H/Advisors Private Capital Wrap-Up / 22 November 2024
WORTH A READ
Europe
To mark its 25th anniversary, Real Deals interviewed industry veterans to reflect on private equity's evolution since the last millennium and to look ahead. The article offers a snapshot of opinions on various topics, including the industry's growth from a local to global enterprise, the creation and enduring stability of the 10-year LP fund structure, and more. What unites these veterans is their consensus that democratisation will be a key driver of growth. However, they acknowledge that this growth comes with challenges, notably increasingly stringent regulations and concerns over the kinds of returns that can be generated.
The Financial Times' Alphaville suggests that private credit may be facing more stress than surface-level data indicates, despite falling interest rates. Alphaville points to the growing use of “payment-in-kind” loans from companies who previously made interest payments in cash as a case in point but concludes the industry "doesn't look like a disaster. At least not yet."
Unilever has shelved plans to run a sales process intended to find a private equity buyer for its €15bn ice cream division and will instead focus on a push to spin off the unit in an independent listing. People familiar with the process told the Financial Times that the size and complexity of a potential deal was a major obstacle. A person with knowledge of the process said the recent election of Donald Trump to the White House could have a “positive” impact on Unilever’s plans to list the business “because the IPO market is stronger now”.
United States
According to research by Nepean, a U.K. management consulting firm, a private equity firm’s reputation is one of the most important considerations for companies selecting a private equity sponsor. Private Equity International’s Hannah Zhang reports that common responses in the survey were about PE firms being “well-established” or “well-known”, as well as “trusted” or “trustworthy.” Notably, while only 10% of respondents claim to take size into consideration when evaluating a potential sponsor, more than half of the firms regarded as the “best owners” in the survey manage over $100 billion in assets.
Last week, The American Medical Association voted to support state-level regulation over private equity investments in the medical field. According to WSJ Pro Private Equity’s Chris Cumming, while the trade group stopped short of advocating for federal regulation, the vote “toughens its stance” against financial investments in healthcare and paves the way for the group to work with organizations at the state level to limit private equity’s role in the industry. Cumming adds, however, that not all physician groups are opposed to private equity’s growing role in the field. Of note, the American Independent Medical Practice Association advocates that PE investments are one of the few ways for smaller practices to remain independent of larger healthcare conglomerates.
While BlackRock has spent heavily to expand its private equity arm, it recently announced that it would be halting its Long-Term Private Capital program and winding down its $4.5 billion debut fund. According to Axios’ Dan Primack, even the $10 trillion ETF king can be hit hard by LP distribution demands. While many of the fund’s deals have been winners, such as the sale of Creed to Kering for almost $4 billion, paper multiples have been much more impressive than the actual distributions, and LPs have been less than pleased. Primack adds that, when BlackRock went to the market to sustain its program, LPs pushed the firm to focus on returning money rather than raising capital.
WALL OF MONEY
EQT has set an upper limit of $14.5 billion for its new Asia-focused fund. In August 2024, EQT set a target of $12.5 billion.
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US real estate private equity firm Temerity Strategic Partners has raised over $175m (€166m) for its debut fund's final close.
Bain Capital has raised $5.7 billion for global special situations that will be deployed alongside the $3.3 billion it previously raised for funds and affiliated vehicles in Asia and Europe.
Saudi Arabia’s Jadwa Investment Co. has raised as much as 1 billion riyals ($266 million) for a new fund to boost dealmaking, the latest sign of growing appetite for investment vehicles focused on the Middle East.
MEDIA OF THE WEEK
This week, Carlyle CEO Harvey Schwartz unpacks Asia's unique investment opportunities during a fireside chat at the AVCJ Private Equity Forum 2024 in Hong Kong. He detailed how each market in Asia – be it Japan, India, or China – is different from the point of view of macro tailwinds, valuation parameters, and political risks, so private equity firms have to ‘configure’ themselves to be able to deliver opportunities for clients. Listen to the fireside chat here.
DEAL CHART
MOVERS AND SHAKERS
Apollo Global Management has opened an office in Seoul and appointed Jay Hyun Lee as partner and head of Korea.
The private markets investment arm of JPMorgan Chase has hired Dean Hoang from Macquarie Group to become executive director of secondaries.
Lazard Inc. has hired Jennifer Tedesko as a managing director in its private-capital advisory business, where she’ll focus on originating and advising on private equity secondary transactions.
The NATO Innovation Fund (NIF), a €1bn vehicle backed by 24 NATO allies to invest in defence and deeptech startups, is already seeing a shakeup in its upper ranks: founding partner Thorsten Claus and managing partner Andrea Traversone have both left the fund just over a year after it launched.
FROM THE HORSES MOUTH
[On the industry's evolution since the millennium] “The biggest single market for our companies is the US, and the biggest growth markets are the Middle East and Asia. That has meant that we have had to build a firm that has global capability, the capacity to support global buildups, and the operating teams that can help companies go from A to B to C.” – Andrea Bonomi, the chairman and founder of Investindustrial.
“This acquisition [of Balanced Commercial Property Trust] by controlled affiliates of the Starwood Capital Group will increase our exposure to logistics and other high-conviction sectors and we look forward to supporting BCPT through our access to capital, scale, and operational expertise.” – Matthew Parrot, managing director of Starwood Capital.
“Few will have the greatness to bend history itself; but each of us can work to change a small portion of events, and in the total of all those acts will be written the history of this generation.” – Robert F. Kennedy, American politician and lawyer, born 20th November 1925.