Riverside sees double upside for tech; Actis expands energy infrastructure team

Technology assets likely recession proof.

Morning Eurohubsters, Craig McGlashan here.

Elon Musk’s dalliance with buying Twitter might well be turning sour – the social media company has just filed a lawsuit accusing the world’s richest person of not being serious about the deal – but for savvy private equity managers, tech could soon give them “some of the best investments” of their career, Karsten Langer, managing partner of Riverside Europe, told me.

Software is still eating the world. The technology business offers a double whammy for investors, both in terms of price and resilience to a downturn in the economy, said Langer.

“Technology is clearly the space that had the biggest run-up in valuations and in hype during the past couple of years,” he said. “If you look at what public markets have done recently, you would expect that some of that correction in prices will translate into the private markets as well. I don’t think we should expect as great adjustments in technology in the private markets as in public markets because they never went as high in the first place. But also because private capital takes a slightly longer view.”

Langer reckons Europe is “probably going into a period where the economy is going to grow slower than it did in the last couple of years since the covid lockdowns” and that “you might even think that there’s a recession on the horizon”. But much of the technology business should be immune to that.

“The trend winds in favour of technology won’t change with a recession,” he said. “That software is eating the world and everything’s becoming tech enabled is not going to change just because there’s a recession for a couple of quarters. Investors will be savvy enough to understand that you can at that point invest in technology and maybe make some of the best investments of your career. Not because they’re going to be dirt cheap, but they’re going to be relatively cheaper.”

Energy security. One of the biggest headwinds for the economy in Europe has of course been Russia’s invasion of Ukraine, and the ensuing disruption in Russian fossil fuel supply to the continent.

That made us take note of a hire announced on Tuesday by Actis. Jaroslava Korpanec, a founding partner of Allianz Capital Partners, will join the firm in September as partner and head of Central and Eastern Europe. She will lead Actis’ energy infrastructure investment activity in the region.

I asked Lucy Heintz, partner and head of energy infrastructure at Actis, how the company will approach the business in this region, given it stands in the very centre of one of the world’s most serious geopolitical situations in decades.

“Central and Eastern Europe has been significantly affected by recent events unfolding in Ukraine,” she told me. “Short term, the crisis has both humanitarian and economic impacts; the humanitarian crisis continues to be both awful and real, and our hearts extend to those affected. Long term though, we believe the investment themes that we back – including supporting the transition to a low carbon economy and reducing reliance on fossil fuels, by building renewable energy platforms of scale with increasing focus on commercial and industrial offtake, will continue to grow – and in fact may be accelerated by the move towards energy security across the region.”

LNG infrastructure. For those who would like to hear more about the transition to a low-carbon economy, I recommend reading my US colleague Obey Martin Manayiti’s excellent interview with Apollo Global Management partner Brad Fierstein over on PE Hub.

The firm last week announced a joint venture with New Fortress Energy to create a platform that provides infrastructure for the delivery, storage and regasification of liquefied natural gas (LNG).

“We believe LNG is a critical enabler for energy transition, decarbonisation, energy security and reliability for global economies,” Fierstein told Obey. “For us to invest behind the critical assets that facilitate its use, we think it’s an attractive investment opportunity and a key part of our sustainable investing thesis.”

That’s all from me today – speak to you all tomorrow.

Cheers,

Craig