Maitland/amo Private Equity Monitor – 13 May 2022

13th May 2022

Worth a read

The Hybrid Deal

There has been an uptick in “hybrid deals” – those which have financing sourced from both private and public markets. The FT reports that private lenders such as Apollo and Ares have been propping up corporate bond deals in public markets amid the volatility that has been crushing the volume of riskier debt sales. Traditional asset managers have become more wary of buying corporate bonds, especially after suffering large withdrawals from their funds due to recent changes in monetary policy. This dip in demand has contributed to a chill in the issuance of high-yield bonds this year and allowing private lenders to step in on terms less contingent on near-term price swings.

What the Supply Chain Disruption Can Do For PE

The WSJ writes that PE firms have been on the hunt for companies that are set to profit from the supply chain crisis, with logistics and transport investments reaching $50.6bn globally in 2021, more than three times the amount in 2020 and 34% higher than in 2019. According to Bain Capital, PE firms are looking at where unmet demand exists, such as in warehouse automation, in key operations currently suffering from labour shortages, and storage businesses, which are now among the largest supply chain-related investments by the private capital industry. However, this sector has not historically produced the rates of growth demanded by private equity.

Opportunities in Japan

The proposed take-private of Toshiba got people talking about investing in the long overlooked market. It was set to be the most ambitious deal by the industry in Japan as well as a turning point for global and Asia-focused PE firms. The FT emphasises the significance of this deal and how attention on Japan could not be any greater, especially as dry powder from Asian dealmakers is now far less likely to be deployed for China. Japan is finding itself in a new context as business focus shifts from efficiency to security, with the Yen’s weakness and expectations that it is set to decline further adding to the appeal.

Virginie Morgon: Captain of the Ship

Eurazeo’s CEO, Virginie Morgon, was featured in Financial News’ “An Audience With” series where she discussed Eurazeo’s growth, the importance of ESG, being a senior woman in private equity, and of course, being the captain of the ship. Morgon is Eurazeo’s first female CEO, a position she took on since 2018, and is credited with the firm’s rapid growth and strategic diversification despite the pandemic, inflation, supply chains disruption, and more. In the piece, she discusses ESG as being core to the firm’s operation and future.

Interest Rates Incoming

FT Adviser takes a look at the squeeze PE might receive from higher interest rates, especially for firms that bought platforms with debt. It speaks to David Ferguson, CEO of Seccl and founder of Nucleus, on how platform fees will likely be going to fall by as much as half in the coming years, while the cheap debt that PE companies have used to their advantage will likely rise in cost. It notes that higher interest rates on debt refinancing means that PE will face the prospect of either extracting a higher level of income from platforms, or selling businesses quickly to raise cash.

Wall of money

TPG targeting more than £18.5bn for healthcare and generalist funds

TPG is reportedly targeting a combined total of $18.5bn for its latest main fund and its second healthcare fund, which aims to collect $3.5bn. TPG has also recently closed its TPG Rise Climate at a hard cap of $7.3bn, which will target growth-stage investments in businesses dedicated to climate solutions.

Ergon holds EUR 800m final close for Fund V

Ergon Capital Partners has held a €800m final close for Ergon Capital Partners V, surpassing its target and original hard-cap of €750m. The fund was registered in May 2021 and is Ergon’s flagship fund, looking to to target mid-market businesses in the Benelux region, France, Germany, Italy and Spain and focus on the healthcare, media, services, leisure, consumer goods and luxury, and niche industrials sectors. This follows the strategy of its predecessor fund, which held a final close in March 2019 raising €580m against a €500m target. According to a statement, almost all of Ergon’s institutional investors re-upped for the fund. The GP now has €2.5bn in AUM.

Lombard Odier partnership seeks $500m of private capital to curb plastics pollution

Lombard Odier Investment Managers has formed a partnership with Dow Inc. and non-profit Alliance to End Plastic Waste to use private capital to reduce plastic waste, aiming to raise $500m for a private equity investment strategy focused on projects that tackle the issue. The Alliance to End Plastic Waste plans to provide an anchor commitment for the strategy and develop solutions that can be taken to scale, while Lombard Odier will manage the strategy with support from the Alliance. The strategy will invest directly in companies on themes such as plastic waste collection and sorting infrastructure, and technologies that improve plastic durability, reuse, and recyclability. The partnership will look to invest $15m to $25m at a time on its own and with other investors.

Eurazeo Sustainable Maritime Infrastructure fund makes first commitment

Eurazeo’s Sustainable Maritime Infrastructure (ESMI) fund has reached €200m, more than half of its target fund size, while it has received a cornerstone investment from the European Investment Fund (EIF) of €70m. The fund looks to support the transition of the global maritime industry to a carbon-neutral economy by 2050, and investments will contribute the finance three main assets: vessels equipped with environmentally friendly technology that use more efficient or alternative fuels, innovative port equipment and infrastructure to aid ecological transition and assets that support the development of offshore renewable energies. The fund was launched five months ago, and has made its first transaction in the financing of a jack-up vessel used for the construction, repair and maintenance of European offshore windfarms.

Deal chart

Acquisition TargetBuyerSellerValueDate AnnouncedRegionSector
AltheaF2i and DWSPermiraUndisclosed11/05/2022ItalyTech/Healthcare
STAXSCWS CleanroomsSilverfleet6x multiple exit10/05/2022The NetherlandsBusiness services
EurolyserAntech DiagnosticsArchiMed6x return10/05/2022AustriaHealthcare
Kantar PublicTrilanticKantarUndisclosed10/05/2022UKMedia services
Brebeck CompositeARX Equity Partners-Undisclosed10/05/2022Czech RepublicIndustry
ImagesoundLivingbridgeECI2.6x return09/05/2022UKMedia services
ItalgelBregal Unternehmerkapital-Undisclosed09/05/2022ItalyFood

Movers and Shakers

UK & Europe

17Capital has promoted David Wilson, Emad Shahin and Fokke Lucas from managing director to partner in its London office. Wilson joined the firm in 2019 and is co-head of credit, having prior experience with JP Morgan and Lehman Brothers, while Shahin is general counsel at 17Capital and was involved in every transaction made by the company since joining in 2019. Lucas joined in 2012 and has completed 23 transactions, 11 of which have now been fully realised.

Verdane has promoted Christopher Parmo to partner. Parmo joined the firm as COO in 2018 and has led the building out of Verdane Elevate, an in-house team assisting the operations of portfolio companies, He was previously at Linas Matkasse and Deloitte. The firm has also promoted Max Carlsen, Karin Kans and Reed Snyder from director to principal.

From the horse’s mouth...

“You don’t have 10 people doing this in your organisation, across the board, and then elevate your ESG director to partner level because you want to look fashionable. You show your team, your partners inside the firm, that this is serious.” – Virginie Morgon, CEO of Eurazeo, on the importance of ESG and greenwashing. 

“When the high-yield market shuts down . . . the private markets have to come in for support. We benefit from the volatility because we are able to step in and work with companies we like.” – Kipp deVeer, head of Ares Credit Group. 

“I suppose sooner or later in the life of everyone comes a moment of trial. We all of us have our particular devil who rides us and torments us, and we must give battle in the end.” – Daphne du Maurier, British novelist and playwright, born on this day in 1907.