AI race comes to private equity; declining healthcare equipment investment

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

Blackstone Inc. CEO Stephen Schwarzman this summer said he intends to keep the world's largest alternative asset manager at the forefront of the AI revolution, predicting on the firm's second-quarter earnings call that "the timeliness and effectiveness of [AI] implementation will be determinative of who the winners and losers will be."

Schwarzman was referring to the industries that the firm with $1 trillion assets under management invests in and also to private equity itself.

Blackstone is deploying AI internally to improve its own operations, and sources tell S&P Global Market Intelligence that dozens of other private equity firms are building and testing AI-powered software tools. Private equity firms are already using AI to assist in some of the more labor-intensive tasks associated with sourcing and evaluating investments.

One major goal — to build an AI bot that can advise on investment decisions and even explain its reasoning — remains out of reach but possibly not for long. Richard Lichtenstein, an expert partner at Bain & Co., suggested that such a development is "on the near-term horizon."

Read more about private equity's fast-developing plans for artificial intelligence.

CHART OF THE WEEK: PE investment in healthcare equipment pacing for consecutive down years

⮞ Private equity and venture capital investment in healthcare equipment companies appears to be headed for a second consecutive year-over-year decline in 2023 based on 309 transactions with an announced value of $6.76 billion between Jan. 1 and Aug. 22.

⮞ That was despite $1.64 billion worth of deals announced in the third quarter, an improvement over the second quarter, bringing to an end three straight quarters of declining investment value.

⮞ The acquisition of a majority stake in dental implant company Osstem Implant Co. Ltd. by MBK Partners and UCK Partners Inc., a deal valued at $1.82 billion, was the largest private equity-backed deal in the healthcare equipment sector in the year through Aug. 22.

TOP DEALS AND FUNDRAISING

– PAG agreed to purchase a controlling stake in bar and restaurant operator Australian Venue Co. Ltd. from KKR & Co. Inc. The parties expect to close the deal in late 2023, subject to regulatory clearances and other customary conditions.

– L Catterton Partners agreed to buy supplement company Thorne HealthTech Inc. for $10.20 per share in a cash deal. The approximately $680 million deal is likely to close in the fourth quarter.

– Questa Capital Management LLC closed the Questa Capital Partners III LP fund with $397 million in capital commitments. The vehicle will invest in growth companies in the healthcare industry.

– Maddix Capital launched Maddix Capital Services Fund II with a fundraising target of more than $125 million. The hybrid closed-end fund seeks $100 million in equity and $25 million in opportunistic credit. The firm already received soft commitments for 30% of the fund.

MIDDLE-MARKET HIGHLIGHTS

– ArchiMed SAS will buy UK-based healthcare technology company Instem PLC in a cash transaction amounting to 833 pence per share.

– Prime Ventures is selling its stake in European financial technology company SlimPay SA to Trustly Group AB.

– Affiliates of the middle-market private equity firm KSL Advisors LLC will acquire luxury and lifestyle hotel real estate investment trust Hersha Hospitality Trust in an all-cash deal worth about $1.4 billion.

– Omnes Capital SAS and Alven Capital Partners SA completed the sale of France-based AI software company Mipsology SAS to Advanced Micro Devices Inc.

FOCUS ON: ELECTRONIC EQUIPMENT AND INSTRUMENTS

– INCJ Ltd. sold its stake in Tokyo-based optical comb generator company XTIA Co. Ltd. to a fund managed by Susquehanna International Group LLP.

– Trustar Capital agreed to sell Japanese optical components provider Moritex Corp. to Cognex Corp. for ¥40 billion in an all-cash transaction.

– Firda AS expanded its investment in Airthings ASA, a Norwegian hardware-enabled software company that develops products and systems for indoor air quality, radon and energy efficiency monitoring, by acquiring an additional minority stake.

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.