European Carve-Outs Reward Operators as Private Equity Consolidates into Asset Managers, OpenGate's Adams Argues

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What's New

The efficient North American buyout market has squeezed out the value in ordinary deals, and the remaining alpha sits in complex, multi-jurisdictional European corporate carve-outs that large asset managers cannot process at scale. Josh Adams, Partner at OpenGate Capital, argues this in a podcast on How I Invest. OpenGate has completed 37 carve-outs in 20 years, now spends 70 to 80% of its time in Europe, and has relocated Adams there. The edge is operational: standing up orphaned divisions as standalone businesses, sourced through years of direct dialogue with corporate M&A teams, and won on speed and certainty. Allocators concentrating into ten mega-platforms should ask where those platforms will deploy, because the answer is downstream, into the specialist's market.

Why It Matters

LPs are writing one $250 million check instead of ten at $25 million, which consolidates the industry into a handful of asset managers that own insurers and banks and do not feel the pain of a bad deal. Adams says every firm's website now claims carve-out capability, so the differentiator is whether the playbook actually exists. On the other side are the largest buyout platforms and the retail capital flowing into them. Adams runs a billion-dollar specialist and sells complexity, so the thesis is his positioning. He also agrees with the host's warning that trillions raised at the top must flow into lower-middle-market assets, which would bid up the very deals he pursues.

Big Picture Drivers

Inefficiency is geographic: After 13 to 14 years in North America, Adams calls it an exceptionally efficient market. Europe offers plentiful carve-outs and plentiful complexity, and requires locals on the ground rather than executives commuting from the US.
Operational value creation is the only durable alpha: Post-GFC shifts in the cost of capital and rates remove financial engineering as a lever. What remains is what the owner controls: taking an unloved division from roughly $30 million to $100 million of EBITDA and selling to a strategic.
Sourcing precedes the process: OpenGate talks to heads of M&A, CFOs, and divisional leads about strategy years before a sale, rather than asking what is for sale. A Brussels zinc chemicals deal began with a question about downstream units after the parent sold its mining business, long before the CEO announced a review.
Speed and certainty beat size: With a 5 to 10% late-stage hit rate typical in private equity, a track record of closing carve-outs with the same sellers repeatedly gives a smaller fund credibility against larger competitors with more governance layers.
Alignment changes behavior: OpenGate invested only its own recycled capital from 2005 to 2015 and was among the largest LPs in its first institutional fund. Adams says feeling a bad deal personally is what large asset managers have lost.
Focus over synergy: OpenGate's partners have deliberately capped growth, arguing that fund size and returns are negatively correlated and that sector distraction was an earlier lesson learned.

By The Numbers

37: Corporate carve-outs completed in 20 years.
70 to 80%: Share of the firm's time now spent in Europe.
10 years: Period OpenGate invested its own capital, recycling every dividend, before raising a fund in 2015.
$30,000: Founder Andrew Nikou's 401(k) withdrawal that seeded the firm in 2005.
5 to 10%: Typical private equity hit rate on deals reaching late stages, the number speed and certainty are meant to lift.
$25 million to $250 million: The shift in LP check size Adams sees driving consolidation into mega-managers.

Key Trends to Watch

Downstream capital pressure: If retail and mega-fund capital pushes into lower-middle-market assets, watch entry multiples on European carve-outs and whether OpenGate's speed advantage still wins against overpaying platforms.
Specialist acquisitions: Adams expects specialists to persist until acquired. Watch whether asset managers buy carve-out franchises rather than build them.
Secondaries and co-invest replacing blind pools: LPs increasingly deploy through co-investments for lower fees and direct exposure. Watch how that shifts fundraising for a billion-dollar specialist.
Corporate divestiture flow in Europe: Macro and political shifts push conglomerates to shed divisions. Watch European corporate carve-out volume as the supply side of the thesis.

Memorable Quotes

"The inefficiency of Europe is where opportunity lies." The geographic core of the argument.
"Speed and certainty. That's how we win deals." The mechanism a smaller fund uses to beat larger bidders and unreliable closers.
"The benefit of focus is immediate. The benefit of synergy is theoretical." Why OpenGate capped its own growth.
"If you're going to have a bad investment you need to feel the pain of it because it doesn't work if it's someone else's money." Adams on GP commits and why asset managers behave differently.

The Wrap

The thesis holds if European carve-outs keep delivering operational EBITDA expansion that strategic buyers pay for, if OpenGate's relationship sourcing keeps landing deals ahead of auctions, and if specialist funds under a few billion outperform the consolidated mega-platforms across the current cycle. It fails if downstream capital from the largest firms bids up lower-middle-market assets to the point where speed and certainty no longer offset price, if European corporates slow divestitures, or if platform firms build genuine carve-out capability rather than claiming it. The 2025 to 2028 European deployment, measured against a wave of retail-fueled mega-fund capital seeking targets, will show whether complexity remains a moat.