Maitland/AMO Private Equity Monitor – 7 January 2022

7th January 2022

Worth a read

Growth equity coming in hot

Akila Quinio and Robin Wigglesworth of the Financial Times take a look at the booming growth equity market, finding that the investment trend has been growing exponentially in the past five years. Growth equity has doubled in size since the end of 2016, reaching an AUM of almost $920bn at the end of Q1 2021, with Numis discovering that 73% of 200 institutional investors plan to increase their asset allocation to growth equity. However, the trend is also increasingly becoming a battleground between private equity, venture capital, hedge funds and mutual funds, and time will tell if the hype will deliver results.

Seeking yield in private debt

The FT’s Lex column comments on the once-niche area of asset management, observing that credit investors and cautious banks have been driving its growth. It highlights two factors fuelling demand – persistently low rates, and falling returns in the traditional debt market – as private debt provides higher fixed rate returns that gain appeal to “yield hungry” investors. Questions nonetheless remain – the FT asks if there are enough small to medium-size borrowers to absorb the cash, or whether the inflow of funds could push down yields, suggesting that its less stringent lending standards could meet a reckoning in the next few years.

Year of Tech

The WSJ reports that tech deals have driven private equity’s blockbuster 2021, with US technology deals totalling $401.71bn. This accounts for 41% of a record $990.25bn in overall private-equity deals in the year, and more than doubled 2020’s $196.34bn. More tech deals are incoming, especially with the pandemic accelerating digitalisation, and firms are noted to be eyeing software service businesses that offer a reliable recurring-revenue model with strong and consistent returns.

Newbie Arctos betting big on Sports

The FT has featured a piece on Arctos Sports Partners, a PE firm that specialises in professional sports team investments. Launched in April 2020, it most recently struck a deal with Shaquille O’Neal for his minority interest in the Sacramento Kings. With an AUM of $3bn, the company currently owns stakes in 16 franchises including the Boston Red Sox, Liverpool FC, and Golden State Warriors, and sees opportunity in sport assets for its longevity and growth that is bolstered by the soaring market of media rights, real estate and new revenue streams.

Not the saviour of Fossil Fuels

Bloomberg Opinion’s David Fickling argues that private equity will not be the saviour of fossil fuels, despite accusations from Vale SA executive Luciano Siani Pires that PE firms are looking to acquire polluting businesses at a bargain since companies are rushing to offload fossil fuel assets. Fickling points out that private equity activity in the sector is actually very nearly at a halt, and of the $70bn of coal deals since the end of 2014, PE only accounted for $3.63bn. Besides, what PE needs is sustainable and consistent income in its investments – something that coal can no longer provide.

Wall of money

TPG seeks $9.5bn valuation

US private equity firm TPG launched its roadshow pitch to investors on Tuesday and is targeting a valuation of up to $9.5bn for its IPO. According to a regulatory filing, the firm is aiming to sell shares at between $28 and 31 apiece.

Permira raises $4bn for growth

Permira has beaten its target of $2.5bn for its second growth-focused fund, closing on $4bn with commitments from the likes of the Washington State Investment Board. The first fund for this strategy closed on $1.7bn in 2019.

Deal chart

Acquisition TargetBuyerSellerValueDate AnnouncedRegionSector
Inbox InsightMobeus-£17.7m07/01/2022UKSoftware
PayFitGeneral Atlantic-Undisclosed06/01/2022FranceSoftware
Quorum CyberLivingbridge-Undisclosed05/01/2022UKCybersecurity
STEIN HGSIK Partners-Undisclosed04/01/2022GermanyRetail
Miller HomesApollo Global ManagementBridgepointUndisclosed24/12/2021UKConstruction
MBA IncorporadoAddLifeAlantra€111m22/12/2021SpainHealthcare

Movers and Shakers

UK & Europe

Earth Capital has appointed Avent Bezuidenhoudt as head of investment. Previously she was an investment director at the firm and will be responsible for deploying the firm’s Nobel Sustainability Fund.

TPG has hired Matt Jones to oversee the firm’s US and European secondaries business from its London office. Previously Jones was co-head of Pantheon’s global secondaries team.

TA Associates has promoted a number of employees including Max Cancre, Lovisa Lander and Jérémy Dréan in London. Cancre and Lander have been promoted from principal to director while Dréan has been promoted to senior vice president from principal.

YFM Equity Partners has appointed Stephen Murray as an investment director in its Midlands team. Previously Murray was in an investor role at BGF in 2018.

From the horse’s mouth...

By its nature, growth equity does not have the same return profile as early stage venture capital investing, as you’re investing at a much later stage, but an upside return scenario remains and the risks are lower as the companies have already proven that their business model works” – Marc Brown, partner and head of growth investing at Swedish buyout firm, EQT

Overall private equity was a net buyer across Europe last year, but that was skewed by a handful of landmark large-cap buyouts” – Christiian Marriott, head of investor relations at Equistone

Do I get up every morning and ask: am I doing the things that I believe in and am I doing them for the best possible motives? Yes. Unambiguously yes.” – Sir Nick Clegg, vice-president of global affairs and communications, Meta, deputy prime minister