On the lookout for entries; chemical industry investments plunge

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

Prolonged market downturns like the one that began in 2022 are widely believed to produce some of private equity's best vintages, allowing funds to buy portfolio companies when valuations are down and ride the economic recovery to a strong exit.

So where are all the entries?

The global private equity industry closed out 2022 with a near-record level of dry powder to deploy into deals, yet there remains a persistent gap between buyers and sellers on valuations after public markets' dramatic fall last year. Tighter bank lending standards are likewise still an impediment to buyout deals, although the ability of firms to tap into private credit fueled a surge of take-private deals in the first quarter.

Dealmaking will build slowly as market participants regain confidence in the banking system and the economic outlook, Blackstone Inc. President Jonathan Gray told analysts on his firm's first-quarter earnings call.

"I think it will happen in waves in different segments. It ultimately will happen, it always does. But it's hard to point to any one thing as we sit here today," Gray said.

Hopes that a turnaround might begin in the second half of 2023 are supported by data showing that private equity entry value jumped 55% in May over the previous month. But it is not all good news. Entry value was down year over year in May, as it has been every month of 2023 so far.

Read more about private equity entries in May.

CHART OF THE WEEK: Private equity investment in North America's chemical sector plunges

⮞ Investment backed by private equity and venture capital in North America's chemical industry is on track for its slowest first half since 2018, according to S&P Global Market Intelligence data.

⮞ Soft demand and an uncertain economic outlook mean the prospects for the second half of 2023 are not much better, Deloitte & Touche LLP partner Philip Hueber said.

⮞ Private equity sponsors of North American chemical businesses are currently more focused on operational improvements at their current portfolio companies than on deals, said Hueber, who heads the firm's US chemical M&A practice.

TOP DEALS AND FUNDRAISING

– KKR & Co. Inc. will acquire Circor International Inc., which provides mission-critical flow control products and services to the industrial, aerospace and defense markets, for about $1.60 billion. The all-cash deal will see KKR paying $49 per Circor share.

– Funds managed by EQT AB (publ)'s EQT Fund Management SARL and Luxinva SA reached a deal to buy Dechra Pharmaceuticals PLC for about £4.46 billion.

– Just Climate LLP secured $1.5 billion in institutional capital at the close of its inaugural fund. Climate Assets Fund I will invest in solutions that reduce or remove greenhouse gas emissions.

– Healthcare-focused private equity firm Martis Capital Management LLC closed on $779 million for its fourth fund, Martis Partners IV LP, surpassing its $700 million target.

MIDDLE-MARKET HIGHLIGHTS

– MidOcean Partners LLP closed the acquisition of QualiTech Inc., a nutrition and food ingredients manufacturer.

– Hull Street Energy LLC acquired the Bastrop Energy Center and Paris Energy Center power plants in a deal with Mesquite Generation Holdings LLC, an Atlas Holdings LLC affiliate.

– Auxo Investment Partners LLC added Avon Machining LLC to its portfolio. As part of the deal, Chad Fietsam will remain CEO of the machining solutions company and will continue to own a significant stake.

– TPG Capital LP's The Rise Fund provided significant capital to Banyan Treatment Center LLC, a mental health service provider.

FOCUS ON: APPLICATION SOFTWARE

– A group of investors including Brand Capital agreed to sell India-based rental management platform Nestaway Technologies Pvt. Ltd. to Aurum PropTech Ltd.

– Fulcrum Equity Partners Inc. and GP Ventures sold mobile-based student information platform Full Measure Education Inc. to Student Bridge Inc.

– Poseidon Asset Management LLC and WelCan Capital completed the sale of cannabis compliance technology platform Komplyd Inc. to Green Check Verified Inc.

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.