Higher-for-longer prompts PE portfolio scrutiny; funding rounds down in May

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

An outlook of higher-for-longer interest rates is adding to the pressure on private equity fund managers as they try to ramp up the pace of portfolio company exits.

Close to half of global buyout funds' roughly 28,000 portfolio company investments are four years old or older, according to a recent Bain & Co. estimate. Fund managers are typically looking for an exit at that point in an investment, though years of economic uncertainty and the impact higher interest rates have had on cash flow mean some of those investments are struggling.

The valuations fund managers place on portfolio companies are now facing intense scrutiny. Exits will show whether those businesses are worth as much as their sponsors say.

More exits are potentially on the way. Much of the global economy seems to be headed for a soft landing, avoiding the potential recession that loomed as central banks wrestled to contain inflation in 2022 and 2023.

Read more about aging private equity portfolios.

CHART OF THE WEEK: Funding rounds fall in May

⮞ The value of private equity- and venture capital-backed funding rounds notched a year-over-year decline in May, down 4% to $22.78 billion, according to S&P Global Market Intelligence data.

⮞ There were 1,137 total global funding rounds in May, down 24% from 1,497 rounds during the same month in 2023.

⮞ Over half the total value of May's funding rounds flowed to businesses in the technology, media and telecommunications sector.

TOP DEALS AND FUNDRAISING

– Bain Capital Pvt. Equity LP offered to buy Australian vehicle parts company Bapcor Ltd. for A$5.40 per share in cash. The nonbinding proposal values Bapcor at approximately A$1.83 billion.

– Cognizant Technology Solutions agreed to buy engineering research and development services company Belcan LLC from AE Industrial Partners LP for about $1.3 billion in cash and stock.

– Partners Group Holding AG secured more than $15 billion in client commitments for its fifth private equity program. The program includes Partners Group Direct Equity V fund and associated client solutions and open-ended funds.

– PAG is set to close its latest Asia-focused buyout fund at $4 billion in late June, less than half of the vehicle's $9 billion target, Bloomberg News reported, citing people familiar with the matter.

– Foresite Capital Management LLC raised $900 million in capital commitments at the close of Foresite Capital Fund VI LP. The firm's sixth fund will invest in healthcare and life sciences startups.

– InTandem Capital Partners LLC raised $715 million for InTandem Capital Partners Fund III LP at final close. The vehicle will make control investments in payer, provider and pharmaceutical services companies in North America.

– J.P. Morgan Private Capital's 270 Life Sciences Private Capital Fund I LP closed above its $500 million target. The inaugural venture capital fund will invest in private biotechnology companies across stage, modality, therapeutic area and geography.

– Parquest Capital secured €414 million at the final close of Parquest Capital III Fund. The fund will invest in small and medium enterprises in France and possibly internationally, with a focus on business-to-business service and healthcare industries.

– Toronto-based Northleaf Capital Partners Ltd. closed Northleaf Venture Catalyst Fund III GP Ltd. on its $370 million hard cap. The fund will invest in Canadian venture capital and growth funds as well as make direct investments in later-stage, high-growth companies.

MIDDLE-MARKET HIGHLIGHTS

– Caymus Equity Partners LLC exited its investment in TriplePoint MEP Holdings LLC, a commercial heating, ventilation, air conditioning and refrigeration services company. Stellex Capital Management LP was the buyer.

– Lee Equity Partners LLC closed a growth investment in insurance brokerage solutions provider Axis Insurance Managers Inc.

– H.I.G. Capital LLC, through an affiliate, signed a deal to sell DGS SpA to Intermediate Capital Group PLC and the Italian IT company's co-founders and management team.

FOCUS ON: BIOTECHNOLOGY

– Amber Therapeutics Ltd., a London-based company developing implantable adaptive neuromodulation treatment for women with mixed urinary incontinence, closed its series A funding round at $100 million. New Enterprise Associates Inc. led the round and was joined by new investors F-Prime Capital, Lightstone Ventures and Intuitive Ventures.

– Bright Peak Therapeutics AG, a Swiss-based multifunctional immunotherapy-focused biotechnology company, raised $90 million in a series C funding round led by Johnson & Johnson Innovation - JJDC Inc. New investors in the round included Venrock, KB Investment Co. Ltd. and Northleaf Capital Partners.

– Moleculent AB, a Swedish biotechnology company focused on the spatial mapping of human cell-to-cell communication, closed a $26 million series A funding round led by Arch Venture Partners LP and co-led by Eir Ventures.

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