H/Advisors Private Capital Wrap-Up 11th October 2024
WORTH A READ
United States
Following last week’s U.S. port strike, Axios’ Dan Primack did a deep dive into private equity’s often overlooked role in America’s ports. According to Primack, while most ports are controlled by public entities, like port authorities, the actual cargo terminals are typically owned by private companies, including private equity firms. This means that unions, despite having an idea, often don’t have the full picture of their employers’ true financials. The bottom line, Primack says, is that private equity’s role in ports, and the U.S. economy more generally, “makes it much more complicated to suss out who's in the right when vital work comes to a halt.”
With the rise of private equity investment and influence in the insurance sector, new deals have raised concerns among regulators who are worried about risks to policyholder assets, including retirement savings and annuities. According to WSJ Pro Private Equity’s Luis Garcia, large private equity firms are defending their investments, stating that their individual strategies adequately mitigate risks to policyholders and can even generate higher returns from the carriers’ assets. Garcia points out that while all firms share the same goal, they employ diverse strategies to achieve it. These approaches range from "symbiotic" operating relationships to more "balance sheet-light" structures that keep operations separate.
The Financial Times reports that New York-based HPS Investment Partners finds itself at a critical juncture, debating between launching an initial public offering (IPO) or pursuing a sale that could value the firm at over $10 billion. Initially planning to go public in late September, HPS has postponed the IPO, opting to wait until after the U.S. presidential election to assess market conditions. The firm, which was founded by JPMorgan and manages $117 billion AUM as of June, has also attracted acquisition interest from financial giant BlackRock, in what has been described as potentially being a “giant AUM land grab”.
Europe
The Financial Times discusses the recent trend of private equity firms conducting dividend recapitalisation deals, exemplified by Belron Group's record €8.1 billion deal. While debt investors are generally wary of these transactions due to increased leverage and risk, many are participating due to a lack of other attractive investment opportunities in the current market environment. The trend is expected to continue as private equity firms seek to return cash to investors, but some analysts warn that an economic downturn could potentially change the landscape.
The European Private Equity sector is withdrawing itself from the consumer sector, a once-booming marketplace, according to Private Equity News. This transition has been progressive, with firms "de-emphasising" their focus on this sector and deploying deal makers. Reasons for this detachment include the lack of deal quantities in this sector and investors seeking lower-risk investments. Moreover, investors are increasingly specialising in industries that overlap with the consumer sector, such as healthcare and business services, allowing them to capitalise on synergies and optimise their investments.
Despite Q3s tending to have lower investment activity, this year, strong numbers in July and September drove the overall number of buyouts, growth capital and bolt-on deals up by 11% to 763, compared to the previous quarter. Julian Longhurst, Head of Data & Research at Real Deals, explains this trend is largely thanks to continuous deals in the large-cap space, given two of Europe's largest ever-seen deals being completed: Netco's $24 billion buyout by KKR, and Axel Springer's €13.5 billion acquisition by KRR and CPP investments.
Sanofi, the French pharmaceutical giant, is in talks to sell a 50% controlling stake in its consumer health business to private equity firm Clayton Dubilier & Rice. The transaction is expected to value the unit at approximately €15 billion, potentially marking Europe's largest deal this year. This strategic move aligns with Sanofi's focus on developing innovative medicines, while also underscoring the growing momentum in healthcare deals across Europe.
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WALL OF MONEY
Shore Capital Partners, a private equity firm focused on lower-middle market investments, has closed its inaugural Healthcare Advantage Fund, second Business Services Partners Fund, and first Shore Search Partners Fund with a combined $1.9 billion in commitments. The fundraising for these funds has exceeded all targets, bringing the firm’s AUM to $9.1 billion.
Renovus Capital Partners has held the final close of its fourth private equity fund Renovus Capital Partners IV Core Buyout, which was significantly oversubscribed with total capital commitments of $875 million.
DEAL CHART
MEDIA OF THE WEEK
Sequoia Capital is one of the most successful and influential venture capital companies in Silicon Valley history, but it has come under pressure from global economic uncertainty, geopolitics and boardroom battles. Can Sequoia adapt in a fast-changing world? The Financial Times has produced a 30-minute short film to address this. Watch the film here
MOVERS AND SHAKERS
Private equity firm Cinven has appointed Michael Weber as a partner. He joins from the mid-market group Riverside.
I Squared Capital has hired Guillaume Pepy as a senior policy adviser. He was previously the chief executive of French national rail group SNCF.
Nuveen Private Capital, the $74 billion private credit platform and one of the world’s largest private credit managers, has continued the expansion of its pan-European coverage team with the appointment of Ralph Hora as Partner and Head of DACH, Business Development.
FROM THE HORSES MOUTH
“We are seeing many PE firms revisit their approach to investing in consumer products. Some are simply being much more diligent in any potential investments, but there are some who are winding down their consumer arms and redirecting teams towards sectors with a lower risk profile and potentially higher returns.” — Mark Veldon, co-head of AlixPartners in the UK and AlixPartners’ EMEA private equity practice
"We think that the strongest alignment is being an owner and treating the business like an owner." — Craig Lee, KKR's head of insurance and strategic finance
"The future belongs to those who believe in the beauty of their dreams." — Eleanor Roosevelt, American political figure, diplomat, and activist, and first lady of the United States from 1933 to 1945, born 11th October 1884