H/Advisors Private Capital Wrap-Up
WORTH A READ
United States
The private equity dealmaking “machine” is starting up again, reports WSJ Pro Private Equity’s Maria Armental, as public firms and investment banks are speaking optimistically about deal activity, driven by large amounts of dry powder available for investment. For example, in an April earnings call, Roper Technologies CEO Neil Hunn told stakeholders that “In the private-equity world, it’s all about…getting money back to investors”, and emphasized, “we're just going to compress two and a half years' worth of deals in a year, year and a half.” Armental, however, warns that firms are still struggling to exit investments, and fund investors may begin to apply pressures to sell assets and return capital.
According to WSJ Pro Private Equity’s Isaac Taylor, large asset managers best known for their private equity businesses are increasing their private credit and insurance activity as a percentage of AUM. Managers attributed this uptick to strong returns and significant investor and borrower interest in debt offerings.
WSJ Pro Private Equity’s Chris Cumming recently spoke to Sara Razi, co-chair of the antitrust and trade regulation group at Simpson Thacher & Bartlett, about private equity’s strategy for healthcare investing amid increased government scrutiny. While Razi acknowledged the stricter regulatory environment, she noted that “more often than not, deals are moving forward,” and emphasized that firms are getting better at anticipating what concerns the government may raise. She added that certain deals, such as ones that combine adjacent products or services, may receive more scrutiny, but with the right advocacy strategy, they still have a good chance of getting through.
Europe
In its Lex column, the Financial Times suggest that, although private equity firms are employing strategies like debt refinancing and continuation funds to delay selling assets at discounted valuations, these are only providing temporary relief, masking but not solving the mounting pressure to return capital to investors and exit investments amidst challenging market conditions.
Private equity firms are increasingly acquiring undervalued UK companies, taking advantage of low valuations. However other listed companies are deciding to bet on themselves according to Portfolio Adviser, opting for share buybacks to support their share prices. The number of take-privates is raising concerns about the declining quantity and quality of UK listed companies however, as the high-potential businesses depart the exchange, highlighting the need for more IPOs to replenish the market.
Business development companies (BDCs), which provide loans to mid-market businesses, are showing signs of stress in the private credit market. Some BDCs have seen a rise in non-performing loans and are allowing borrowers to pay with additional debt instead of cash, indicating borrower distress. In another article by the Financial Times’ Lex, it posits whether, although publicly traded BDCs provide transparency, investors may be better off investing directly in the parent companies managing the BDCs rather than the vehicles themselves.
WALL OF MONEY
Astorg had originally aimed to raise €6.5bn when it launched the fund in December 2021. However, the Paris-headquartered private equity firm scaled back its target by roughly €2bn last summer, reflecting a wider slowdown in the fundraising market amid intense competition for limited partners’ capital.
West Street Real Estate Credit Partners IV will have more than $7bn of lending capacity including leverage.
Recommended by LinkedIn
Top institutions including Credit Suisse and BMW’s pension fund are backing a new impact investing fund raised by one of Europe’s largest venture capital groups, set up by Niklas Adalberth, a founder of Swedish buy now, pay later pioneer Klarna, as it hunts for a new generation of tech “unicorns” on the continent.
DEAL CHART
MEDIA OF THE WEEK
Goldman Sachs Head of Global Credit Finance Christina Minnis says it feels like a good time to invest in credit. She says private credit is starting to pick up and is "cautiously optimistic" there will be more activity. Christina Minnis speaks with Sonali Basak from the Goldman Sachs Leveraged Finance Conference.
You can listen to the full interview here.
MOVERS AND SHAKERS
Permira’s head of investor relations and fundraising Chris Davison is leaving by the end of the year. He will be replaced by Chris Buchanan, a former partner and global head of institutional sales at Apollo Global Management.
Quilvest Capital Partners, a global mid- and lower mid-market alternatives investment manager with over $7bn in AUM, has appointed John Eggleston as its first Global COO and Partner.
HarbourVest has appointed John Toomey as Chief Executive effective 1 October 2024. The private markets giant said co-CEO Peter Wilson will remain at the firm through the end of 2025, when he plans to retire.
FROM THE HORSE’S MOUTH
“Capital from the banking system and private credit is more readily available. Private credit and syndicated loan spreads are at historically tight levels.” – Harvey Schwartz, Carlyle CEO.
We’ve been talking about the UK market being cheap for a number of years, but it’s just become cheaper and cheaper, particularly relative to the US”. – Katen Patel, co-manager of the JPMorgan UK Small Cap Growth and Income trust.
“There is no better than adversity. Every defeat, every heartbreak, every loss, contains its own seed, its own lesson on how to improve your performance next time.” – Malcolm X, American human rights activist, born 19 May 1925.