Maitland/AMO Private Equity Monitor – 20 November 2020

20th November 2020

Worth a read


How much longer can this carry on?

Carried interest occupies much of the Financial Times‘ opinion pages: from an impassioned opinion piece by City Editor Jonathan Ford, in which he advocates for carried interest to be taxed as income tax, thereby forcing buyout groups “discriminate more carefully” which transactions they got involved in”, to the Editorial Board soberly exhorting a root and branch rethink to taxing of private equity. The Editorial Board argues that the UK has a unique opportunity to send a powerful message to the world, that change is afoot. Noting that reform of this “tax anomaly” is long overdue, the piece also exhorts politicians to emphasise that any change should not be seen as a deliberate salvo on the private equity industry but instead should portray the industry as well placed to play a meaningful role in the post-Covid economic recovery.

Private equity surges ahead leaving hedge funds out in the cold

According to a report by EY, private equity has attracted more interest from investors than hedge funds. An article in Citywire Selector writes that hedge funds have continued to lose their lustre this year as investors have preferred to allocate increasingly to private equity. The piece notes that investors have broadly felt that their managers have outperformed relative to their expectations during the pandemic with a whopping 81% saying that private equity strategies either met or exceeded performance expectations. However, it’s not all plain sailing for alternatives: the report found that private equity and hedge funds are both behind on diversity and inclusion as well as integrating ESG standards.

How Hg got it right in tech - and what they can teach others

Private Equity News contains a  profile piece on Hg and in particular on their evolution from a jack of all trades mid-market buyout firm to becoming one of the largest specialist tech investors in Europe today. Noting that the  company now has $11bn of fresh capital to put to work, the firm is seeking to reinvent itself once more.

Private equity and oil: looking for an exit

Bloomberg reports that private equity firms which giddily jumped onto the oil bandwagon in the past few years now find themselves with something of a millstone around their necks.  Many are now forced to contemplate innovative ideas to make an exit. What started as a niggling problem in 2019, due to concerns re fossil fuels, has now become far worse after oil demand and prices collapsed in the first wave of the pandemic.

Electronic payments processing: Not so dull after all

Once upon a time, over  a decade ago, there was an ugly duckling called electronic payments processing. As the Financial Times notes, it was largely regarded a dull, back office function. Now it’s something of a swan, thanks to private equity firms. Citing this week’s Nexi and Nets deal, which created one of Europe’s largest payments companies, demonstrates how private equity firms are excited by this sector. This push into the payments sector has been lucrative: since 2008, buyout firms’ investment has returned 2.7x the amount of equity invested – compared to 2.1x for financial services and 2.3x for technology. Time to jump on the bandwagon…


Wall of money


Calling off the search

Searchlight Capital has held a final close of its third fund at $3.4bn, exceeding its $2.75bn target for a fund that was oversubscribed. The fund will target investments in sectors including communications, media and financial services and, according to founding partner Oliver Haarmann, saw a high re-up rate from existing investors.

Investindustrial's SPAC prices $350m IPO at $10

Investindustrial’s SPAC, Investindustrial Acquisition, has raised $350m by offering 35 million units at $10. The SPAC targets the consumer, healthcare, industrial and tech sectors and plans to focus on businesses within these sectors with EVs between $1bn and $5bn.


Deal chart


Acquisition TargetBuyerSellerValueDate AnnouncedRegionSector
ECI SoftwareLeonard Green & PartnersApax PartnersUndisclosed, 4x return20/11/2020USSoftware
Giacom World NetworksDigital Wholesale SolutionsLivingbridge, LDCUndisclosed20/11/2020UKSoftware
Zippy ShellThe Carlyle Group-$95m19/11/2020USStorage
IberchemCrodaEurazeo€820m18/11/2020SpainFragrance
ISSDeutsche BoerseGenstar CapitalUndisclosed, 80% stake17/11/2020USFinancial Services
Taylor Swift's music catalogueShamrock CapitalIthaca Holdings$300m17/11/2020USEntertainment
ThinkprojectEQTTA AssociatesUndisclosed17/11/2020GermanySoftware
SymphonicPING IdentityMavenUndisclosed, 2.9x return17/11/2020UKSoftware
KeesingBC PartnersErgon Capital, Mediahuisc. €300m13/11/2020NetherlandsEntertainment

Movers and Shakers


Europe

EQT has appointed Morten Hummelmose as head of capital raising and client relation after Jussi Saarinen, an EQT partner and head of CR, decided to leave the firm after 13 years.

Permira has appointed Bruno Strigini to support the firm’s expansion into the healthcare sector. Strigini currently serves as chair of the board of Owkin and is a partner at OneHealth Partners.

Level 20 has named Cheryl Potter as its new chairperson. Potter, a former partner at Permira, will from January succeed Level 20’s chairperson and industry veteran George Anson.

RW Baird has announced that David Silver, a senior dealmaker who led the bank’s push into the European mid-market, is leaving the firm after 23 years.

Graphite Capital has promoted Lara Markham to an investment director. Markham was previously with OC&C Strategy Consulting.

Asia 

KKR has named Jim Rowan as a senior adviser to the firm’s Asia private equity team in Singapore. Rowan is a former chief executive and chief operating officer of Dyson.


From the horse’s mouth...

Frankly, we haven’t had any company in our entire portfolio that has had any significant problems, but we are conscious that not all of society is that fortunate” –  Nic Humphries, senior partner of Hg notes it’s very much business as usual for its portfolio companies

It has been an incredibly successful subsegment to focus on – definitely one of the most interesting we’ve seen in private equity” – James Brocklebank, managing partner at Advent lauds buyout firms’ foray into the payments sector

I ran as a proud Democrat. I will now be an American president. I will work as hard for those who didn’t vote for me — as those who did.- Joe Biden, President-Elect of the United States of America, born on this day in 1942