Private equity exit expectations; Brazil draws region-leading PE investment

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

Global private equity exits from portfolio companies trended higher through the first three quarters of 2023, though the industry is still catching up after monetization activity plunged in 2022.

The consequences of that slowdown are visible in portfolio company holding times. The average length of time between the private equity (PE) buyout and exit of a US or Canadian portfolio company was 7.1 years, based on exits recorded for the year through Nov. 15, higher than any annual average going all the way back to 2000, according to Preqin.

The slower pace of exits is also slowing the entire private equity investment cycle. Longer hold times challenge private equity firms' value-creation strategies for existing portfolio companies and may hinder their ability to make new investments. Industry fundraising totals took a hit in the first half of the year because fewer exits meant less capital returned to investors, who then had less to commit to new funds.

Growing pressure on private equity fund managers to exit investments — even if they are at multiples well below 2021 levels — is also coming from investors who face a stark choice: Unless distributions pick up soon, they will likely have to trim their private equity portfolios.

Read more about the outlook for private equity exits.

CHART OF THE WEEK: Brazil's region-leading tally of PE-backed companies

⮞ Brazil's tally of 2,849 private companies with private equity or venture capital backing is the most of any country in Latin America and the Caribbean, according to S&P Global Market Intelligence data as of Nov. 6.

⮞ The private equity penetration rate for Brazil's private sector — the percentage of privately owned companies with private equity or venture capital involvement — is the sixth highest in the region, at 3.39%.

⮞ Nicaragua has the region's leading private equity penetration rate, at 5.53%, but with just 506 private companies, it has a much smaller private sector than Brazil.

TOP DEALS AND FUNDRAISING

– Private equity funds managed by Blackstone Inc. affiliates agreed to buy London-based public sector software solutions company Civica Group Ltd. from Partners Group Holding AG. The parties expect to close the deal in the second quarter of 2024.

– An investor group comprising Permira Advisers LLP, The Blackstone Group International Partners LLP, General Atlantic Service Co. LP and TCMI Inc., or TCV, made a voluntary tender offer to buy all outstanding ordinary class A shares of Adevinta ASA, a Norway-based online classifieds specialist, for over $13 billion.

– Kinterra Capital Corp. secured total commitments of $565 million for Kinterra Battery Metals Mining Fund LP. The firm's debut fund will invest in critical mineral assets and infrastructure for the energy transition.

– MiddleGround Capital raised about $440 million in capital commitments for MiddleGround Carbon CV LP, a single asset continuation vehicle.

MIDDLE-MARKET HIGHLIGHTS

– Bregal Unternehmerkapital GmbH will take a majority stake in Netrics, a Swiss cloud-managed service provider, from Waterland Private Equity Investments BV. The deal is expected to close by the end of 2023.

– INVL Asset Management's INVL Baltic Sea Growth Fund agreed to acquire Lithuania-based Galinta Group, which produces buckwheat in Europe. The fund expects to close the deal at the start of 2024.

– OpenGate Capital Management LLC reached an agreement to purchase amusement and gaming equipment supplier Player One Amusement Group Inc. for C$155 million.

– Mill Point Capital LLC agreed to divest International Designs Group LLC, a distributor of design-oriented surfaces, architectural specialty products and appliances, to The Home Depot Inc. The deal is likely to close by the end of 2023.

FOCUS ON: HEALTHCARE

– Levine Leichtman Capital Partners LLC divested its stake in TRC Healthcare Inc., or Therapeutic Research Center, a provider of education and training for the healthcare industry. Gridiron Capital LLC portfolio company Colibri Group was the buyer.

– Merck & Co. Inc.-owned private equity firm, MRL Ventures Fund LLC, agreed to purchase Caraway Therapeutics Inc. for total potential consideration of as much as $610 million. SV Health Investors LLC, Amgen Ventures, AbbVie Ventures Inc. and Eisai Innovation Inc. are among the sellers.

– German pharmaceutical company Boehringer Ingelheim International GmbH acquired Swiss bacterial cancer therapy specialist T3 Pharmaceuticals AG from an investor group that includes Reference Capital SA for up to CHF 450 million.

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.

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