PE views on consumer discretionary risk; European restaurants on PE's menu

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

Since 2022, quarterly analysis of risk across the economic spectrum has repeatedly zeroed in on one sector: consumer discretionary.

Providers of nonessential goods and services appear to be in a tricky position as inflation erodes the buying power of consumers. But private equity firms with portfolio companies in the sector paint a more nuanced picture.

"It's really a tale [of two different sorts] of groups," said TPG Inc. CEO Jon Winkelried when quizzed about consumer-oriented portfolio company performance on the firm's full-year 2022 earnings call in February. Winkelreid said wealthy consumers were still spending freely, even as inflation prompted a "pullback in demand" from consumers with lower incomes.

Apollo Global Management Inc. co-President James Zelter made a similar observation that same month, describing a "bifurcated economy" during a conference question-and-answer session.

"Entertainment, lodging hotels, travel, gaming [are] very, very strong. Anything tied to the consumer in the US — deep industrials, autos, car prices, white goods, homebuilders — are a little bit more challenged," Zelter said.

Read more about the signs of risk emerging from the consumer discretionary sector.

CHART OF THE WEEK: European restaurants on PE's menu

⮞ Private equity and venture capital investment in European restaurants came to $447.5 million in the year to June 26, more than 125% higher than the total for the full first half of 2022.

⮞ Driving much of the increase was a single deal: private equity firm McWin sro's $434.8 million bid for Fr L'Osteria Gmbh, a Munich-headquartered chain of Italian restaurants.

⮞ Distressed and special situations deals are expected in the restaurant sector in 2023 as the industry grapples with inflation and other challenges, according to a report from Kroll.

TOP DEALS AND FUNDRAISING

– The Carlyle Group Inc. agreed to buy a majority stake in sustainability specialist Anthesis Consulting Group Ltd. The London-based company's existing shareholder, Palatine Private Equity LLP, will be reinvesting to retain a minority stake.

– IK Partners is in exclusive negotiations for the sale of its interest in Pr0ph3cy Group to Carlyle. IK Partners will reinvest in Pr0ph3cy alongside Carlyle and the French cybersecurity company's management team.

– Altas Partners LP held the final close for its third fund, Altas Partners Holdings III LP, with capital commitments of $4 billion.

– Cathay Capital Private Equity SAS raised $270 million at the final close of Small Cap IV, a growth private equity fund that seeks to invest in healthcare, consumer and technology companies across Europe, North America and Asia.

MIDDLE-MARKET HIGHLIGHTS

– L Catterton Partners exited its investment in Cicli Pinarello Srl, an Italy-based cycling brand.

– Platinum Equity LLC acquired JELD-WEN Holding Inc.'s building products business in Australasia for about $461 million.

– Mobeus Equity Partners LLP invested £19.6 million to acquire a minority stake in UK-based business development consultancy Intralink Ltd.

– Bridgepoint Group PLC will sell a majority stake in DMC Power Inc., which specializes in technology systems for high-voltage power infrastructure, to Golden Gate Capital.

FOCUS ON: INDUSTRIAL

– KH Group Oyj sold Finland-based logistics company Logistikas OY to Logent AB for €23.5 million.

– Permanent Equity acquired a majority stake in Chance Rides Manufacturing Inc. and kept the company's brand in the form of Chance Rides LLC. Chance Rides owner and CEO Dick Chance will transition to holding a minority stake in the business, which manufactures amusement ride products.

– Innova Capital Sp. z o.o. bought a 51% stake in Romania-based industrial access systems company Equipement Maintenance Industrie SA, or EMI Group. The transaction was a combination of a partial buyout and a €15 million capital increase.

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.