Limited partners' flight to quality; private equity-backed megadeals decline

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

There are signs of a flight-to-quality phenomenon in private equity's challenging fundraising market.

Private equity's second-quarter fundraising total fell 17.4% year over year to $241.58 billion, according to S&P Global Market Intelligence and Preqin data. But the number of funds in the market experienced a much steeper decline, dropping 50.3% year over year in the second quarter.

Those two data points indicate that limited partners — many facing a liquidity crunch tied to slowing distributions — are directing their capital commitments to a smaller set of private equity fund managers. The winners in this environment are likely to be larger, better known private equity firms, said Bart Molloy, a partner at placement agent Monument Group.

"I think there is some skew toward the larger funds that have shown they are a safe pair of hands," Molloy said.

Preqin's second-quarter private equity update report picked up on the same trend, adding that limited partners with limited liquidity are focusing on re-ups with fund managers they already know.

"Generally speaking, the larger and more successful 'brand name' GPs are expected to continue to grow their share of overall fundraising," the report's authors note.

Read more about private equity’s first-half fundraising performance.

CHART OF THE WEEK: $1B-plus private equity deals drop

⮞ The aggregate value of private equity and venture capital-backed deals worth $1 billion or more is pacing for its lowest total since 2019.

⮞ Global private equity and venture capital deals worth at least $1 billion totaled just $99.47 billion across 33 deals through July 13.

⮞ In addition to other factors hampering global M&A activity, big-ticket private equity deals are down because of weakness in the syndicated loan market, Brenda Rainey, a leader in Bain's private equity practice, told S&P Global Market Intelligence.

TOP DEALS AND FUNDRAISING

– An H.I.G. Capital LLC affiliate will acquire audiobook publisher RBmedia from KKR & Co. Inc. The parties expect to close the transaction by the fourth quarter, subject to regulatory approvals.

– The Carlyle Group Inc. agreed to acquire Evolution Funding Ltd., a UK-based motor finance platform that links car dealers with multiple lenders. The company's founders, management and existing backer LDC (Managers) Ltd. are investing alongside the Carlyle Europe Technology Partners V fund in the transaction.

– Venture capital firm Goodwater Capital LLC, which focuses on consumer technology investments, secured more than $1 billion across its family of early- and growth-stage funds.

– Consumer-focused private investment firm Bansk Group LLC closed its first investment vehicle, Bansk Fund I LP, at $800 million.

MIDDLE-MARKET HIGHLIGHTS

– Thoma Bravo LP is selling its stake in cybersecurity company Imperva Inc. in a deal with strategic buyer Thales SA.

– Agilitas Private Equity Services Ltd. exited its investment in UK-based wastewater treatment products and solutions company Hydro International Ltd. The buyer was Oldcastle infrastructure Inc.

– Surge Private Equity LLC purchased Toska Spa and Facial Bar, a facial skincare treatment company, from Viking Mergers & Acquisitions.

– Inflexion Private Equity Partners LLP agreed to buy London-based DWF Group PLC, which provides legal and business services, for about £342 million. The transaction is expected to take effect around the fourth quarter.

FOCUS ON: HEALTHCARE EQUIPMENT

– One Rock Capital Partners LLC sold Kova International Inc., maker of in vitro diagnostic products. The buyer was LGC Ltd.

– MedCap AB (publ) signed an agreement to acquire Dutch healthcare equipment company SurgiCube International BV for €8 million. MedCap will pay €6 million at closing and up to €2 million based on SurgiCube's gross profit growth until December 2024.

– Diagnostic Medical Systems SA agreed to buy Sweden-based mobile X-ray equipment specialist Solutions For Tomorrow AB from Verso Capital Oy.

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.