Jun 22, 2024 · 35 min
Private equity reshapes UK markets as investors test company quality
IC023 Investor Insights: Private Equity Trends, Contrasting Founders, Good Results & Investment Ideas
The episode connects private funding, shrinking public markets and higher rates with a practical test of valuation, debt and accounting quality.
- 1Private equity’s expansion and abundant private funding are helping explain the decline in UK public listings.
- 2Higher interest rates could expose overleveraged businesses and challenge acquisition-driven models built on cheap debt.
- 3Intercede, MP Evans and Brickability illustrate contrasting combinations of growth, income, insider conviction and valuation.
Don't miss
The final comparison between Victoria’s debt-heavy, adjustment-rich accounts and James Halstead’s conservative reporting makes the episode’s analytical standard explicit.
The brief
Private equity’s growing role in UK markets sits alongside a shrinking pool of public companies, raising questions about leverage, ownership and the future of listings.
The hosts test that backdrop against companies including Hargreaves Lansdown, Nvidia, Adobe and Games Workshop, weighing competitive advantage, valuation and changing technology.
Intercede stands out for rapid revenue and profit growth, high gross margins, major US federal contracts and a strong cash position—though its valuation must justify the momentum.
The discussion contrasts MP Evans’s dividend appeal and palm-oil income with Brickability’s director buying, while Tristel’s insider selling adds a note of caution.
The closing comparison between heavily indebted Victoria and more transparent James Halstead crystallizes the episode’s preference for conservative accounts over complex adjustments.
What was said on this episode
32 statements · 15 positive · 15 negative · 2 mixed
Higher interest rates will make private equity investing more difficult.
“It's going to be tougher for them now with the way interest rates have perked back up.”
Listen at 0:20
Private equity may need to sell some overleveraged investments.
“Is the next phase they're going to have to offload some of these overgeared plays that they've supported?”
Listen at 0:27
More electric-vehicle startups will fail.
“But look out for more EV startups failing.”
Listen at 4:43
Rivian is currently struggling.
“Rivian, I understand, has been struggling.”
Listen at 4:48
Tesla’s development from startup to major automaker has been exceptional.
“What has been achieved at Tesla from startup to where it is now is just fantastic.”
Listen at 5:12
Nvidia is currently the world’s largest company by market capitalization.
“It's now the world's largest company by market capitalization.”
Listen at 6:14
Nvidia will face increased competition in AI chips.
“looking further out, it's clearly competition's going to arrive.”
Listen at 7:13
Nvidia’s customers will likely resist paying premium prices for its chip designs.
“Its customers will probably be reluctant to pay top price for its chip designs.”
Listen at 7:16
Adobe is a high-margin, growing company investing in artificial intelligence.
“But a great company, great margins, 30-plus percent operating margins, 30% return on capital, growing double-digit growth, putting money into AI.”
Listen at 11:50
Artificial intelligence is both a threat and opportunity for Adobe.
“Yeah, it is. It is a threat. And it also could be an opportunity as well if it gets it right.”
Listen at 12:14
Games Workshop is performing well and retains substantial international growth potential.
“Games Workshop looks in a great spot and trading really well and clearly has great international growth potential still.”
Listen at 13:19
Games Workshop could achieve significant growth in China.
“If you could work in there as well, out there as well, where it started tiptoeing, it could still have a long way to go.”
Listen at 13:45
AOTI reported 31% revenue growth and adjusted-EBITDA profitability.
“Revenues last year rose 31% to $43 million, and they say it's profitable at adjusted EBITDA level.”
Listen at 15:15
The pool of quality AIM investment companies is shrinking.
“The universe of good companies to invest in is shrinking.”
Listen at 17:51
Private equity is acquiring quality AIM companies prematurely.
“Now we've got a lot of good companies that are being taken out far too early.”
Listen at 18:15
Private equity funding reduces companies’ incentives to pursue public listings.
“So you don't necessarily need to list on a stock market and be exposed to public demands, and you can quietly grow with the help of private equity money, which has really stopped many companies wanting to join.”
Listen at 19:11
Private equity may have passed its peak period.
“So have we had the peak period of private equity?”
Listen at 20:23
Very low borrowing costs can create broad economic and financial problems.
“When you're paying nothing, virtually nothing for debt, it can create all kinds of problems.”
Listen at 21:11
MP Evans shares are cheap and offer a 5.5% dividend yield.
“You get a lovely dividend yield out of this. It's mostly a dividend play, 5.5% dividend yield, trading at a single-digit multiple. Shares are very cheap.”
Listen at 22:48
MP Evans is conservatively managed and performing well.
“So yeah, look, this is a conservatively run business that's doing very nicely.”
Listen at 23:08
Tristel shares have a high valuation.
“It's very highly rated.”
Listen at 24:01
Brickability could rebound strongly from depressed construction-sector conditions.
“So hopefully that's a good indicator of Brickability, which is in the construction materials sector, which has been at its lows but could rebound really strongly.”
Listen at 25:42
Brickability could perform well if rates fall and construction recovers.
“when the market turns, interest rates fall, construction sector gets a bit of an encouragement, we can see it doing nicely, Brickability.”
Listen at 26:10
Intercede remains small but secured its largest US federal-agency order.
“So still quite a small business. Saw its largest order from a US federal agency this year.”
Listen at 27:04
Intercede’s earnings forecasts are likely to be upgraded.
“I would expect this thing to have upgrades.”
Listen at 27:36
Tatton targets $30 billion of assets under management by 2029.
“now it's set a new growth target for $30 billion of assets under management by 2029.”
Listen at 29:18
Tatton Asset Management has an expensive valuation.
“The rating looks really rich.”
Listen at 29:27
Investors should consider Young & Co’s non-voting shares.
“I would implore you to look at the non-voting.”
Listen at 30:36
Victoria is currently in a perilous financial condition.
“It is looking in a very perilous state.”
Listen at 30:53
Victoria may struggle to recover if markets remain volatile.
“And can it recover? I don't know. It's got a tough job trading itself out of this situation if markets stay choppy.”
Listen at 31:23
Companies should present straightforward, transparent accounts.
“I like companies to be honest, straightforward.”
Listen at 32:09
James Halstead has no debt and is conservatively managed.
“House did not have any debt and is very prudent and conservative, maybe overly so, should we say.”
Listen at 33:47
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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