Private Capital Monitor 26/01
30th January 2024
WORTH A READ
It seems the weather reflected sentiment at this year’s IPEM private markets conference. With attendees experiencing both sun and cloud in Cannes, Private Equity News details how executives expressed optimism for deal recovery while simultaneously showing concern about the challenging fundraising environment.
BlackRock’s $12.5bn deal for Global Infrastructure Partners highlights challenges for publicly traded capital managers acquiring private equity firms, as tensions between fund investors, public shareholders, and employees arise. While founders benefit, mid-level executives face potential downsides, and aligning stakeholder interests remains complex due to demands for specific profit margins and steady management fees in an increasingly institutionalised private equity landscape.
Valuation disagreements are persisting with private equity firms struggling with portfolio company exits. Ares Management’s Stephane Etroy highlighted the existence and the scale of bid/ask spreads at the IPEM private markets conference, which he says has led to a wait-and-see approach. However, some can’t afford to wait as long as others.
After another record low year in the IPO market, startups are turning to alternative sources of liquidity. TechCrunch’s Alex Wilhelm and Anna Heim report that they expect to see companies, some of which may be unicorns, resort to private equity as a viable path to an exit in 2024.
WSJ Pro Private Equity’s Luis Garcia reports that some private equity firms are sticking with their natural gas investments despite the worldwide narrative around the shift to clean energy. Jason Downie, co-founder and managing partner at Tailwater Capital, tells Garcia that he and other firms have “made a fundamental bet that natural-gas demand will be around for a lot longer than most people expect.”
Large private equity firms have taken on new terrain, most recently investing in life insurers and taking advantage of their balance sheets which serve as a new source of funding. Despite the apparent strategy, The Economist warns that these investments bring risks to both firms and taxpayers.
WALL OF MONEY
Blackstone’s CFO, Michael Chae, announced on Thursday that the company is nearing the fundraising for its next set of strategies. This includes the imminent launch of a $10 billion opportunistic credit fund, aligning with other major investors capitalising on credit market dislocations.
MEIF7 closed in December 2023, two years after launching with a €7 billion-€8 billion target. Adam Lygoe, head of Institutional and International Wealth Distribution, sees more LP ‘allocations continuing to come online in the infra space’. The fund was supported by 24 new LPs.
The company, which is building a hydrogen-powered steel plant in northern Sweden, has now raised €6.5bn in debt and equity financing.
|Apollo Global Management
|Beauty & skincare
|Serbia, Bosnia-Herzegovina & Montenegro
|Beauty & skincare
|Nov Santé Actions Non Cotées fund (Eurazeo)
|Blackstone Real Estate Partners
|Arcline Investment Management
|Aerospace defence technology
|The inherent group (Keensight)
|IT & connectivity
|Telecom Italia fixed line network
MEDIA OF THE WEEK
During his battle with terminal lung cancer, Renowned private markets investor, Peter Cowley, has written a book about the tragedies he’s faced during his life.
MOVERS AND SHAKERS
- RJ David has left Carlyle to join rival private equity group Broad Sky Partners, which focuses its investments on middle market business services and consumer services companies.
- Antares Capital has hired Jack Snyder to lead the asset manager’s launch of its private wealth business. Snyder, who previously worked at First Eagle, will sit as the head of US wealth distribution.
- European VC Cherry Ventures has promoted Dinika Mahtani to be its first London-based partner.
- Siris announced the promotion of Stephen Catera, formerly a managing director at the firm, to partner.
FROM THE HORSE’S MOUTH
“Some sales are impossible to do, some exits are taking longer than expected. Our expectation is that it’s just jet lag of six to nine months, and so 2024 should show a strong recovery in this aspect.” – Christophe Bavière, Eurazeo co-chief executive.
“There’s a bid/ask spread, and people just wait for better days… If they can wait, why would you want to put your average company up for sale right now?” – Stephane Etroy, Head of European private equity at Ares.
“In the long run, no matter how good or successful you are or how clever or crafty, your business and its future are in the hands of the people you hire.” – Akio Morita, Japanese businessman and co-founder of Sony, born on this day 1921.