H/Advisors Private Capital Wrap-up | 24th May 2024
WORTH A READ
Europe
In the Financial Times, Will Louch highlights how European private equity firms are being forced to hold assets for ever-longer periods, highlighting problems returning cash to investors as the traditional buyout model faces growing pressure. Last year, companies sold by buyout groups in Europe were owned for nearly six years on average - the longest since at least 2010 - while typical hold periods are 3-5 years, indicating major challenges in exiting investments.
Bloomberg examines the challenges facing private equity firms that acquired low-margin British consumer companies at bargain prices, using cheap financing. With interest rates now higher, there are growing concerns over these companies' ability to service their debt burdens. This situation has prompted scrutiny from lawmakers who are worried about potential risks to jobs and taxpayers.
Private Equity News reports new filings show ex-cabinet heavyweights score six-figure salaries at EQT, Appian, LetterOne as Rishi Sunak confirms July general election. Whilst the move from Westminster to the City is a “well-trodden path”, the latest register of interests shows this will continue, as a new cohort of Conservative MPs are already following their predecessors into lucrative gigs in the world of private equity.
United States
Following a settlement in a federal court in California which challenged the NCAA’s restrictions on college athletes profiting from their name, image and likeness, athletic departments are questioning how they will afford to pay players. According to The Wall Street Journal’s Andrew Beaton and Louise Radnofsky, private equity firm RedBird Capital has the solution – investing millions of dollars into select universities with the idea of building business that “help monetize a school’s intellectual properties and provide them with advice and capital to do that at a time when the stakes have never been higher.”
The architecture, engineering and construction space continues to attract more private equity firms, reports Fast Company’s Patrick Sisson, especially as billions of dollars become available through the Infrastructure and Jobs Act, the CHIPS Act, and Inflation Reduction Act. Jeffrey Sprau, CEO of Legence, which counts Blackstone as its financial sponsor and has made 21 deals to acquire engineering firms in the past three years, estimated that these green infrastructure needs comprise a $400-500 billion market opportunity. Sisson added, “Private equity, not surprisingly, sees the importance of the energy transition, and the built environment, and doesn’t want to be left behind.”
The Wall Street Journal’s Miriam Gottfried broke the news that Blackstone will grant equity to most employees at its U.S, buyouts. In an effort to expand ownership beyond the management ranks, the firm is kicking the program off by giving ownership to the approximately 18,000 employees of Copeland, which Blackstone bought last year in a $14 billion deal. The move follows in the footsteps of KKR, which first began implementing broad-based employee-ownership programs at all of its industrial companies in 2011, and later extended them to the rest of its U.S. portfolio companies.
WALL OF MONEY
Using the scientific concept of 'planetary boundaries' as a guide, the fund will invest in small and mid-market companies focused on the regenerative and circular economy or which are helping the world transition and adapt to a climate-friendly future. The fund will be supported by an advisory board of sustainability experts including the former head of the European Environment Agency, Hans Bruyninckx; and Catherine McKenna, Canada's former minister of environment and climate change.
Permira is raising a new debt fund. The London-based firm is seeking €750m, or about $814m, for Strategic Opportunities I LP, a vehicle that will provide financing to mid-market businesses and aim to take advantage of disruptions in the credit market.
Recommended by LinkedIn
Private market funds raised $295 billion across all asset classes in the first quarter of the year, according to a report from data provider Pitchbook. The first quarter’s fundraising was on par with the $298.4 billion raised in the first quarter of 2023 though the number of fundraisings fell by 45.9% YoY as fundraising became more concentrated.
DEAL CHART
MEDIA OF THE WEEK
Geoff Lewis, Bedrock founder and managing partner, joins ‘Squawk Box’ to discuss Lewis’ initial investment in OpenAI, scrutiny against a privately-held company like OpenAI, and more. He discusses the fact that there might be a lot of lawsuits to come against OpenAI.
MOVERS AND SHAKERS
· Blue Owl Capital Inc. has hired Goldman Sachs Group Inc.’s co-head of asset-management investment banking, Chris Eby, according to people with knowledge of the matter. Eby is set to join the New York-based firm, which is led by co-chief executive officers Doug Ostrover and Marc Lipschultz, as head of strategy and corporate development in September.
FROM THE HORSES MOUTH
“There are big incentives in private equity to gear up these businesses to the hilt, both at a corporate and personal level... The downside risk is covered by the taxpayer.” – Liam Byrne, a former Labour Treasury minister who chairs Parliament’s business and trade committee.
[On the slowdown in dealmaking] “First of all Covid came and then everything that followed after. It wasn’t a double whammy, it was a triple whammy.” – Philip De Vusser, COO at Gain.pro, a data provider.
“We will not have failure - only success and new learning.” – Queen Victoria, born on this day in 1819.