Monitor
Private Capital Monitor 13/10
13th October 2023
WORTH A READ
United States
The value of exit deals for U.S. private equity portfolio companies in the third quarter fell more than 40% from Q2 and was more than 80% lower than the peak in the second quarter of 2021, according to a report from PitchBook Data. The number of U.S. exit deals also fell by almost 50% compared to the same period a year ago. In addition to the ongoing issues of interest rates and inflation, the thread of a government shutdown further limited deal activity in the third quarter.
Ex-public company CEOs or COOs have long been known to leave their posts to go run private equity portfolio companies, but this trend has expanded through the C-suite to include lower-level executives, writes Fortune’s Geoff Colvin. While most public companies select their next CEOs internally, companies bought by private equity look to the outside for their leaders 75% of the time. Private company executives benefit from fewer distractions, more resources, and a clear strategy without the competing demands of thousands of shareholders.
Following a tough start for Birkenstock’s life as a public entity, with shares down 13% on the first day of trading, the Financial Times highlights the shaky start other newly listed businesses are facing. With ARM, Instacart and Klaviyo all trading down since their listing, there’s increasing concern on the health of the IPO market. Despite falling volatility and rising shares spurring a tentative rebound in listings, some investors don’t foresee volumes fully recovering until early 2024.
Europe
Sarah Murray, a writer for the Financial Times’ Moral Money Forum, discusses the sustainable credentials of private equity asserting the sector is “struggling to shake off its image as a rapacious sector with a slash-and-burn business model”. While private equity’s “economic clout” is undeniable, Murray recognises the argument that its long-term approach and value creation model position the sector as a “transformation engine” for progress toward a more sustainable economy, as noted by Saïd Business School Professor Robert Eccles. Murray argues the sector’s capital could be vital for a sustainable economy, but it requires more transparency and accountability to make it happen.
While the London Stock Exchange is facing challenges in luring IPOs, private equity firms are thriving in a vibrant market for taking companies private, writes Jeremy Chan in Private Equity News. Chan notes that “for many growth companies, the scrutiny of public markets is a disincentive to list.” He asserts that 2024 is likely to serve as the “litmus test” for evaluating how far UK capital markets have declined. This will test the City’s expectations of a rebound in IPOs and may challenge the theory that its troubles stem solely from market conditions.
Alex Janiaud, in an article for Sustainable Views, argues that EU proposals for a social taxonomy “appear moribund.” Janiaud observes that “companies and investors are already digesting swathes of European sustainability regulations,” but reports that investors remain interested in the concept. Janiaud’s conversations with industry figures like Sophie Flak, the managing partner for ESG at Eurazeo, and Shami Nissan, the head of sustainability at infrastructure investor Actis, underscore the need for harmonisation and clarity in how new standards and obligations will be “applied, interpreted, and enforced.”
Apollo Global Management reached an agreement to acquire The Restaurant Group (TRG), the parent company of Wagamama, for £506 million, at a 34% premium to the closing price of TRG’s shares on Wednesday. The board of TRG unanimously endorsed the offer, noting it had received irrevocable undertakings from Oasis and Irenic Capital, who together own a near 20% stake in TRG.
WALL OF MONEY
Warburg Pincus closes private equity fund above $17bn target
The US group has raised $17.3 billion for its largest fund since inception. The fund will focus on corporate buyouts and equity stakes, with plans to make 75 to 90 investments. The average ticket size is expected to be around $175 million.
Brookfield raises $12bn for its flagship fund
Brookfield Capital Partners VI is the largest fund raised to date for the Canadian manager. The fund has so far committed approximately $4 billion to acquire six businesses.
Appian closes its third fund above $2bn
The buyout firm, which focuses on mining companies, closed Fund III at $2.06 billion. The fund will target mid-sized deals, with a focus on energy transition commodities and precious metals. Up to one third of the fund’s capital can be invested in credit opportunities.
MEDIA OF THE WEEK
Bloomberg’s Ed Ludlow breaks down the latest out of the Israel-Hamas conflict and its impact on the region’s tech and VC industries. Plus, payments firm Klarna discusses the company’s investment in artificial intelligence.
DEAL CHART
| Acquisition Target | Buyer | Seller | Value | Date | Region | Sector |
| Restaurant Group Plc | Apollo | £506 million | 12/Oct | UK | Restaurants | |
| J&K | SK Capital | Core Industrial Partners | 12/Oct | US | Ingredients supplier | |
| DWF | Inflexion | *P2P* | £342 million | 12/Oct | UK | Law firm |
| Amspec | TPG Rise Climate | Olympus Partners | 12/Oct | US | TIC | |
| Holland Industrial Construction Systems | Mutares | 12/Oct | Netherlands | Construction | ||
| Bazooka Candy Brands | Apax | Tornante Madison Dearborn Partners |
11/Oct | US | Confectionery | |
| InsuranceDekho | Eurazeo Mitsubishi UFG |
11/Oct | India | Insurtech | ||
| Ecomundo | Lisam Systems (Keensight) | 9/Oct | France | Chemical compliance software | ||
| Applied Stemcell | QHP Capital | 9/Oct | US | Cell and gene therapy | ||
| GIA | Lonsdale | 9/Oct | UK | Building consultancy |
MOVERS AND SHAKERS
- Carmignac has appointed Edouard Boscher as Head of Private Equity to oversee and coordinate a series of PE initiatives made in recent years.
- Bowmark Capital has appointed Rahul Satsangi as a Partner to extend its investment programme to growth-oriented, lower mid-market businesses in the UK.
- PGIM Investments has hired Dominick Carlino for its newly-created role of Global Head of Alternative Investments.
- eB Capital has appointed former Sprint and SoftBank executive Marcelo Claure as Vice Chairman and Managing Partner.
HORSE’S MOUTH
“It is difficult to develop technical screening criteria for a social taxonomy that would work across different jurisdictions and geographies… Social impacts, whether negative or positive, are highly localised – so even at nation-level, there is inherent complexity.” – Shami Nissan, head of sustainability at infrastructure investor Actis.
[Discussing the UK’s IPO drought and rise in take-privates] “We’ve been in a doom loop, which has just been too often a prevalent narrative ever since Brexit, and we need to stop it…It can become a self-reinforcing narrative…It can become the perception and then perception can become reality, even though it is very often not actually true.” – Mark Austin, a partner at Latham & Watkins and chair of the UK’s secondary capital raising review.
“The longer it takes you to be successful, the harder it will be for somebody else to take it away from you.” –Hugh Jackman, actor, born on this day 1968.
