Maitland/AMO Private Equity Monitor – 25 June 2021

25th June 2021

Worth a read


Private equity up to its bad old tricks

In fulminating form, Alex Brummer, City Editor of the Daily Mail, looks at the “daring bid” by Clayton, Dubilier & Rice for UK supermarket staple, Morrisons, and caustically opines that the private equity house has done the financial community a big favour insofar as it has exposed the “chasm between the debt-driven panjandrums of Mayfair and the broader corporate responsibilities.” A consistent critic of the industry, he opines that many companies which have been through the “marauding” private equity mill emerge “healthy” when restored to the public markets.

Private equity: a case of sour grapes?

In a different take from The Daily Mail, The Times’ Financial Editor, Patrick Hosking looks at the current image problem private equity has in the UK and wonders whether the recent opprobrium directed towards it is entirely fair. Taking a cooler, rational approach, Hosking opines that the verdict of private equity houses being “asset strippers” isn’t entirely fair and that the notion that they would want to damage the assets they own is frankly “daft”. He also has no truck with the notion of buyout houses disguise the damage wrought – whether that is a lack of investment or cutting costs to the bone – considering what new buyer wouldn’t do proper due diligence, or are easily hoodwinked. Hosking concedes there are some “horror stories” which have been seared on the public consciousness, citing Debenhams and Saga, but maintains that overall the numbers simply do not support the idea that private equity cynically hollowed out businesses that later imploded once sold to credulous new investors. Hosking ends by saying that private equity partly has itself to blame for its poor image, while exhorting that the industry needs to be more transparent – but that many of the criticisms lobbed of it have a particular taste: that of sour grapes.

Burnt out bankers turn to PE

Financial News reports that a burnout crisis in investment banking is giving an unexpected red-bull infused boost to private equity: junior pups want to trundle off to the private equity jungle. While private equity has long been a landing spot for junior bankers looking for their next move, a crisis among younger dealmakers who have warned of a looming burnout amid a surge of deals over the past six months has led to an “explosion” in its popularity. The advantages of the move isn’t really the hours – its’ more the rhythm of the working day, increasing peaks and troughs and also the work as an investor rather than as an adviser. Private equity firms seem to welcome the trend: according to Preqin, 62% of 143 firms surveyed said they were adding to their teams this year, with mid ranking staff in most demand and junior bankers following swiftly afterwards.

Why the UK is such a good stomping ground for private equity

And in confirmation of this swathe of deals comes The Guardian, which notes that takeover bids from private equity houses have become so common that “even investment bankers are starting to sound weary.” Noting that private equity firms have announced over 100 deals for UK companies according to Dealogic, this is the fastest pace of dealmaking since 2007. Unsurprisingly, the piece is more negative towards the private equity industry (and we’re not sure the journalist would  agree with Mr Hosking’s piece) and notes the sector’s reliance on debt to fund acquisitions, a “controversial tactic” of stripping out costs, while noting that Labour is reviewing its policy on private equity bids. An informative piece, but narrated in something of a forked tongue.

It's time to go public on ESG

The CEO and founder of Apex Group, Peter Hughes, has written a piece in Private Equity News, in which he argues that if private equity is to meet investors’ concerns about sustainability then data and transparency will be central to assuaging them. Noting that private companies make up more than 90% of global business he argues that there is a huge opportunity for the industry to affect material behavioural change and drive capital towards a sustainable recovery. In Hughes’ view, it’s time for private markets to act now.


Wall of money


TPG's climate target

According to public documents, TPG has set a target of $5bn for a new fund that will invest in companies that have a positive impact on the environment by reducing carbon emissions. The new fund will invest using growth-equity, private-equity and value-added-infrastructure strategies and will be led by former US Treasury Secretary Henry Paulson.

Timber!

Lithuanian firm INVL has raised a further €18.5m for its sustainable timber and farmland fund, which has now reached €51m at the second close. It targets investments into sustainably managed forests and agricultural farmland in the Baltic Sea region as well as neighbouring countries.


Deal chart


Acquisition TargetBuyerSellerValueDate AnnouncedRegionSector
St Modwen PropertiesBlackstone Group-£1.27bn24/06/2021UKReal Estate
Saunderson HouseRathbone Brothers PlcEpiris£150m24/06/2021UKFinancial Services
CryptomathicRiverside-Undisclosed24/06/2021DenmarkCybersecurity
MollieBlackstone, EQT Growth, TCV et al-€665m funding round23/06/2021NetherlandsFintech
Home Partners of AmericaBlackstone Group-$6bn22/06/2021USReal Estate
French retail bankCerberus Capital ManagementHSBC€122/06/2021FranceFinancial Services
ItsuBridgepoint-Undisclosed, minority stake21/06/2021UKFood & Drink
Mirion TechnologiesGS Acquisition HoldingsCharterhouse Capital Partners$2.6bn18/06/2021USResearch
Learning PoolMarlin EquityCarlyle Cardinal IrelandUndisclosed18/06/2021UKSoftware

Movers and Shakers


UK & Europe

QPE has appointed Nick Manning to its investment team. Previously, Manning was at Livingbridge.

KKR has appointed Ajay Kavan as a senior adviser in Europe, supporting the firm’s pan-European investments in technology and digitally-enabled businesses. Previously he served as CEO of Matches Fashion.

North America

Northleaf Capital Partners has hired Shane Feeney as the firm’s global head of secondaries, based in Toronto. Previously, Feeney was senior managing director and global head of private equity at CPP Investments.

 


From the horse’s mouth...

Part of the rationale in leaving investment banking is either to work the same hours, and get paid more or work fewer hours and get paid the same”  – Adam Cotterill, a former Goldman Sachs analyst 

“All of the large banks aced the test” – RBC analyst Gerard Cassidy comments on the fact US banks have passed a Fed stress test allowing them to loosen restrictions on dividends and buybacks

Copiers do not collaborate” – Antoni Gaudi, architect, born on this day in 1852