Tuesday, January 31, 2023

Why Big Tech Regulation is Good for Private Equity, According to CEO

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A closer look at the power of Big Tech may make some shareholders sweat. But not for private investors.

With a new Biden administration and recent threats to crack down on some of the biggest tech behemoths (from Facebook at Amazon), there appears to be support for more regulation. And according to the CEO of alternative investment manager Hamilton Lane, Mario Giannini, that could be good news for the private equity industry.

“Reducing the dominance of big tech companies… is probably not good for parts of the industry, but good for private equity,” says Giannini Fortune. In Congress, which now maintains a slim Democratic majority, “I think everyone is interested in saying, ‘Amazon is too powerful, Google [is too powerful], “Pick your name,” he says, arguing that there is bipartisan support for more regulation.

As to what lawmakers are doing about it, “I’m not sure,” Giannini says, but “as long as they do anything to decrease the power of these companies, it’s good for capital- investment because it creates opportunities for small businesses.

Granted, the government’s scrutiny of big tech companies is a story as old as time, but in recent times regulators seem to be stepping up the pressure on the biggest names: Facebook was Recently hit with antitrust lawsuit alleging it crushed competition, while players like Amazon and Apple, big winners of the pandemic era, found themselves the topic of government anger over antitrust concerns. Google, meanwhile, is in hot water once again for its research and advertising research practices. And companies like Facebook and Amazon could be facing their own headwinds in Europe, too.

According to Giannini, whose company has $ 73 billion in assets under management and advises on $ 474 billion in additional assets, dominating these FAANG names has been a priority for private equity firms when looking for opportunities. ‘operations.

“Right now, when all private equity [firm] makes a deal,… if that’s not their first question, it’s one of their three main questions: “Is Amazon going to enter this space, yes or no?” And that has a huge impact: “Is Google in this space?” He says.

It’s not just a technology issue. Companies like Amazon are turning to healthcare, for example by launch of online pharmacies. “If suddenly the government [would] let’s say, “I’m not going to allow Amazon to encroach on certain areas”, so I think for private equity, oddly enough, it becomes a net positive because then you have an opportunity with other companies, ”says Giannini .

While some on the streets argue that the threat of sweeping legislative changes to hamper Big Tech’s reach is still minor, the new (albeit slim) Democratic majority in Congress poses “a clear negative for Big Tech because … we would expect with much closer scrutiny and sharper teeth around the FAANG names, ”wrote Wedbush analyst Dan Ives in a recent memo.

For private investors, says Giannini, this “just creates different sets of opportunities.”

More to read absolutely financial cover of Fortune:

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