Monitor
Private Capital Monitor 06/10
06th October 2023
WORTH A READ
United States
Private equity portfolio company CFOs are struggling to fill critical roles in their businesses as their owners double down on cost-cutting strategies to boost profits, PitchBook reported last weekend. Particularly at larger funds, CFOs feel their organizations are understaffed while many fund managers feel the same organizations are in fact overstaffed. These executives often face difficulties coming from prior roles with abundant resources, as they now feel the pressure of fund managers scrutinizing any additional expense – including hiring.
Investors of private credit funds are growing increasingly skeptical of the profits going to fund managers as a result of higher interest rates. Bloomberg reported this week that LPs are seeking more transparency around “hurdle rates”, or the point where funds can begin to collect profit on their returns. Floating rate lending, which allows managers to achieve higher yields as base rates soar, also adds difficulty to fund administration and distribution of capital.
Europe
The Financial Times reports on comments from Nikhil Rathi, chief executive of the Financial Conduct Authority, who warns that global interest rates are likely to cause an adjustment in private market valuations. The comments follow the regulator’s plans to review how valuations are being undertaken and whether any risks could spread into banking. Rathi stated “At some point you might expect that risk will crystallise in valuations of assets. Those valuations of assets could be assets like commercial real estate, and we know what’s happening in China.”
Chris Hughes writes for Bloomberg Opinion on the rise of secondary funds, arguing that their popularity stems from an overinvestment in private capital during easy monetary policy. Hughes hopes the normalisation of secondaries won’t prevent investors from exerting more restraint in future public vs private asset allocation. Despite this, Hughes concedes that secondaries play an important role in correcting excess while meeting exit needs.
While private equity remains bullish on consumer sectors long-term, the market faces shifting headwinds and evolving consumer demand, as reported by Private Equity International. Camila Mendoza notes that private equity firms are focused on resilience, pricing strategies, and data-driven understanding of changing behaviours. Whereas investors are aligning with companies benefiting from tailwinds in niche and authentic products targeting younger demographics.
WALL OF MONEY
Brookfield cheers $12bn haul for flagship private equity fund
Brookfield said that Brookfield Capital Partners VI (BCP VI) is the largest private equity fund ever raised by the company. Brookfield has committed $3.5bn to the fund, which has also received investments from public and private pension plans, sovereign wealth funds, financial institutions, endowments and foundations, and family offices.
Bain Capital raises €6.35bn for European fund
The US buyout shop told Private Equity News that it has tapped investors for €6.35bn, including €750m in Bain Capital co-investment. The close of Fund VI marks a 26% increase from Fund V, according to Bain.
European venture capital firm Atomico raises $1.1bn to defy tech slowdown
The London-based group has raised fresh money across its new venture and growth funds, according to US regulatory filings, nearing its goal of $1.35bn for both vehicles, according to regulatory filings.
MEDIA OF THE WEEK
Private Fund Investors Don’t Need SEC’s Help: Opinion
Bloomberg Opinion editor Romesh Ratnesar presents an editorial arguing that new regulations on private investment funds would upend a business model that has persisted for decades, but the benefits of doing so are far from clear.
DEAL CHART
| Acquisition Target | Buyer | Seller | Value | Date | Region | Sector |
| Clipway | Carmignac & General Atlantic |
05/Oct | UK | Private equity | ||
| Milestone | SK Capital | Amberjack Capital | 04/Oct | US | Carbon storage | |
| Absolute Energy | I Squared Captial | 04/Oct | US | Energy transition investment | ||
| Exus | Partners Group | $1 billion | 04/Oct | Spain | Energy transition investment | |
| BioPharma Solutions (BPS) | Advent International Warburg Pincus |
Baxter International | $4.25 billion | 03/Oct | US | Biopharmaceuticals |
| TRG | Vista Equity | Pamlico Capital | 03/Oct | US | Subscription management software | |
| Everise | Warburg Pincus | $1 billion | 03/Oct | US | Healthcare outsourcing | |
| Banks Renewables | Brookfield | $1 billion | 03/Oct | UK | Renewable energy | |
| Seoul Medical Group | Ascend Capital | 03/Oct | US | Physician Association | ||
| Avenu Insights & Analytics | Arlington Capital | Mill Point Capital | 02/Oct | US | Public-sector software | |
| Regeldienst | Sogelink (Keensight) | 02/Oct | Netherlands | Public-sector software | ||
| Niva Bupa | Bupa | True North | INR 2700 Cr ($324 million) | 29/Sep | India | Health insurance |
| Cook & Boardman Group | Platinum Equity | Littlejohn | 29/Sep | US | Doors and security | |
| Chico’s FAS | Sycamore Partners | *P2P* | $938 million | 28/Sep | US | Fashion |
MOVERS AND SHAKERS
- KKR is expanding its operations in India with the opening of a new office in Gurugram, which the firm expects to be home to some 150 new staff by early 2024.
- Carlyle has appointed Jeff Nedelman as Global Head of Distribution, effective the 16 October, 2023.
- Bridges Fund Management has appointed Henry Jones as partner and head of value creation, to strengthen the performance of its portfolio companies.
FROM THE HORSE’S MOUTH
“When I started out [in 2001], each investor would have about 120 GP relationships. Today that has been pared back to between 30 and 60 relationships, and the number is going down.” – Mounier Guen, Founder and CEO, MVision
“We’re looking at it from a risk management perspective to understand where that build-up of risk might have taken place, how the valuations are governed and how that might feed back into other parts of the financial system be that banking, insurance or elsewhere.”– Nikhil Rathi, Chief Executive of the Financial Conduct Authority, on its upcoming review of private market valuations.
“Luck is a dividend of sweat” – Ray Kroc, McDonalds CEO (1967-1973) responsible for its global expansion, born on this day in 1902.
