Maitland/AMO Private Equity Monitor – 15 May 2020
Worth a read
WSJ Pro Private Equity reports that increasing numbers of companies are trying to wiggle out of M&A deals due to the pandemic. But as you can imagine, the sellers aren’t too happy and across the pond more than half a dozen lawsuits have been filed since the beginning of April. The article notes the abiding principle of caveat emptor or “buyer beware”. The most prominent example of such a dispute was from Sycamore Partners’ planned takeover of Victoria’s Secret from L Brands. Hinging on a particular clause, (MAC – a Material Adverse Change) companies are looking at the fine print and getting litigation lawyers on the phone.
Private equity heavyweight David Rubenstein has said that the private equity industry is is “reasonably good shape” according to CNBC. He notes that firms have a “fair amount of dry powder” and argues that it won’t make much of an impact if companies don’t move in “a week or two or a month”.
“Fraught negotiations lie ahead” for private equity firms and the executives at their portfolio companies, argues Reuters Breakingviews, as the focus turns from immediate survival to long-term incentives for managers to drive the business forward. The article suggests that bargaining from portfolio companies has improved with the amount of capital deployed by private equity firms, although often the funds hold preferred shares, which mean these executives “eat last”.
Private Equity International reports that Partners Group has announced a plan (unrelated to Covid-19) to improve private markets as a “better place to be”. The article notes that this differs from “properly taking account of the ‘S’ in ESG” because it may well end up “hitting returns rather than enhancing them”. The company’s CEO stresses that this evangelical stance does not come as a result of the poor reputation the private equity industry receives but notes the public view of the industry is “unfortunately not reflective of the reality that we are pretty good corporate citizens”.
Private equity is said to be “circling the Australian market” after KKR announced a third deal in the country this year with the acquisition of Colonial First State, the wealth management arm of Commonwealth Bank of Australia. The Financial Times writes that the deal was “in train” before the pandemic, but highlights that businesses such as Virgin Australia are targets for private equity, which has A$13bn in dry powder to deploy.
Bain Capital has agreed to take Japanese company, Showa Aircraft Industry, private in a $817m deal. The Financial Times reports that this is one of many take-private deals anticipated in the Japanese market this year due to Covid-19’s impact on public market valuations.
Venture capital and private equity owners are set to benefit from a surge in usage of telemedicine apps as record numbers of patients turn to online medical consultations during the Covid-19 pandemic according to Private Equity News. Venture capital firms have invested more than £1bn since 2014 in telemedicine start-ups in Europe, according to PitchBook.
Private equity’s approach to retail requires overhaul according to the Wall Street Journal, which reports that out of the 38 US retailers with the with the weakest credit profiles, more than 70% were owned by private-equity firms on April 20, 2020. Critics say a broader decline in the sector has been compounded by heavy debt loads retailers assume in buyout deals.
FTSE-100 listed private equity group 3i has said that it will maintain its dividend this year despite the coronavirus-induced hit to its portfolios and what chairman Simon Thompson described as “the most uncertain outlook for generations”. The Financial Times writes that the firm reported a strong 11 months before the outbreak, which also helped to soften the impact on its retail operations.
Wall of money
The German-listed private equity group has closed its eighth fund on more than €1.1bn, surpassing the predecessor which raised €1.01bn in 2016. DB said that 86% of the capital came from existing investors.
Midmarket-focused Stellex Capital Management has said that it is looking to raise more than $1bn for its second flagship fund. The firm also has plans to expand its deal team to deploy fresh capital amid the market dislocation caused by the coronavirus.
Cathay Capital has closed its first global private equity fund on $850m, which will include a 10% allocation to North America for the first time in addition to its previous focus on Europe and China. Midcap II surpassed its predecessor, which closed on $525m in 2014.
Enterprise software-focused private equity firm Main Capital Partners has closed its sixth fund on the hard cap of €564m, beating its target. The fund will focus on investments in the Benelux, DACH and Nordics in companies which have an active add-on acquisition strategy.
|Acquisition Target||Buyer||Seller||Value||Date Announced||Region||Sector|
|Bridge Farm||Artemis Growth Partners||-||c. £66m||15/05/2020||UK||Agriculture|
|Apex Parks||Cerberus Capital Management||-||$45m||14/05/2020||US||Leisure|
|Verimatrix||One Equity Partners||Jolt Capital||Undisclosed||14/05/2020||France||Cybersecurity|
|Column Group||Parabellum Investments, Acacia Group||-||Undisclosed||14/05/2020||US||Business Services|
|Colonial First State||KKR||Commonwealth Bank of Australia||$1.1bn||13/05/2020||Australia||Financial Services|
|Lucien Ortscheit||Silver Investment Partners||-||Undisclosed||13/05/2020||Germany||Pharmaceuticals|
|ProSiebenSat.1 Media||KKR||-||Undisclosed, 5.21% stake||12/05/2020||Germany||TMT|
|TM Lewin||SCP Private Equity||Bain Capital Credit||Undisclosed||12/05/2020||UK||Fashion|
|Showa Aircraft Industry||Bain Capital||-||$817m||11/05/2020||Japan||Manufacturing / Real Estate|
|Corilus||Gilde Buy Out Partners||AAC Capital||Undisclosed||11/05/2020||Belgium||Healthcare|
|Eco Baltia||INVL Baltic Sea Growth Fund||-||Undisclosed||11/05/2020||Latvia||Recycling & Waste|
|UKFast||Inflexion||-||Undisclosed, 75% stake||07/05/2020||UK||TMT|
Movers and Shakers
Warburg Pincus has appointed current managing directors René Obermann and Adarsh Sarma as co-heads of the firm’s European business, effective 1 June 2020.
IK Investment Partners has poached Thierry Aoun from KKR as capital markets director.
In another departure from KKR, Silke Scheiber has joined Asterion Industrial Partners as head of the Portfolio Management Committee.
Stirling Square has appointed Emin Aleskerov to lead its new innovation and sustainability team which will focus on data and technology issues at portfolio companies. Ahmed Khamassi has also been appointed as head of data science.
Dee Dee Sklar has taken on the role of senior adviser at 17Capital. Sklar joins from Wells Fargo where she was vice chair of subscription finance.
Katy Hodgetts has been appointed as a director in Sanne’s Guernsey office. Previously Hodgetts was at BNP Paribas where she managed a portfolio of global and boutique investment clients.
From the horse’s mouth...
“The depth of the economic carnage is still ahead of us.” – Raymond Svider, Chair of BC Partners
“Until mid-March this was going to be a thunderingly good set of results, and the thing that has knocked it is unrealised marks.” – 3i Chairman Simon Borrows on the firm’s latest set of results
“It took me quite a long time to develop a voice, and now that I have it, I am not going to be silent.” – Madeleine Albright, US Secretary of State (1997-2001), born on this day in 1937