT’s data lag was 14 months. When Chat GPT 4-Turbo was released in Nov. 2023, data lag was 6 months. How much longer before it is real-time? People prefer to “ask” rather than “search” – ChatGPT vs. Google, Amazon, Facebook, etc. and looking for the “answer” (narrowing / focusing) rather than “search results” (broadening / expanding).  SEO will be replaced by LMO – Language Model Optimization.
My day-to-day responsibilities caught up with me after lunch and I had to skip the 3rd panel.

​At 2:15, I was joined by my Lockton colleagues Tony Addino and Machua Millet for a discussion of Transaction Protection moderated by Nicolas Alvarez-Tolcheff T’24. We discussed the application of several effective transaction and financing facilitation insurance products such as Tax & Contingent Liability coverage as well as Representations and Warranties Insurance. For instance, Tax Insurance has been most often used to protect renewable energy tax credits and certain tax elections and qualifications. More recently, tax insurance has expanded to address a broad array of tax risks, including those identified during transactions and excluded from RWI policies, tax-free internal transactions, transfer pricing and valuations, and transferable tax credits.

Click here to see our latest - Lockton's Transactional Liability: Market Update 
 
Other issues we’re seeing in the PE market as it relates to risk management and insurance include…

• Cost Escalation and Budget Constraints
     - Private equity firms are grappling with the escalating costs of insurance coverage, impacting their ability to adhere to budgetary constraints. Finding a balance between comprehensive coverage and cost containment is a concern.
• Risk Management in Portfolio Companies
     - Ensuring that portfolio companies have robust risk management strategies and appropriate insurance coverage is important. Identifying potential gaps and aligning insurance programs with the specific risks faced by each portfolio entity can be a complex task.
• Due Diligence Challenges
     - During the due diligence phase, private equity firms sometimes encounter challenges in thoroughly assessing the existing insurance structures of target companies. This includes evaluating the adequacy of coverage, policy terms, and potential liabilities in areas like D&O, Cyber and more.
• Claims Management and Settlements
     - Efficient claims management is crucial for private equity firms, especially in handling claims across their portfolio. Streamlining the claims process and achieving favorable settlements are ongoing concerns for firms seeking to mitigate financial risks.
• Cybersecurity and Data Privacy
     - With the rising threat of cyberattacks, ensuring that PE firms and their portfolio companies have robust cybersecurity insurance coverage is a top priority. Private equity firms are increasingly focused on protecting sensitive data and managing the financial impact of potential breaches.
• Adaptation to Regulatory Changes
     - Navigating the ever-evolving regulatory landscape poses challenges for private equity firms. Staying abreast of changes in insurance regulations and ensuring compliance across diverse jurisdictions are critical aspects of risk management.

Walking back up Tuck Drive to The Inn, the sun was dropping in the west and we were in for a glorious Dartmouth sunset. Always energizing to be back in Hanover, meet new people and see some familiar faces. I already look forward to the 2025 conference.

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