S&P Global Market Intelligence offers our top picks of global private equity news stories and more published throughout the week.
Note to subscribers: The Private Equity Pulse will not publish Dec. 25 and Jan. 1. Your next issue will be dated Jan. 8.
If you don't laugh, you'll cry. With the benefit of hindsight, the headline of our 2020 outlook piece seems a little comical at this point in the year: "Private equity expects 'more of the same' in 2020 despite ongoing threat of downturn."
Although an end to the bull run was expected at some point, nobody would have predicted it would be spurred on by a pandemic and a halt to the day-to-day way of life everyone took for granted.
Market participants predicted fundraising in 2020 to remain in line with previous years. Limited partners continued to commit to private equity funds in the aftermath of the outbreak, but the pandemic deepened a market bifurcation between firms able to raise large sums and those that were already facing difficulty in winning allocations.
Funds that were advanced in their fundraisings were "almost accelerated," as limited partners prioritized commitments to new vehicles that were being raised by their existing managers. Likewise, the large-cap private equity market was a beneficiary of COVID-19. Funds focused on sectors that performed strongly during the coronavirus pandemic also saw demand, advisers told S&P Global Market Intelligence in the third quarter.
On the flip side, emerging managers and established general partners that had neglected investor relations over the past two years were expected to find fundraising more difficult. Some managers opted to kick the can down the road, putting their fundraising plans on hold until early 2021.
Large deals were also expected to remain a feature across the market in 2020, with advisers noting that funds were looking to spend capital in less competitive processes. Following the outbreak, there was a considerable dip in deal-making altogether. In the U.S., entry and add-on activity dropped 27% in the second quarter to 1,655 deals from 2,261 announced in the first quarter. Volume had crept up slightly in the third quarter with 1,814 deals announced, according to S&P Global Market Intelligence data gathered in October. Across Europe, transaction volume slipped 10% compared with first-quarter figures, from 1,710 deals to 1,531, with a slight increase in the third quarter to 1,564 deals.
European deal-makers were cautious as they moved into the third quarter but were eager to get back to investing, managers told S&P Global Market Intelligence. During the same period, deal-making had come back into focus for U.S. private equity firms, but managers were in no rush to execute deals in what had become a bifurcated market. Those companies that had performed well continued to achieve high valuations, which is where we saw large deals completed in 2020. COVID-19-hit sectors, however, had no choice but to come to market for more capital. Those companies that could remain in their ownership structure were expected to "stay put" until "they looked more sellable."
Looking ahead to 2021, managers in both regions have a more positive outlook on deal-making, with the general expectation that transaction volume will increase — more on that in our private equity coverage in the lead-up to Christmas. Perhaps we will end the year on somewhat of a high note after all.
CHART OF THE YEAR: SNAPSHOT OF U.S. ACTIVITY
➤ U.S. private equity and venture capital entry volume dropped 15% year over year to 1,137 deals during the third quarter, according to S&P Global Market Intelligence data.
➤ In our chart of the year, we tracked where transactions were being announced across the U.S.
➤ Read more about how private equity deal flow in the country faired in our third-quarter report.
FUNDRAISING AND DEALS
* Vista Equity Partners LLC and Partners Group Holding AG, along with other institutional investors, will purchase technology workforce developer Pluralsight Inc. in a cash deal worth about $3.5 billion.
* Apollo Global Management Inc.-managed funds and Hudson Executive Capital LP agreed to buy ATM operator Cardtronics PLC in an approximately $2.3 billion all-cash transaction.
* EQT AB (publ) is looking to buy Swedish contract development and manufacturing organization Recipharm AB (publ) for $2.1 billion.
* Advent International Corp.-managed funds are selling Danish sustainable food packaging company Færch Plast A/S to A.P. Møller Holding A/S in a roughly €1.9 billion transaction.
* KKR & Co. Inc. agreed to sell British smart meter company Calisen PLC to a consortium consisting of affiliates of BlackRock Inc., Mubadala Investment Co. PJSC and Goldman Sachs Group Inc. in a deal valued at about £1.43 billion.
* Carlyle Group Inc. is exploring the sale or IPO of specialty chemical company Nouryon Cooperatief UA's industrial business, which could be worth at least $3 billion, Bloomberg News reported, citing people familiar with the matter.
* Brookfield Asset Management Inc. raised $2.7 billion for its second infrastructure debt fund, a source close to the matter told IPE Real Assets.
ELSEWHERE IN THE INDUSTRY
* AlpInvest Partners BV secured $9 billion for its seventh secondaries fund, Private Equity News reported.
* General Atlantic Service Co. LP-backed online marketplace operator ContextLogic Inc., doing business as Wish, debuted on the Nasdaq Global Select Market at a closing price of $20.05 per share, which is 16.46% lower than its IPO price.
* General Atlantic is also considering a partial sale of its stake in Indian hospital chain Krishna Institute of Medical Sciences Ltd. through an IPO, three people aware of the development told LiveMint.
FOCUS ON: BLANK-CHECK COMPANIES
* Vickers Venture Partners' special purpose acquisition company Vickers Vantage Corp. I filed for an IPO of 10.0 million units at a price of $10 apiece, or $100.0 million in the aggregate.
* KSL Advisors LLC-backed blank-check company Experience Investment Corp. will acquire Blade Urban Air Mobility Inc. at an estimated pro forma equity value of $825 million.