Monitor
Private Capital Monitor 23/10
23rd October 2023
Europe
EQT Group is planning private stock sales for portfolio companies as an alternative to dysfunctional public IPO markets. The Nordic firm would hold private auctions among its 1,100 limited partners, enabling them to buy and sell stakes without public listings. This would act as a potential way to provide liquidity and return capital more efficiently than complex continuation fund deals.
ONE FUND’S LOSS IS ANOTHER ONE’S GAIN
Former Odey Asset Management portfolio managers have taken short positions against private equity, believing rising rates will depress valuations of their portfolio companies. The managers, now of Lancaster Investment Management, believe private equity’s challenges could spill over and harm the broader economy, justifying them to short the Russell 2000 index and its 40% of constituents which are currently loss-making.
Private equity firms are facing the worst year in a decade for selling portfolio companies due to higher interest rates and geopolitical tensions ending the buyout boom. Buyout deals generated $584bn in the first 9 months of 2022, down from over $1tn in 2021. Higher rates have hampered IPOs and acquisitions. As sales of portfolio companies are rarely at the price they want, firms are becoming increasingly creative, such as making use of margin loans and continuation funds, in order to generate investor returns.
United States
The SEC said it would focus on scrutinizing fee arrangements and how private equity firms market their funds as part of its new examination priorities, announced on Monday. Under chief Gary Gensler, the regulatory body has tried to tighten regulations on private funds but has run into conflict with the industry and its lobbyists. One attorney tells WSJ Pro PE that the SEC has been particularly attentive to management fee calculation methods for older funds that have stopped making new investments.
Although the difficult fundraising environment has resulted in layoffs at large-cap PE shops, many middle-market firms are still looking to fill positions across the board- particularly in portfolio operations, writes Middle Market Growth. Without the usual deal flow, the role of operating partner has become even more important as firms try to maximize portfolio company performance.
The cost of borrowing debt for private equity firms has grown to the point where lenders and banks are asking for more equity investment to shore up portfolio companies, according to WSJ Pro PE’s Chris Cumming. Private equity traditionally aims to use leverage rather than equity investment to maximize profits, but lenders are being stricter in their requirements to extend loans for refinancing debt.
MEDIA OF THE WEEK
Beezer Clarkson head of Sapphire Partners‘ venture investments appears on The Twenty Minute VC podcast to reflect on the LP landscape.
DEAL CHART
| Acquisition Target | Buyer | Seller | Value | Date | Region | Sector |
| Banook Group | Motion Equity Partners | 20-Oct | France | Medical services provider | ||
| Le Guellec | BNP Paribas Développement and Siparex Entrepreneurs | – | – | 19-Oct | France | Manufacturing |
| Arriva Group | I Squared Capital | Deutsche Bahn | €1.6 bn | 19-Oct | UK | Transport |
| Kin and Carta | Apax | – | £200mn | 18-Oct | UK | Digital transformation consultancy |
| LOGISTEC Corporation | Blue Wolf Capital Partners and Stonepeak | – | £723mn | 17-Oct | Canada | Marine cargo services provider |
| IK Partners | Wendel SE | IK Partners | €383mn | 17-Oct | UK | Private Equity |
| abrdn Private Equity | Patria Investment | Abrdn | £80mn | 16-Oct | UK | Private Equity |
WALL OF MONEY
EQT raises nearly €20bn for latest flagship fund
Stockholm-listed European private equity giant EQT is nearing the close of the EQT X buyout fund having raised almost €20bn for its latest flagship vehicle.
PE firm Integral targeting $3bn-plus fund following Tokyo listing
Private equity firm Integral Corp is aiming to launch a find of around $3.3bn in the next four to five years by leveraging the funds it raised in an initial public offering in Tokyo last month.
BlackRock’s Kreos Capital taps investors for €1.2bn
BlackRock’s newly-acquired private debt firm Kreos Capital has tapped investors for €1.25bn at final close with commitments from over 30 institutional investors.
MOVERS AND SHAKERS
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Clayton, Dubilier & Rice appointed former healthcare executive Jonathan Porter as Operating Advisor to CD&R Funds.
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Greenbacker Capital Management (GCM) has expanded its private equity investment team with the appointment of Rahul Bhalodia as a managing director of the Greenbacker Development Opportunities (GDEV) strategy.
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Kirkland & Ellis has hired senior private equity partners Ian Barratt and Sinead O’Shea from rival US law firm Simpson Thacher & Bartlett in London.
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MiddleGround Capital has named Christopher Speight as a Partner. He will be based in the firm’s Kentucky headquarters and initially will assume responsibility for Fund Accounting and Management Company Accounting functions.
FROM THE HORSE’S MOUTH
“When 30-year mortgages and car loans cost you 8% it will impact consumer behaviour. Growth has been remarkably resilient, but if you keep policy this tight, this long, invariably you will cause the economy to slow down.” – Jonathan Gray, President of Blackstone.
“There is a pick-up in activity because people have realised that market conditions are not going to change dramatically. It doesn’t suit our industry to sit on the sidelines for a long period”. – Tristan Nagler, Partner at Aurelius.
“Success is no accident. It is hard work, perseverance, learning, studying, sacrifice and most of all, love of what you are doing or learning to do”. – Pelé, born on this day, 1940.
