Private equity secondaries picking up; exit deals continue decline

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

A record $57 billion in private equity stakes traded on the secondaries market in the first half of 2022, despite a significant slowdown in dealmaking by midyear. Activity may be ramping up again.

Private equity limited partners, including institutional investors like public pension funds, drove most of the dealmaking earlier this year. Many of those public pension funds operate with strict allocation targets for their public and private investments, and a swift sell-off in public markets earlier this year left them overweight in their private market holdings.

Selling on the secondaries market was one way to move those allocations back on target, but there was a hitch: the declining valuations of public market companies raised questions about just how well private equity portfolio company values were holding up. Secondaries buyers demanded a steep discount on investors' private equity stakes, prompting some would-be sellers to hit pause.

That pause lasted through the summer, but the pipeline of LP offerings is filling up again, said Christine Patrinos, founding partner of Mozaic Capital, who told S&P Global Market Intelligence her firm is "launching a number of LP portfolio deals this quarter." That could keep the secondaries market on track for its second-best year ever.

Read more on what is bringing LPs back to the secondaries market and what they can expect.

CHART OF THE WEEK: Private equity exits drop further in Q3

⮞ The just-concluded third quarter was also the third consecutive quarter of declining global private equity and venture capital exit activity, which totaled just $12.78 billion for the three months ended Sept. 30.

⮞ Three-quarters of the way through 2022, private equity exits generated $66.77 billion globally, or just 40% of the $166.25 billion total for the same period a year ago.

⮞ Exits bounced back quickly after a brief pause near the start of the global pandemic in 2020, but the macroeconomic concerns underlying this slowdown in exits run much deeper, and recovery is likely to take longer, said Les Cheek, head of global financial sponsors for Baird's global investment banking business.

DEALS AND FUNDRAISING

* Funds managed by Apollo Global Management Inc. and Migdal Insurance are investing up to $500 million in Doral Renewables LLC, a U.S. renewable energy and storage developer. The investment is in the form of notes convertible to common equity interests in Doral at a $1.5 billion pre-money valuation.

* KKR & Co. Inc. purchased a minority stake in SkinSpirit Skincare Clinic & Spa, an aesthetic skin and body care provider, through its KKR Health Care Strategic Growth Fund II SCSp.

* Bain Capital LP and an Abu Dhabi Investment Authority unit completed the acquisition of Merchants Automotive Group LLC, doing business as Merchants Fleet and Merchants Auto.

* EQT AB acquired Affiliated Managers Group Inc.'s stake in Hong Kong-based Baring Private Equity Asia. The seller received pretax consideration of $240 million and 28.68 million ordinary shares of EQT.

* Warburg Pincus LLC intends to invest $350 million to create a retail-focused insurance platform in Southeast Asia, which will be known as Oona Insurance.

* Morgan Stanley's private markets platform, Morgan Stanley Private Markets Solutions, closed its Private Equity Co-Investment Fund II with $1.25 billion in total commitments. The fund had an initial target of $750 million.

ELSEWHERE IN THE INDUSTRY

* Valeas Capital Partners will buy a minority stake in wealth management firm Sequoia Financial Group LLC in a deal expected to close Oct. 31.

* OutSolve LLC, a provider of outsourced labor and employment compliance services, received a capital injection from The Riverside Co.

* An affiliate of CVC Capital Partners Ltd. and Nordic Capital wrapped up their purchase of vehicle glass repair and replacement company Cary Group.

FOCUS ON: SOFTWARE

* Vista Equity Partners Management LLC, in partnership with institutional coinvestors, closed its deal to take Avalara Inc. private. The all-cash transaction was valued at $8.4 billion, including the cloud-based tax compliance solutions provider's net debt.

* Thoma Bravo LP acquired cloud-based identity management platform company Ping Identity Holding Corp. from Vista Equity Partners in an all-cash deal worth roughly $2.8 billion.

* Option3 sold its stake in automated network security solutions provider Dark3 Inc., or Dark Cubed, to Celerium Inc.