Caution amid generative AI frenzy; PE-backed funding rounds fell in February

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

Even as the value of overall private equity-backed deal activity sank to a five-year low in 2023, investments in one particularly hot corner of the technology sector more than doubled year over year.

Generative AI businesses attracted $2.18 billion from private equity and venture capital firms in 2023, up from $1 billion in 2022, according to S&P Global Market Intelligence data. In a year when interest rates, inflation and geopolitical turbulence combined to curb dealmaking, the transformative potential of AI systems that can generate text and images based on user inputs "gave investors something to be excited about," said Melissa Incera, a research analyst with S&P Global Market Intelligence 451 Research.

Still, separating hype from reality remains a challenge for investors in generative AI. Blackstone Inc. is among the firms sidestepping the generative AI gold rush, focusing instead on investments in the infrastructure that powers AI, including data centers.

The Carlyle Group Inc. offered a history lesson to generative AI investors in a report issued in late 2023, drawing a comparison to the arrival of another transformative technology a century ago, when mass electrification in the US connected many to the grid for the first time. While 1920s investors "aggressively bid up" valuations for electricity producers, more value was created by the companies buying that power, according to the report.

Read more about trends in private equity-backed generative AI investment.

CHART OF THE WEEK: Funding rounds trend lower in February

⮞ The value of private equity- and venture capital-backed funding rounds fell 11.2% year over year to $16.65 billion in February, according to Market Intelligence data.

⮞ Funding rounds also decreased in number to 1,009 in February from 1,406 a year earlier.

⮞ The technology, media and telecom sector absorbed the most venture capital in February, attracting more than a third of the funding round commitments that month.

TOP NEWS AND FUNDRAISING

– Carrier Global Corp. agreed to sell its industrial fire solutions business to Sentinel Capital Partners LLC for about $1.43 billion.

– United Rentals Inc. agreed to buy matting provider Yak Access LLC from Platinum Equity LLC for about $1.1 billion in cash. The deal is expected to close during the first quarter.

– New York Community Bancorp Inc. will receive over $1 billion in equity investment to help strengthen its balance sheet and liquidity position. Private equity firms Liberty 77 Capital LP, doing business as Liberty Strategic Capital, and Reverence Capital Partners LP will help provide the investment.

– EQT AB (publ) raised €3 billion in total commitments for its EQT Future fund at final close. The vehicle will invest in companies working in the areas of climate protection, agricultural productivity and health and wellbeing.

MIDDLE MARKET HIGHLIGHTS

– MPE Partners acquired conveyor chain manufacturer Webster Industries Inc. from its employee-owned stock ownership plan.

– Court Square Capital Management LP closed on a strategic investment in cloud-based business applications company Velosio.

– Round Table Capital Management LLP, or RTC Partners, added marketing agency Commonwealth Creative Associates Inc., or COMM, to its portfolio.

FOCUS ON: INTERACTIVE MEDIA AND SERVICES

– Berlin-based Amazon businesses aggregator Razor Group GmbH secured more than $100 million in a series D funding round led by Presight Capital.

– Revenue operations data automation company Openprise Inc. raised $25 million in a series B round led by Morgan Stanley Expansion Capital.

– Singapore-based AI Palette Pte. Ltd., which operates an AI platform for the consumer packaged goods sector, pulled in $5.8 million in a series A1 funding round. Tin Men Capital Private Ltd., Exfinity Venture Partners LLP and Pi Ventures LLP participated in the round.

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.

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451 Research is a technology research group within S&P Global Market Intelligence.