Global private equity firms are sitting on more than $2.1 trillion in “Dry Powder.” Their investment decisions and purchasing power will shape the public and private investment markets in ways that shape the future of the global economy. DailyAlts provides constant updates and insights on deal-making, regulatory shifts, global capital flows, and more.
The past fiscal year has been notable for the record returns generated by some of the top public pension funds in the US and abroad. What’s interesting is that many of these superlative gains were propelled by private equity investments that put even public stock returns in the shade.
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Ardian has raised $18 billion for a new fund to buy stakes in private equity funds. Reports say the European private equity manager could close the fund to new investors as soon as next month.
The $2 trillion stimulus package passed by Congress and signed by President Trump last week contains wins and losses for the private equity industry. While none of the legislation was directly aimed at the industry, restrictions on which companies can access aid will affect those companies with private equity ownership.
Private credit has been one of the fastest-growing areas of the credit market since the great credit crisis ended a decade ago. As banks stepped back from small and mid-market lending, especially in riskier areas like expansion and takeovers, funds sprang up to fill the void for a price. Institutions pensions placed enormous sums of…
Goldman Sachs (NYSE: GS) is said to have released a report advising companies to ignore the advances of private equity firms right now.
With valuations compressed dramatically in a very short period of time, private equity is looking to deploy its cash stockpile of around $1.5 trillion. Goldman, along with other investment banking firms, is advising clients that want to remain independent to take advantage of bridge loans and other funding provisions in the stimulus package that is being passed today rather than sell equity at bargain-basement levels.
Private equity managers will likely deploy more than $2 trillion in cash that has sat on the sidelines during the recent carnage and volatility in the financial market.
The American Investment Council released a report this week that shows that the private equity industry invested $309 billion in 4,788 businesses across all regions of the country.
The median investment in each private equity-backed business was $58.9 million. The top three sectors receiving the most private equity investment in 2019 were Business Products & Services ($93 billion), Information Technology ($64 billion), and Healthcare ($45 billion).
McKinsey and Company just published guidance for the private equity industry. In the paper titled “Private Equity and the New Reality of Coronavirus.” They suggest that “private equity (PE) firms and their portfolio companies come into the crisis riding a decade-long wave of growing transaction volumes, valuations, and fundraising. That position of strength may prove a bulwark in the months ahead, especially for firms that have exercised prudence recently.
In the largest deal since the coronavirus began crashing markets and economies, KKR (NYSE: KKR) is buying UK recycling company Viridor.
It will acquire the firm from Pennon Group for £4.2 billion in cash. Net proceeds to Pennon Group will be 3.7 billion pounds, with additional consideration of 200 million pounds contingent on future events. The Pennon Board of Directors said it intends to use the net cash proceeds to reduce Pennon’s company borrowings and make a return to shareholders.
Hellman & Friedman announced it has purchased the majority stake in Tel Aviv-based Checkmarx from Insight Partners. After the sale is complete, Insight will retain a minority interest in Checkmarx, a global leader in software security solutions for DevOps. The deal represents the largest acquisition of an application security company to date.
DailyAlts market strategy Tim Melvin says that the game is changing for private equity.
“We will see a pullback in deal multiples, and leverage levels are going to decline,” he said on Tuesday.
The dramatic decline in equity markets due to the coronavirus could solve one of the private equity industry’s biggest problems.
Last year, the industry raised over $300 billion in commitments to private equity investments. As a result of his success, the industry entered the year with over $1 trillion in dry powder.
But all that money created a problem. With valuations surging, too much money chased too few ideas. Buyouts became extremely difficult due to valuation concerns. Dry powder accumulated.
Firms do not start earning fees until they deploy cash, so private equity dry powder wasn’t delivering returns.
Soho China could be next. Proving once again that the firm is fearless, private equity and alternative form Blackstone (NYSE: BX) is stepping up to the plate to bid for real estate in China. Blackstone is bidding $4 billion to take over Hong Kong-listed property company Soho China.
The law firm says that private markets have attracted more capital than public markets over the past two decades. The report says, “We have witnessed that trend continue during the past year, and have worked with our clients to navigate the greater uncertainty that results with greater litigation risk and regulatory scrutiny. And as predicted, the ride seemed to get a little bumpier in the second half of 2019, with several events suggesting that litigation and regulatory risks have ratcheted higher.”
Blackstone CEO Stephen Schwarzman said it “remained unclear” if the Fed can restore economic confidence following the coronavirus outbreak. The Federal Reserve slashed interest rates by 50 basis points on Tuesday. Fed Chair Jerome Powell is attempting to reduce economic fallout due to the spread of the virus. However, the Dow still shed more than 700 points after the rate cut.
Blackstone (NYSE:BX) announced today that funds managed by Blackstone Energy Partners have completed the acquisition of NRStor C&I L.P. (“NRStor”). NRStor is a Toronto-based developer of battery storage solutions, targeting scale storage deployment opportunities in North America. Terms of the transaction were not disclosed.
Quadria Capital, a Singapore-based private equity firm, announced it has closed its second fund. According to reports, the fund reached its maximum of $595 million. The firm plans to invest in healthcare assets across Asia, the firm said in a statement. It had initially targeted a raise of $400 million.
CVC Capital Partners is reportedly seeking to raise up to 20 billion euros for a new flagship fund. That fund, in U.S. terms, is worth roughly $22 billion.
Reuters reports that the private equity ship could possibly set the company record for the largest capital pool on record. The CVC Capital Partners Fund VIII would invest in companies in North America and Europe. Reuters suggests that the firm will end up raising between 17 billion euros and 20 billion euros.
German industrial concern Thyssenkrupp AG has announced that it is selling its profitable elevator business.
A group of private equity firms is taking part in what looks to be the largest private equity deal in over a decade in Europe. The PE firms, led by Advent International and Cinven, are paying €17.2 billion ($18.91 billion) to acquire the business.
Thyssenkrupp has been shopping the deal for months to other suitors. Reports show they pursued deals with rival private equity firms and the Finnish elevator maker Kone. However, it has chosen to accept the offer form the Advent and Cinven led group.
A new Pitchbook report shows that private equity shops are snapping up an interesting alternative investment. Flush with dry powder, PE shops have been snapping up VC-backed startups, according to a report from Pitchbook.
Ares Management Corporation (NYSE: ARES) beat earnings expectations for its fourth quarter and fiscal year ended December 31, 2019 reports.
GAAP net income attributable to Ares Management Corporation was $38.5 million and $148.9 million, respectively, for the quarter and year ended December 31, 2019. On a diluted basis, net income attributable to Ares Management Corporation per share of Class A common stock was $0.25 and $1.06, respectively, for the quarter and year ended December 31, 2019. With approximately $149 billion in assets under management, Ares Management Corporation is one of the largest global alternative asset managers. It operates three investment groups: credit, private equity and real estate.
The Harvard Law School Forum on Corporate Governance published a memorandum from Andrew Nussbaum, Karessa Cain, and Steve Cohen of the Wachtell Lipton law firm. Wachtell Lipton is a New York-based corporate law firm that handles mergers and acquisitions, strategic investments, takeovers and takeover defense, shareholder activism, corporate and securities law, and corporate governance. The memo is titled Private Equity—Year in Review and 2020 Outlook.
Real Estate Analytics Startup HouseCanary Raises $65 Million. The funding will allow HouseCanary to develop the most accurate valuations in the property sector. The round was led by Morpheus Ventures, Alpha Edison, and PSP Growth, and it brought HouseCanary’s aggregate funding to $130 million.
Sycamore Partners is considering a deal to purchase Victoria’s Secret from L Brands (NYSE: LB). CNBC reported a possible deal Sunday while citing sources close to the matter. Sycamore manages roughly $10 billion in assets and has specialized in brick-and-mortar deals. It has previously worked on deals involving Talbots, Nine West, and Staples.
West Street Capital Partners – the private equity arm of Goldman Sachs – will start fundraising next week. The PE shop is part of Goldman’s ambitious effort to raise $8 billion for a second buyout fund. Reuters reports this would be the second buyout fund for the bank since 2008.