Portfolio company bankruptcies remain elevated; funding rounds fall in April

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

Sticky inflation and higher-for-longer interest rates are squeezing private equity portfolio companies and pushing bankruptcies into record territory.

Bankruptcy filings by US private equity portfolio companies reached an all-time high in 2023 and are on pace to nearly match that record in 2024, according to an S&P Global Market Intelligence analysis of bankruptcies filed between Jan. 1 and April 30. Private equity- and venture capital-backed companies also accounted for an unusually large portion of all bankruptcies recorded between Jan. 1 and April 30, at 16%. On average, the annual portion between 2010 and 2023 was under 9%.

The combination of inflation and elevated interest rates hits consumer-facing businesses particularly hard, throttling cash flow as consumers pull back on purchases while also making it more expensive for businesses to refinance existing debt. Businesses in the healthcare and consumer discretionary sectors accounted for the largest share of portfolio company bankruptcies in 2023 and remained at the top in early 2024.

Read more about the record pace of private equity portfolio company bankruptcy filings.

CHART OF THE WEEK: Venture capital funding rounds trend lower, again

⮞ The value of venture capital funding rounds in April dropped 10% year over year to $17.20 billion, according to Market Intelligence data.

⮞ When measured year over year, the data builds on a two-year trend of venture capital funding totals coming in lower nearly every month since March 2022.

⮞ The two exceptions to the trend were October 2023 and January 2024.

TOP DEALS AND FUNDRAISING

– Blackstone Inc. agreed to take a majority stake in Israel-based business software provider Priority Software Ltd. Existing investors Fortissimo Capital Management Ltd. and TA Associates Management LP will roll their stakes.

– Blackstone reached a deal with I'rom Group Co. Ltd. President and CEO Toyotaka Mori to take the Tokyo-based clinical trial management services provider private. As part of the deal, Blackstone will own a 55% stake in I'rom and Mori's asset management company will hold a 45% stake.

– Permira Advisers Ltd. agreed to take website builder Squarespace Inc. private in an all-cash transaction valued at about $6.9 billion. General Atlantic Service Co. LP and Accel Partners will reinvest in the company.

– EQT AB (publ)'s EQT Infrastructure VI fund made an offer to buy Swedish renewable energy company OX2 AB (publ) for 60 kronor per share in cash. The offer values OX2's total shares at 16.35 billion kronor.

– TrueBridge Capital Partners LLC raised $1.6 billion in total commitments across five venture capital funds: Truebridge Capital Partners Fund VIII LP, TrueBridge Seed & Micro-VC II LP, Truebridge Direct Fund III LP, TrueBridge Secondaries I and TrueBridge Blockchain I LP.

– Patron Capital Ltd. raised more than €860 million at the close of its seventh flagship fund. The Patron Capital VII LP vehicle will focus on distressed and undervalued investments across Western Europe.

– Sands Capital Ventures LLC secured $555 million at the close of its third life sciences fund. The Sands Capital Life Sciences Pulse Fund III LP will invest mainly on private therapeutics, diagnostics, medical devices and life sciences tools companies.

– Ocean 14 Capital Ltd. raised €201 million for Ocean 14 Capital Fund I at final close. The vehicle will invest in sustainable solutions that improve ocean health.

MIDDLE-MARKET HIGHLIGHTS

– Mill Point Capital LLC agreed to acquire a majority interest in business process outsourcing solutions provider iQor Inc.

– The Firmament Group LLC made a strategic investment in waste collection service company Whitecap Waste LLC.

– Avathon Capital added health professional education courses provider Summit Professional Education LLC to its portfolio.

FOCUS ON: IT SERVICES

– 3i Group PLC will invest about €116 million in French IT managed services provider Constellation SAS.

– Attain Capital Partners invested in Agile technology solutions specialist Excella Consulting Inc. in exchange for a minority stake.

– Oakley Capital Investments Ltd., through its Oakley Capital Origin II fund, agreed to buy a majority stake in Germany-based broadband open access platform vitroconnect systems GmbH. The transaction is expected to close around the end of the first half of 2024.

______________________________________________

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.

For private credit news, see our latest private credit newsletter issued twice per month.