Maitland/AMO Private Equity Monitor – 9 July 2021

9th July 2021

Worth a read

A restricted set of tools

The Editorial Board of the Financial Times wrote this week that amid a spree of private equity bids for UK companies, the government should probably look at ways of restricting the tools available to the private equity industry in buyouts. Among the restrictions proposed are one model similar to that imposed by the European Central Bank where loans can only equal up to six time a company’s EBITDA, or the dusting off of a consultation on the tax treatment of carry (similar to that proposed by Joe Biden in the US).

The engine room

Financial columnist Matthew Lynn comments in The Daily Telegraph that private equity is necessary for the UK economy and urges the UK not to become “like France” and block private equity buyouts, describing the industry as the “engine oil of capitalism”. He argues that Morrisons can hardly be described as a national treasure outside of its Yorkshire base and counters claims that private equity are asset strippers, given the superior returns that have been delivered in recent years.

Renewable energy laps fossil fuels

Bloomberg writes that private equity funds focused on renewable energy and climate-friendly investments are being raised at a record pace, largely in response to investor demand for such strategies. According to advisory firm Probitas Partners, institutional investors are moving away from investing in oil and gas “no matter the returns” in order to meet carbon neutral goals. Private equity funds that invest solely in renewable energy assets raised about $52 billion last year—a record, according to Preqin and on top of that, the money garnered so far this year for such funds is outpacing fossil fuel asset fundraising by a factor of roughly 25.

Join the club

Private Equity News reports that private equity investors are turning once more to mega-deals and, perhaps more surprisingly, are more willing to team up to target some of the biggest companies on the market. The article points to last month’s buyout of Medline for $34bn (including debt) by Blackstone, Carlyle and Hellman & Friedman and suggests that club deals allow PE firms to bypass limits by their investors on the amount that can be placed in a single investment and therefore better compete with “cash-rich corporate buyers for larger prey”.

Europe is king

According to a report by corporate services provider Auxadi, Europe is the most-favoured Western market for cross-border deals among GPs, followed by the UK and then North America. Among the reasons cited for this preference, as reported by Private Equity International, are fewer challenges when it comes to language and education, easier access and lower interest rates.

Wall of money

KKR closes its second European real estate fund at $2.2bn

KKR has made a final close of its Real Estate Partners Europe II Fund at $2.2bn. The fund will invest in “opportunistic” and “value add” opportunities. The fund has been supported by new and existing investors globally, including pension plans, sovereign wealth funds and insurance companies.

Deal chart

Acquisition TargetBuyerSellerValueDate AnnouncedRegionSector
U-PolAxalta Coating SystemsGraphite Capital£428m08/07/2021UKAutomotive
Brenderup GroupStorskogenAccent EquityUndisclosed08/07/2021SwedenTrailer supplier
Infra GroupIntermediate Capital GroupAndera PartnersUndisclosed08/07/2021BelgiumInfrastructure
Reno De MediciApollo Global Management-67% stake05/07/2021ItalyCardboard manufacturing

Movers and Shakers

UK & Europe

WestBridge has promoted Peter Barkley to the position of director. Barkley joined WestBridge in August 2019 to head the firm’s newly opened Manchester office.

North America

Pantheon Group has hired Roman Braslavsky and David Elliott to lead its push into real estate in New York. Both joined from GI Partners in San Francisco.

From the horse’s mouth...

“The move towards ESG-focused investing is starting to starve the supply of capital to the conventional energy space.”Dave Lowery, head of research insights at Preqin

“If it wasn’t hard, everyone would do it. It’s the hard that makes it great.”Tom Hanks, American actor born on this day in 1956

Buyout groups’ returns should not come from buying its property portfolio too cheaply, levering the company up with debt, and potentially reducing the tax paid to the Exchequer.” – Andrew Koch, a senior fund manager at Legal & General Investment Management