Geopolitics, rates drag on private equity deals; Israel's high PE investment

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

Ten and a half months into 2023, it is looking pretty certain that private equity deals are on track for a second consecutive down year.

Aggregate private equity and venture capital deal value totaled $375.16 billion globally between Jan. 1 and Oct. 31, down over 40% from the same 10-month period a year ago, according to S&P Global Market Intelligence data. Higher financing costs and an unsettled macroeconomic outlook also took a toll on deal volume in the first 10 months of the year, with the 9,990 deals recorded through Oct. 31 representing a 32% year-over-year decline.

The lack of deals seemed to drain some of the optimism from the most recent earnings season for private equity's four largest publicly traded firms. Investor sentiment is an intangible but critical ingredient to markets, and The Carlyle Group Inc. CEO Harvey Schwartz said it turned sour amid rising geopolitical instability.

"Multiple wars, along with higher rates and economic uncertainty, have increased volatility and reduced confidence levels," Schwartz said. "As we all know, sentiment is the greatest market elixir, and negative sentiment has slowed transaction activity over the past year."

Read more about global private equity deal activity in October, including the month's largest deals.

CHART OF THE WEEK: Where PE invests in Middle East, Africa

⮞ Israel is home to 3,602 companies backed by private equity or venture capital, the highest number among countries in the Middle East and Africa, according to Market Intelligence data.

⮞ The portion of Israeli private companies with private equity or venture capital backing is 11.81%, one of the highest private equity penetration rates in the region.

⮞ Rwanda had the highest private equity penetration rate in Africa and the Middle East, with investment in 17.28% of its private companies, but it has a relatively small private sector comprising just 492 companies.

TOP DEALS AND FUNDRAISING

– EQT AB's BPEA Private Equity Fund VIII will initiate a tender offer to take Benesse Holdings Inc. private, in partnership with the founding family of the Japan-based education and nursing care provider. The tender offer has approval from the board of Benesse.

– General Atlantic Service Co. LP agreed to acquire a majority stake in Joe & The Juice A/S and expects to close the deal in the fourth quarter. Valedo Partners will exit its investment in the urban juice bar and coffee company.

– Pantheon Ventures (UK) LLP is launching an evergreen global private equity fund that will give investors access to a diversified secondary and coinvestment portfolio through a single investment. The new Pantheon Global Private Equity Fund will be available in 20 countries outside of the US and includes a quarterly liquidity mechanism.

– PAI Partners closed PAI Partners VIII, its latest flagship fund, with capital commitments of €7.10 billion.

– Menlo Ventures Management LP secured $1.35 billion in fresh capital to target technology companies involved in the AI transformation. The new capital will be deployed by Menlo XVI, Menlo Inflection III and affiliated funds.

– Kinderhook Industries LLC closed its continuation fund with $1.30 billion in total commitments. The continuation fund was led by The Carlyle Group Inc.'s unit AlpInvest Partners BV, with support from a diverse group of investors.

MIDDLE-MARKET HIGHLIGHTS

– Flexpoint Ford LLC-managed funds made a substantial investment in GoldState Music.

– Thoma Bravo LP finalized its acquisition of NextGen Healthcare Inc., a healthcare technology solutions provider, for $1.8 billion.

– An entity controlled by Sumeru Equity Partners LP will buy capital markets access platform Q4 Inc. for C$6.05 per common share. Certain shareholders, including Ten Coves Capital LP funds and Q4 CEO Darrell Heaps, will roll over 34.1% of common shares for equity interests in the purchaser.

– Ardian purchased the 21.6 MW Honkajoki wind farm in Finland through its Clean Energy Evergreen Fund. The sellers were Access Capital Partners and KGAL Investment Management GmbH & Co. KG.

FOCUS ON: BIOTECHNOLOGY

– Cartesian Therapeutics Inc. acquired Selecta Biosciences Inc. from Vivo Capital LLC in a reverse merger deal.

– Telix Pharmaceuticals Ltd. signed a conditional term sheet to acquire QSAM Biosciences Inc. and its lead asset, CycloSam, from Cyclone Power Technologies Inc. and Checkmate Capital Group LLC for $33.1 million in equity.

– LENZ Therapeutics Inc. agreed to acquire Graphite Bio Inc. for about $230 million in a reverse merger transaction. The selling investor group includes VR Adviser LLC, Versant Venture Management LLC, Perceptive Advisors LLC, RA Capital Management LP and Samsara BioCapital LLC.

For further private equity deals, read our latest In Play report, which looks at potential private equity-backed M&A, including rumored transactions, each week.