Big expectations meet muted H1'23 in Japan; private equity runs deep in Baltics

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

The global private equity market is eyeing a growing investment opportunity in Japan, although that did not translate into much deal activity in the first half of 2023.

Disclosed transaction value was a meager $180 million between Jan. 1 and June. 30, representing just a sliver of the $10.15 billion in private equity-backed deals recorded during the first six months of 2022. A lack of take-private deals, which tend to have a higher transaction value, explains much of the decline, Tomoki Miyamori of Japanese M&A advisory firm Nihon M&A Center Inc. told S&P Global Market Intelligence.

Still, private equity industry leaders think more and bigger deals are on the way as Japan warms to the asset class.

"Japan is in early stages of its trajectory, both in terms of large investors starting to allocate to alternatives as well as deployment opportunities as the market opens to outside capital," Blackstone Inc. President Jonathan Gray said on the firm's second-quarter earnings call.

Gray said corporate divestitures of nonstrategic divisions would drive future deal activity, an outlook shared by KKR & Co. Inc. co-CEO Scott Nuttall.

"There's a significant opportunity as conglomerates in that part of the world get simpler and sell noncore [subsidiaries], and we can help those businesses go global by working cross border," Nuttall told conference attendees in February.

Read more about private equity's first-half deal activity in Japan, including the largest deals of the year so far.

CHART OF THE WEEK: PE investments run deep in Baltics

⮞ The Baltic states have the highest percentage of private companies with private equity or venture capital investment out of the 27-member European Union and the UK, according to a Market Intelligence analysis.

⮞ Private equity penetration in private business sectors was the highest in Latvia at 3.54%, followed by Lithuania at 2.24% and Estonia at 1.34%.

⮞ The figures from those three Baltic states compare to an average penetration rate of 0.49% across the EU-27 and 0.35% in the UK.

TOP DEALS AND FUNDRAISING

– KKR & Co. Inc. agreed to take a majority stake in pallet pooling platform Leap India Pvt. Ltd. The investment is being made as part of KKR's Asian infrastructure strategy.

– Francisco Partners Management LP and TPG Capital LP agreed to buy engineering software platform New Relic Inc. in an all-cash deal valued at roughly $6.5 billion. The transaction is likely to be completed in late 2023 or early 2024.

– CVC Capital Partners Ltd.'s Glendower Capital LLP unit raised $5.8 billion for its fifth global secondary private equity fund, Glendower Capital Secondary Opportunities Fund V, at final close.

– SK Capital Partners closed its oversubscribed SKCP Catalyst Fund II with total capital commitments of $800 million.

MIDDLE-MARKET HIGHLIGHTS

– BGF Investment Management Ltd. bought a stake in Nuada for £3.4 million, extending the UK-based carbon capture company's £4.5 million series A funding round. Nuada, which develops technology to decarbonize industrial emissions, was formerly known as MOF Technologies.

– Bridgepoint Advisers Ltd. will sell its stake in one.network, a UK-based digital road management platform, to Causeway Technologies Ltd.

– General Atlantic Service Co. LP closed on a strategic investment in Financial Information Technologies LLC, which provides technology designed to streamline the beverage alcohol industry.

– Palladium Equity Partners LLC added Superior Environmental Solutions LLC, which provides vertically integrated environmental and industrial services, to its portfolio. The seller was Rosewood Private Investments.

FOCUS ON: APPLICATION SOFTWARE

– Marathon Venture Capital sold border gateway protocol company Code BGP Inc. to Cisco Systems Inc.

– OAG Aviation Worldwide Ltd. acquired a majority stake in Danish air travel data platform Infare Solutions A/S from Ventiga Capital Partners LLP.

– Revolution Ventures sold advanced search platform Resolute Innovation Inc., also known as ResoluteAI, to Research Solutions 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.