Maitland/AMO Private Equity Monitor – 29 May 2020
Worth a read
The Economist this weekend features two articles about the private equity industry amid the coronavirus. The first looks at whether private equity’s claim that they can turn the crisis into an opportunity is realistic, first looking at performance during the global financial crisis, where funds have yielded a median annualised return of 18%. The article raises the usual questions over the amount of debt fuelling M&A activity and the rise of alternative lending, but generally suggests that now is an opportunity, particularly for those firms that are able to look at loans and bonds as well as traditional buyouts.
The second Economist article asks if the coronavirus pandemic might halt the meteoric rise of private equity as an asset class, particularly as it seems that deals are drying up and buyout firms are nervous about existing investments. However, Johannes Huth of KKR is referenced in the piece as thinking that PE “might largely be able to weather the crisis” in a world of negligible interest rates and increasing demand for alternative assets from institutional investors.
The loose lending terms and provisions in credit agreements for portfolio companies are likely to cause a “headache” for private equity sponsors, according to Reuters, as the extended period of financial reporting to 120 days could lead an auditor to question the financial viability of a business long-term. The article also notes the challenging situation for auditors amid the pandemic, as the financial health of a business can change rapidly and they are unable to meet executives in person or travel to examine inventory.
The Financial Times reports that Bill Ackman has sold his stake in Warren Buffett’s Berkshire Hathaway saying that his Pershing Square hedge fund can be “much more nimble” than the Sage of Omaha’s “sprawling conglomerate”. The article notes that the sale comes less than a year Mr Ackman bought the stake and declared that the company was “built by Warren Buffett to withstand a global economic shock like this one”.
The Financial Times reports on the Carlyle Group’s ‘long-term’ bet on American Express’ corporate travel business, which is now in jeopardy due to the outbreak of Covid-19. It writes that the buyout house is now seeking to exit the transaction via the courts amid accusations of buyer’s remorse.
The art of persuasion is delicate. Sometimes incentives are needed: The Financial Times reports that private equity firm Silver Lake has tried to sweeten the $2.6bn sale of Global Blue, which Daniel Loeb’s Far Point Acquisition Corp no longer wishes to buy. Silver Lake has taken a 12% stake after Far Point tried to walk away from the deal which had been agreed in January.
Ollie Shah, Business Editor of the Sunday Times, writes that the private equity industry is ‘overdue a reckoning’ amid the economic strain caused by the Covid-19 outbreak. He writes that there are two areas that buyout houses need to urgently improve on, and both involve the industry’s approach to taxation.
Wall of money
KKR has raised close to $4bn from investors to invest in discounted corporate debt resulting from the coronavirus. According to sources, $2.8bn has been raised for the KKR Dislocation Opportunities Fund and more than $1.1bn through separately managed accounts investing alongside the fund.
Aquiline Financial Services Fund IV has exceeded its target of $1.5bn and closed with more than $2bn worth of commitments. The strategy targets investments in financial services and technology, with this fund almost doubling the size of the predecessor closed in 2016.
Private equity firm Falcon Investment Advisors is said to be nearing its target for its sixth credit fund, having already raised $1.24bn from 38 investors. The fundraising comes hot on the heels of firms like Apollo targeting the private credit market amid the coronavirus pandemic.
Andera Partners, the firm that spun out of Edmond de Rothschild Investment Management, has hired an investor relations director (more on that below) as it seeks to raise nearly €1bn in the coming year.
The Bahrain-headquartered firm has announced a final close of €340m for its second fund targeting distressed Italian loans. The fund will invest in non-performing loans secured by residential and commercial property in Italy.
|Acquisition Target||Buyer||Seller||Value||Date Announced||Region||Sector|
|MAKEUP Group||Horizon Capital||-||Undisclosed||29/05/2020||Ukraine||Retail|
|Far Point Acquisition||Silver Lake||-||$100m||28/05/2020||US||Payments|
|Planet Sports||Invision, TonerPartners||-||Undisclosed||28/05/2020||Germany||Retail|
|Mecachrome||ACE Management||-||c. €50m||27/05/2020||France||Aviation|
|Pro14 Rugby||CVC Capital Partners||Celtic Rugby DAC||€120m||26/05/2020||Ireland||Sports|
|Max Matthiessen||Nordic Capital||Willis Towers Watson||Undisclosed||26/05/2020||Sweden||Financial Services|
|Etche France||KKR||BMF Group||Undisclosed||26/05/2020||France||Real Estate|
|Integrated Medhealth Communication||Waterland Private Equity||-||Undisclosed||22/05/2020||UK||Healthcare|
|CityBike||Sherpa Capital||Moventia Group||Undisclosed||22/05/2020||Spain||Travel & Leisure|
Movers and Shakers
TPG Capital has hired Karthic Jayaraman from Carlyle to oversee its healthcare investment activity in Europe. Jayaraman had spent nearly 20 years at Carlyle where he was most recently co-head of Carlyle Global Partners.
Tikehau Capital has hired former ECB economist Natacha Valla as a member of its asset management division’s advisory board.
Andera Partners, the spin-out from Edmond de Rothschild Investment Partners, has appointed Constance Jay as its head of investor relations.
Spain’s Venture Capital & Private Equity Association (ASCRI) has made four new board of director appointments for the 2020-2022 term.
LGPS Central has named its new permanent CIO, promoting Gordon Ross to the role from deputy CIO.
Alantra has announced the hires of Christos Stefanidis and Marcus Evans as managing directors for Greece and the UK. They join from KPMG and PwC respectively.
Nicholas Hyde has joined KKR as a managing director in Australia and New Zealand to run the firm’s client partner group. He joins from Australian asset manager IFM Investors.
From the horse’s mouth...
“I cannot order time to stop . . . and I cannot, obviously, end the Covid-19 pandemic.” – Delaware judge Joseph Slights while ruling on the Carlyle/American Express transaction
“I’m more than okay with it. I ran the process” – Ron Hynes, CEO of Vesta gives his view on Vesta being bought by a private equity firm for the first time
“If not us, who? If not now, when?” – Former American President John F. Kennedy, born on this day in 1917