Maitland/AMO Private Equity Monitor – 21 September 2018

21st September 2018

Worth a read

Private equity companies embrace smaller rewards over riskier returns

“To me!” “To you!” “To me!” “To you!” would perhaps be the Chuckle Brothers’ (requiescat in pace, Barry), jingle for the private equity buying, stripping and then flipping over. But now companies are moving away from Chucklevision and are in danger of appearing on an episode of Britain’s Biggest Hoarders, holding assets for well over a decade, satisfying themselves with the comfort of slippers and steady returns, instead of looking to triple their lot within three or four years. In these uncertain times, promise of less loss at the expense of dazzling returns is, it seems, the new order of the day.

What now for private equity firms which grew to become banks?

Money in the bank or under the bed. Which provides a better return on your investment? Naturally private equity firms considered something simply had to be done: we can beat the banks. In fact, we can be the banks. And so it came to pass, metamorphosing from the traditional buyout private equity manual to private debt, with enormous lending arms. But is it just a case of pass the parcel? Have the risks faced by the banks in 2008 simply been transferred to a murkier, more opaque part of the financial market?

Public to private deals pick up apace in Europe

“What to do with all that uninvested capital?”, the private equity doyens chorus? Well, some are gearing up for ambitious public-to-private deals on the European stock market. And there’s clearly enough appetite for coming out of the shadows into the bright lights of the public eye: this is at the fastest pace since 2008. Although a popular option, it ain’t cheap.

Private equity firm takes a chance on former convicts

Who says there’s no such thing as a second chance? Three Hills Capital has taken a minority stake in Recycling Lives, a waste manager, which counts 40% of  its staff as former prisoners. The organisation runs education programmes in prisons in the northwest of the UK. And it gives a pretty good return on its reoffending rate: of 75 offenders who have gone through Recycling Lives’ training course, only two had reoffended on release, compared with an average rate of over 50%. Three Hills Capital may well be on to something.

Brexit: too hot to handle

Howard Marks, co-founder of Oaktree Capital Management, believes that the sheer uncertainty over Brexit has made it too unsafe to invest in the UK. According to an interview with the Financial Times, Mr Marks said that he was unwilling to risk the “dreadful outcomes”that could come to pass if the UK blotted its copy book in its exit from the EU. However, despite the gloomy sentiment, Mr Marks did see a chink of light at the end of the tunnel and has just about enough optimism that a deal will be struck and there would be no barriers to trade.

Wall of money

Hillhouse Capital raises $10.6bn for new fund

China-based Hillhouse Capital has announced the final close of its new buyout fund at $10.6bn, the largest of its kind ever raised by a private equity firm in Asia. This tops the $9.3bn it raised for the previous vehicle and the firm said it plans to invest in healthcare, consumer, technology and service companies.

Northleaf raises $2.2bn across two new funds and separate accounts

Northleaf Capital Partners on Thursday announced it had raised $800m for its latest secondary fund and is gathering commitments for Northleaf Private Equity Investors VII. The latter will be available to investors through early 2019.

Franklin Templeton partners with Asia Alternatives Management

Investment manager Franklin Templeton has announced it has formed a joint venture with private equity fund-of-funds specialist Asia Alternatives. The platform, Franklin Templeton Private Equity, aims to provide investors with “bespoke global private equity… solutions”.

Five Arrows Capital Partners closes its first buyout fund at $655m

Rothschild’s private equity arm, Five Arrows Capital Partners, has closed its first American buyout fund at over $655m. The fund secured commitments from a wide range of organisations, including corporate institutions and family offices.

Deal chart

Acquisition TargetBuyerSellerValueDate AnnouncedRegionSector
Gimatic SrlBarnes GroupAGIC Capital€370m, 3x return20/09/2018ItalyAutomotive
Hudson Transmission PartnersArgo Infrastructure PartnersAres EIF & Starwood Energy GroupUndisclosed19/09/2018USEnergy
EnvirotainerNovo HoldingsCinvenUndisclosed, 25% stake19/09/2018SwedenLogistics
4Ways LtdECI PartnersSynova CapitalUndisclosed, 6x return18/09/2018UKHealthcare
IWD SASArdian Growth-Undisclosed17/09/2018FranceSoftware

Movers and Shakers

UK & Europe

Inflexion Private Equity has hired Derek Elliott from Darwin Private Equity as a Partner in its partnership capital team, one of five new hires. Ben Suquet has jointed as an Investment Director, Adam Moss and Ravi Shah as Investment Executives and Alex Mathers as Assistant Director of Digital.

Hamilton Lane has hired Martina Schliemann as Principal and Head of Business Development for the DACH region. She joins from Muzinich & Co, where she was country manager for Germany and Austria.

French firm Activa Capital has appointed Charles de Lauriston as an Associate in its ESG and digital transformation team. He was previously an ESG Analyst at Ethifinance.

London-based Cheyne Capital Management has hired Richard Cazenove and Franck Laval from Bluebay Asset Management and Oaktree respectively. Cazenove will join as a Partner in the Strategic Value Credit Business.

CapMan has promoted both Antti Karppinen and Tobias Karte to Partner, while Tomi Alén has been made an Investment Director.

From the horse’s mouth...

“The ultimate outcome on Brexit is something that is unknown to us at this point. I’m the guy who thought they wouldn’t vote for Brexit. And this is not the kind of thing we do for our clients, make a bet on binary cosmic issues.” – Howard Marks, Co-Chairman, Oaktree Capital Management

If you fell down yesterday, stand up today.” – H.G. Wells, writer, born on this day in 1866

What I really love is to be presented with problems, then gather all the facts and solve them.” – Keith Williams, recently appointed head of the UK Rail Review