Take-privates surge; early stage funding rounds remain quiet

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

Private equity firms are taking advantage of stock market dislocation by loading up on take-private deals.

Between Jan. 1 and Oct. 25, private equity (PE) firms took 96 public companies private. That's already the highest annual total for PE-backed take-privates in 16 years, with close to two months of dealmaking remaining in 2023.

Private equity firms are carrying historically high levels of dry powder. Many publicly traded companies lost value in 2022 amid widespread stock market declines, making them attractive targets for PE acquirers.

“With reductions in broad market valuations, we're seeing a wider opportunity set that fits our strategy, particularly in [take-privates] and carve-out transactions,” said Scott Kleinman, co-president of Apollo Global Management Inc., on the company's third-quarter earnings call Nov. 1.

Market dislocation is also keeping the competition at bay. Corporate strategic acquirers who compete with PE on deals may also be dealing with deflated stock prices — not to mention an increasingly uncertain economic outlook tinged with inflation and geopolitical turmoil, factors that could prompt executives to think twice about acquisitions.

Read more about PE-backed take-private deals reaching a 16-year high.

CHART OF THE WEEK: Early stage funding rounds continue skid

⮞ PE- and venture capital-backed early stage funding rounds totaled 1,104 in the third quarter, declining 36.6% from 1,741 in the same period a year ago, according to S&P Global Market Intelligence data.

⮞ The volume of early stage funding rounds, including pre-seed, seed, accelerator, angel and crowdfunding, peaked at 2,478 rounds in the first quarter of 2022 but has declined in every quarter since then.

⮞ The total value of the 1,104 transactions recorded between July 1 and Sept. 30 was $3.18 billion, less than half the $6.51 billion invested by PE and venture capital firms in early stage funding rounds during the third quarter of 2022.

TOP DEALS AND FUNDRAISING

– Blackstone Inc. and Vista Equity Partners Management LLC entered into a definitive agreement to acquire Energy Exemplar Ltd., a simulation software provider, from The Riverside Co. Financial details of the transaction were not disclosed.

– American Securities LLC agreed to sell Paragon Medical Inc., a manufacturer of medical components and instruments, to Ametek Inc. in an all-cash transaction valued at approximately $1.9 billion.

– American Industrial Partners LLC successfully concluded the fundraising for American Industrial Partners Capital Fund VIII LP, reaching its target of $5 billion.

– Trivest Partners LP closed its Trivest Recognition Fund at its hard cap of over $1.3 billion.

MIDDLE-MARKET HIGHLIGHTS

– An investor group led by Greenbelt Capital Management LP acquired Saber Power Services LLC, which specializes in medium-to-high voltage electrical infrastructure work, from Oaktree Capital Management LP. The investor group includes Wafra Inc., StepStone Group LP and Schroders Capital.

– Greif Inc. entered into exclusive negotiations to purchase Ipackchem Group SAS, a manufacturer of jerricans and small plastic containers, from an entity affiliated with SK Capital Partners LP in a cash transaction valued at $538 million.

– MidEuropa entered into an agreement to sell Profi Rom Food to Ahold Delhaize in a deal valuing the convenience and proximity supermarket chain at about €1.3 billion. The transaction is expected to close in 2024.

– PE firm Performant Capital acquired SquadUP Inc., a ticketing, event management and audience engagement platform.

FOCUS ON: HEALTHCARE

– Patient Square Capital LP agreed to take Eargo Inc. private by purchasing the outstanding common shares of the medical device company not already owned by Patient Square for $2.55 per share. The all-cash transaction is expected to close in the first quarter of 2024.

– Luxempart SA acquired a significant minority stake in Alphacaps GmbH, a German contract developer and manufacturer of nutritional supplements.

– Aileron Therapeutics Inc. purchased biopharmaceutical company Lung Therapeutics Inc. from an investor group including The University of Texas System and Bios Equity Partners LP.

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.