Maitland/amo Private Equity Monitor – 17 June 2022

17th June 2022

Worth a read

Workers’ windfall at KKR

KKR exited Illinois-based CHI Overhead Doors for $3bn, a record return 10 times its 2015 investment not seen since the 1980s. More curiously in this instance, it is also observed that CHI’s employees and line workers would net $175,000 in average profits as their windfall. This certainly paints a different picture compared to KKR’s 1986 buyout of Safeway, where the WSJ won a Pulitzer Prize for diving into the mistreatment of employees under the private equity business model. The FT’s Sujeet Indap notes that this marks a shift when it comes to private equity’s labour policies, pointing out that there might be change regarding the industry’s poor reputation over how it treats workers. He welcomes the change, suggesting that the new interest in wellbeing and fairness might have come amid changing demands of the marketplace, and pressure over preferential tax treatment and business practices.

SuperReturn: “Crisis of Value” Over Inflation

The industry has gathered for SuperReturn at Berlin this week, and discussions were aplenty over the economy, outlooks and challenges. General Atlantic’s Gabriel Caillaux and Apollo’s Scott Kleinman sat down with Bloomberg TV, both discussing how private assets are facing a “crisis of value” after years of prices being driven higher by rock-bottom interest rates, and producing excesses as deal cycles become a bit too accelerated. Kleinman believes that private valuations will fall as the industry has to return back capital to investors, while BC Partners’ Nikos Stathopoulos points out that everyone is in a bit of a “wait and see” mode regarding the impact of a tougher economy.

SuperReturn: Deal-Making has Peaked

Meanwhile, Carlyle’s Marco De Benedetti has stated that the buyout industry is showing signs of cooling and seeing a definite slowdown due to uncertainty in the economy. He also points out that expanded investment in tech has contributed to this bubble that has burst, recommending investment in the healthcare and energy transition sectors instead.

Boots: What’s Going On?

The FT’s Cat Rutter Pooley expresses her surprise on how the Boots bid – which she initially thought would be an asset made for a PE buyout – is playing out, writing that it has become “the British symbol of how the buyout boom went bad” and demonstrating the direness of the domestic market. She points out some of its problems: fancy financing is not the way to fix Boots as most stores are leasehold, there are pension complexities, leverage coming down across the industry while debt costs have gone up. The Apollo-Reliance bid, if accepted, is a sign of a desperate seller.

Wall of money

MiddleGround looks to ESG

MiddleGround Capital, a lower midmarket firm that invests in industrial and specialty distribution companies, is preparing to launch a fund focused on companies that aim to generate financial returns alongside environmental, social and governance benefits, as reported by The Wall Street Journal.

Deal chart

Acquisition TargetBuyerSellerValueDate AnnouncedRegionSector
WiiSmileEurazeo-€70m+16/06/2022FranceBusiness services
BienzobasAtrys HealthNexxus IberiaEUR 76m / 4.2x return15/06/2022SpainHealthcare providers
Argo-HytosVoith-Undisclosed15/06/2022SwitzerlandIndustrial Machinery
softgardenGrupa PrajucInvestcorp Technology PartnersEUR 118m / 3x Return15/06/2022GermanySoftware & Computer Services
Medifox DanResMedHg Capital EUR 950m14/06/2022GermanySoftware
Downing Venture DivisionForesight GroupDowning LLP£13.6m13/06/2022UKVenture Capital
HammerlKarl BachlAureliusUndisclosed13/06/2022GermanyBuilding Materials & Fixtures
Media Business InsightGlobalDataGresham House Ventures2.3x return13/06/2022UKMedia
Global Reach GroupFleetcor TechnologiesInflexionUndisclosed10/06/2022UKFinancial Services

Movers and Shakers

UK & Europe

Dickson Minto’s co-founders have stepped back from their executive roles, as the firm eyes succession to a new generation.

Schroders Capital has appointed Mark Bruen as head of private credit solutions to deliver income-oriented solutions for the firm. He was previously the head of fixed income solution at Federated Hermes, where he developed bespoke investment solutions.

H.I.G. Bayside Capital has promoted Mathilde Malezieux to managing director, utilising her 16-year experience in investment banking and distressed investment to grow the firm’s distressed debt portfolio in Europe.

LDC has appointed Alex Benton as ESG director from Deloitte to support its portfolio management teams. He will pursue the firm’s ESG commitments which include ensuring LDC’s operations are net-zero by 2030, addressing diversity and inclusion, and continuing to champion the principles of good corporate governance.

Jolt Capital has appointed Clara Audry as new general partner to strengthen its lower mid-market team by bringing additional operational experience to the firm.

North America

MidOcean Partners has recruited Jim Henderson from Stone Point Capital as managing director in its investor relations team and Marshall Phelps from Lazard as managing director and partner in its business services vertical.

Paul Hastings has hired private equity partner Tom Cartwright from rival US firm Morgan Lewis & Bockius in London as law firms continue to hunt for top private equity talent.

From the horse’s mouth...

“Hard assets with less exposure to input costs and favourable short duration income: that’s what you need in this kind of environment.” – Jonathan Gray, Blackstone president, on the current market environment.

“In many ways, this is a time of reckoning for our industry, where we have to show more than just investing acumen. We also have to show that we can transform companies.” – Philippe Freise, co-head of European Private Equity at KKR, speaking at SuperReturn.

“We have shown that a great deal of what makes people happy is living up to what they think they should be doing.” – George Akerlof, American economist and winner of the 2001 Nobel Memorial Prize in Economic Sciences, born this day in 1940.