Monitor
Private Capital Monitor 03/11
06th November 2023
WORTH A READ
Europe
The Financial Times’ Big Read explores the challenges facing the private equity industry in a changing financial landscape marked by higher interest rates and the need for creative financial strategies to help adapt to the new environment.
Private equity groups are preparing to lobby the Labour party against its pledge to “make the tax system fairer” by targeting the capital gains tax paid on carried interest. The industry has built closer ties with Labour in recent times but still plans to contest how it intends to implement this policy.
Private equity firms are using “payment-in-kind” (PIK) debt to make payments on leveraged buyout loans, preserving liquidity and assuming they can refinance at lower rates in the future. This practice has become more mainstream and is being utilised in various ways across the industry, but it carries the risk that if rates stay high, borrowers could be left with double or triple the original debt.
US
The National Football League is looking at changing its ownership rules, including potentially to open the door to private equity investment in its teams. The NFL, with an average club value of more than five billion dollars, is the only one of the four major American professional sports leagues to prohibit institutional capital ownership. Commissioner Roger Goodell has appointed a committee of five owners tasked with evaluating these policies; the committee will meet with all team owners next March to propose any recommendations.
The number of American public companies has been cut in half since 1996, due in large part to private equity. The Atlantic’s Rogé Karma discusses the perils of companies operating in the dark, without legal requirements to disclose financials. From the post-Great Depression Era to the 1980s, scale for companies has needed to come in exchange for transparency. Now, however, private companies can raise as much as they want without the thought of an IPO, and under the veil of secrecy.
It’s earnings season, and the publicly traded PE fund managers have overcome slumps in dealmaking and fundraising to beat index funds in returns, reports WSJ Pro PE. KKR, Blackstone, and Apollo shares are all up double digits this year, thanks to significant credit operations which have stepped in to fill the void of failing banks. However, “there’s a lot that has to go right to hit those numbers,” says one sector analyst on some PE firms’ optimistic guidance.
WALL OF MONEY
Carlyle closes flagship Fund VIII under target amid industry slump
After two years of fundraising, Carlyle Group held a final close on its eighth flagship fund on around $14.8 billion in August, below its initial $22 billion goal and less than the firm raised for its prior main private equity fund. Carlyle confirmed it closed the fund in August, after launching the fund in 2021 and receiving extensions to continue to try and attract capital from LPs beyond its contractual marketing deadline.
Private investment firm files to launch its first ETFs
White Wolf Capital Advisors announced plans to launch two exchange-traded funds (ETFs), namely WhiteWolf Publicly Listed Private Equity and WhiteWolf Commercial Real Estate Finance Income. These funds will be focused on the private equity and commercial real estate markets and will be actively managed, as indicated in a regulatory filing.
KPS Capital closes two funds with combined $9.7bn
KPS has held the final closings of the KPS Special Situations Fund VI and KPS Special Situations Mid-Cap Fund II. Both the funds were oversubscribed with aggregate capital commitments over 36% greater than their predecessor funds which raised $7.1bn.
CIVC Partners raises $870m for seventh fund
Chicago-based buyout house CIVC Partners has surpassed its $700m target to close its seventh fund. On the fundraising, CIVC Partner John Compall said in a statement, “Being able to complete the fundraise in 120 days in this market demonstrates a strong endorsement of our team, sourcing strategy, value creation approach, and performance.”
DEAL CHART
| Acquisition Target | Buyer | Seller | Value | Date | Region | Sector |
| Cyxtera | Brookfield Infrastructure Partners | $775 million | 2-Nov | US | Data Centre Services | |
| Strutural Building Components LLC | HB Capital | 1-Nov | US | Structural Construction | ||
| Ascential Digital Commerce | Omnicom Group | Ascential | $900 million | 30-Oct | UK | Information and Analytics |
| Ascential Consumer Research (WGSN) | Apax Partners | Ascential | £700 million | 30-Oct | UK | Information and Analytics |
| Entergy Gas Distribution | Bernhard Capital Partners | Entergy | $484 million | 30-Oct | US | Energy |
| Alerce | Oakley Capital | 30-Oct | Spain | Transport Management Software | ||
| Profi Rom Food SRL | Koninklijke Ahold Delhaize | Mid Europa Partners | €1.3 billion | 30-Oct | Romania | Grocery Retail |
| Dollar Shave Club | Nexus Capital Management | Unilever | 26-Oct | US | Grooming | |
| Christine McVie’s Fleetwood Mac royalties | Harbourview Equity Partners | The Estate of Christine McVie | 26-Oct | US | Music |
MEDIA OF THE WEEK
Money Undercover: The State of Private Equity
Andrea Auerbach, head of private investments at Cambridge Associates, talks about the state of private equity. She says this “tight market” could be good from an investing perspective. She speaks to Bloomberg’s Lisa Abramowicz on “Money Undercover.”
MOVERS AND SHAKERS
- Welsh, Carson, Anderson & Stowe has hired Megan Callahan as an operating partner. She was previously operating chief of digital healthcare group Twill.
- Kirkland & Ellis is opening a new office in Riyadh, Saudi Arabia led by corporate partner Kamran Bajwa. Riyadh-based lawyers Noor Al-Fawzan of Latham & Watkins and Manal Al-Musharaf of White & Case have joined as partners.
- Nordstjernan, a Stockholm-based private equity investment firm has appointed Johan Lilliehöök, currently Managing Director, Investments at investment business AP Moller Holding, as its new Chief Executive Officer (CEO).
FROM THE HORSE’S MOUTH
“The tide has gone out, the rocks are showing and we are going to figure out who is a good swimmer” – Andrea Auerbach, head of private investments at Cambridge Associates.
[Commenting on CVC Capital Partners postponed IPO] “You can’t defy gravity” …“Market conditions aren’t there.” – an unnamed source with direct knowledge of the decision.
“While we cannot live without history, we need not live within it either.” – Amartya Sen, Indian economist and Nobel Prize laureate, born on this day 1933.
