During the IVSC Valuation Webinar Series, hosted by the International Valuation Standards Council and sponsored by Kroll, Burcu Esmer, academic co-director of the Harris Family Alternative Investments Program, joined global economists and valuation leaders to explore how macroeconomic forces are influencing valuation across sectors.
During this conversation, Professor Esmer brought her expert insight into the growing influence of private markets, especially in relation to public markets and long-term valuation. Given the rapid growth of private markets in recent years, she remarked on whether private markets are displacing public markets in certain industries – or complementing them. She noted, “It’s both,” explaining that the effects most clearly show up for high growth, small to mid size companies.
“People talk about the end of public markets. It’s not the end, obviously,” Professor Esmer elaborated. “It’s a re-segmentation by function.”
Professor Esmer outlined how private markets are both displacing and complementing public ones:
On the displacement side, companies that once would have listed earlier are staying private much longer, sometimes indefinitely. Backed by large pools of venture and private-equity capital, they can scale and restructure without the costs and scrutiny of public markets. In parallel, sponsors have taken many smaller public companies private, and public-to-public mergers have consolidated tickers. Together, these forces have driven a significant decline in the number of U.S. listed companies since the 1990s.
On the complementary side, private markets offer exposure to sectors that are underrepresented in public indexes. In many cases, private markets help to season companies before they go public and allow investors to diversify their portfolios more evenly.
What are the Implications for Public Markets?
- Fewer Listed Companies: As more companies remain private longer (or indefinitely) the number of public companies shrinks.
- Delayed and Larger IPOs: Companies are entering the public markets at later stages, often as mature, large-cap firms. As a result, major indexes may miss key stages of value creation.
- Reduced Transparency: There is less financial disclosure available to outsiders and regulators in private markets. This limits both investor insight and policymaker visibility into key sectors of the economy.
- Competitive Pressure: Private firms can compete more aggressively with their public peers.
With private markets playing an increasingly prominent role, the boundaries between public and private capital continues to shift. For investors, policymakers, and finance professionals alike, understanding the impacts of this shift is essential.
Learn more about Burcu Esmer and the Harris Family Alternative Investments Program.