Pension funds short of target allocations; PE share of terminated deals up

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

Global pension funds on average came slightly short of meeting their private equity allocation targets amid uncertain macroeconomic conditions that are impacting institutional investment decisions. The results follow a slow 2022 in which global pension fund involvement in broader M&A activity dropped to $26.80 billion, compared to $105.57 billion in 2021.

The first quarter's preliminary numbers show pension funds have a median $4 million net underallocation to private equity, which is likely linked to a sharp decline in private equity and venture capital fund launches. Only 30 funds with a size of over $100 million were launched globally during roughly the first three months of 2023, compared to 450 in the same period a year earlier.

California State Teachers' Retirement System and California Public Employees' Retirement System had the largest first-quarter actual allocations to private equity at $46.73 billion and $46.26 billion, respectively.

Read about pension fund target versus actual allocation to private equity here.

It may indeed be a year of hesitancy for large limited partners who invest in private equity funds. According to the 2023 Private Equity Outlook Report by S&P Global Market Intelligence, about 60% of limited partners with less than $500 million in assets under management said they will increase their allocation to private equity, but fewer LPs with larger AUM expect to do the same.

The report surveyed 246 private equity firms, 129 venture capital firms and for the first time, 131 limited partners.

Check out the survey results here.

CHART OF THE WEEK: PE share of terminated transactions on the rise

⮞ Though the number of overall terminated M&A deals dropped dramatically in the first quarter compared to the corresponding period in 2022, the percentage with private equity involvement was up.

⮞ The first-quarter value of private equity-backed terminated deals totaled $10.16 billion, or approximately 22% of the $47.19 billion worth of all canceled transactions during the period, according to data from S&P Global Market Intelligence.

⮞ Euronext NV topped the list of the largest terminated deals in 2023. The financial exchange withdrew its offer to acquire Allfunds Group PLC from an investor group for $5.92 billion in February.

TOP DEALS AND FUNDRAISING

– BC Partners, through its BC Partners GR Investment LP fund, agreed to acquire a majority interest in Metropolitan College and AKMI IEK. BC Partners expects to close the deal in the second quarter, subject to regulatory approvals.

– Platinum Equity LLC purchased a majority stake in Tarter Farm and Ranch Equipment from affiliates of the company's founders. The Tarter family will retain a minority stake in the company.

– KKR & Co. Inc. raised $8 billion for its KKR European Fund VI at final close. The vehicle will focus on private equity investments mainly in the developed economies of Western Europe.

– MidOcean Partners LLP secured more than $1.5 billion in capital commitments for MidOcean Partners VI LP, the firm's largest fund to date. The fund has so far deployed 15% of the capital across two investments.

MIDDLE-MARKET HIGHLIGHTS

– DataExpert BV, which provides cybercrime and fraud prevention products and services, received a strategic investment from Bridgepoint Group PLC's Bridgepoint Development Capital IV fund. Interstellar Group BV will sell its interest in DataExpert to Bridgepoint as part of the transaction.

– Kinderhook Industries LLC signed a stock purchase agreement to sell its portfolio company, Circon Holdings Inc., to Covanta Holding Corp.

– AgroFresh Solutions Inc., an agriculture technology company, completed its go-private transaction with investment fund affiliates of Paine Schwartz Partners LLC.

– Architect Equity LLC sold Solution Net Systems Inc., an industrial automation solutions provider, to Alstef Group SAS.

FOCUS ON: BIOTECHNOLOGY

– An investor group comprising ArchiMed SAS and WP GG Holdings I BV agreed to sell France-based Polyplus-transfection SA to Sartorius AG-owned Sartorius Stedim Biotech SA for €2.40 billion. Sartorius will finance the transaction with a bridge loan facility from JP Morgan.

– Vitruvian Partners LLP-backed Gelesis Holdings Inc. received a nonbinding offer to sell the outstanding capital stock of the obesity-focused biotherapeutics company to PureTech Health PLC. The proposal offers 21 cents per share of PureTech stock and includes $5 million of senior secured financing to fund daily operations.

– INCJ Ltd. sold its stake in Orphan Disease Treatment Institute Co., Ltd., which is developing treatment for a genetic disorder linked to muscle degeneration, to co-investor Daiichi Sankyo Co. Ltd.

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.