PE opportunity in European banking; information security sweet spot

S&P Global Market Intelligence offers our top picks of global private equity news stories and more published throughout the week.

It is likely that large European banks will be mulling sales of underperforming businesses, and private equity buyers are expected to be front and center to pick up assets, according to market participants.

Cerberus Capital Management LP, which has a track record of buying European banking assets, is reportedly about to snap up HSBC Holdings PLC's French retail banking business, which was put on the sale block following a strategic review in 2019.

Banks are increasingly steering away from the view that they are "full service" companies, according to Christian Kent, managing director in the financial institutions group at investment bank Houlihan Lokey. Lenders aim to slim down their businesses and focus on cost cutting and automation. This, in turn, is driving sales of operations in niche markets or that may require a large amount of manual underwriting, he said.

"These can be attractive to private equity as they operate in niche markets, and can often generate good margins if well managed. Post-COVID-19, with greater certainty around the performance of existing loan books of these businesses/loan portfolios, we can see private equity being more front-footed," said Kent.

Financial services-focused J.C. Flowers & Co. LLC is eyeing further deal making in the European banking industry, according to Tim Hanford, managing director of the firm's Europe team.

Hanford believes that private equity firms are well placed to absorb underperforming bank assets. "Private equity firms ... bring strong management, strategic focus and an investment into technology that allow these businesses to return to independent growth," he said.

Read more about Cerberus' history of European bank deal-making, and what private equity's involvement could mean for the region's banking outlook here.

CHART OF THE WEEK: Information security sweet spot for PE

➤ Although interest in many segments of the systems software sector has dwindled over the last few years, private equity deal-making in the information security segment has driven the overall sector to near record levels, according to Scott Denne, a senior research analyst at 451 Research.

➤ Year-to-date through June 4, private equity investors have spent approximately $24.23 billion in total disclosed deal value for the acquisition of systems software targets — more than twice the tally for 2020, according to 451 Research's M&A KnowledgeBase.

➤ Median deal value for the year-to-date period came to $225 million, while median multiple reached 7.5x, according to 451 Research data. Read the full article here.

FUNDRAISING AND DEALS

* Funds managed by Apollo Global Management Inc. affiliates will sell student learning solutions company McGraw-Hill Education Inc. to private equity peer Platinum Equity LLC for approximately $4.5 billion.

Separately, entities, clients and funds managed by Apollo affiliates will commit up to $500 million to senior secured credit facilities originated by Victory Park Capital Advisors LLC.

* The Blackstone Group Inc. and Vista Equity Partners Management LLC agreed to acquire higher education-focused software company Ellucian Co. LP from TPG Capital LP and Leonard Green & Partners LP.

In a separate deal, funds managed by Blackstone Real Estate submitted a proposal to buy a controlling stake in Chinese commercial property company Soho China Ltd. for about HK$23.66 billion.

* KKR & Co. Inc. is exploring a sale of Marelli Corp.'s suspension systems business to shift the company's focus to electrification, lighting and other higher-end technology products, Bloomberg News reported, citing people familiar with the matter.

The firm, together with Altamar Capital Partners and other investors, also agreed to sell its stake in Spanish residential real estate platform Elix Vintage Residencial Socimi SA to Allianz SE.

ELSEWHERE IN THE INDUSTRY

* Charterhouse Capital Partners LLP portfolio company Mirion Technologies Inc. agreed to be combined with GS Acquisition Holdings Corp. II, a blank-check company backed by an affiliate of The Goldman Sachs Group Inc., in a deal that gives the radiation detection company a pro forma enterprise value of roughly $2.6 billion.

* BlackRock Inc.'s real estate and infrastructure investment unit, BlackRock Real Assets, collected $1.67 billion for its first commingled fund offering in the infrastructure debt market.

* Waypoint Capital Partners LLC will divest home health service provider One Homecare Solutions LLC to Humana Inc.

FOCUS ON: SPECIALTY CHEMICALS

* EQT AB (publ) is considering listing Belgian specialty chemical company Azelis Holding SA after the summer at a potential valuation of about €5 billion, people familiar with the matter told Bloomberg Markets.

* SK Capital Partners teamed up with pigment producer Heubach GmbH to buy Clariant AG's pigment business in a roughly CHF805 million transaction.

* An affiliate of funds managed by SK Capital agreed to sell firefighting product specialist Perimeter Solutions to special purpose acquisition company EverArc Holdings Ltd. in an approximately $2 billion merger deal.