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Pandemic unlocks fundraising efficiencies; restaurant M&A expected to surge

Having raised funds virtually in the middle of pandemic lockdowns, private equity managers are eyeing a middle ground of in-person and online capital raising after finding efficiencies in virtual meetings.

Managers that S&P Global Market Intelligence spoke with, ranging from first-time funds to established platforms, said the flexibility to tailor due diligence around investors' requirements, savings on time and cost of business travel, and environmental, social and governance concerns around constant flying to make face-to-face meetings were all reasons why they believed a snap back to traditional fundraising practices would not occur. But unsurprisingly, all managers stressed the importance of in-person meetings going forward.

"Of course, everyone's keen to have an environment where we can meet again, but ... maybe with a bit more efficiency than in the past," Richard Howell, managing partner and head of PAI Partners' investor team, said. The firm raised its inaugural PAI Mid-Market Fund virtually, announcing its final close in March at €920 million, above its €800 million hard cap.

Private equity conferences could be used as a way to get dates in the diary with investors. Annual general meetings are also seen as an event where flexibility could be introduced.

Although annual general meetings are crucial gatherings that have historically drawn investors to attend in person, Howell recognizes the resource commitment to "fly sometimes halfway across the world to spend a day."

"Do we retain some middle ground there?" Going back to a physical annual general meeting but building in a recorded, online accessible format "as a kind of hybrid could be interesting," Howell said.

Read more about general partners' views on raising vehicles during the pandemic and the future of fundraising here.

CHART OF THE WEEK: Reservation for funds

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As lockdown measures ease and surviving restaurants open their doors to diners, pent-up demand for M&A activity in the industry is expected to be unleashed, Ashleigh Evans, director of operations analytics at research firm Aaron Allen & Associates LLC, said. "A year and a half's worth of investment is going to get pushed through in a six- to nine-month period, starting now," Evans added.

The bulk of transactions globally in the sector year to June 28 were venture capital investments totaling 55 deals with a combined ‭$874.5‬ million raised, according to S&P Global Market Intelligence data.

The global restaurant and mobile food service markets will likely grow to $2.6 trillion by 2027 from $2.1 trillion in 2020 at a CAGR of 3%, according to an April report from Global Industry Analysts Inc.

FUNDRAISING AND DEALS

* Certain funds managed by Apollo Global Management Inc. affiliates are purchasing a majority stake in European recycled carton board producer Reno De Medici SpA from Cascades Inc. and Caisse de dépôt et placement du Québec for €1.45 per share. Separately, the private equity firm and retirement services company Athene Holding Ltd. is buying a 15% stake in Challenger Ltd.

* KKR & Co. Inc. is acquiring a stake in Highway Concessions One Pvt. Ltd. and seven highway assets in India from Global Infrastructure Partners India LLP. The firm will also buy home service brands franchisor Neighborly Inc. in a deal with Harvest Partners LP.

* Apax Partners LLP, Warburg Pincus LLC, BC Partners LLP, Providence Equity Partners LLC and Apollo are among several firms interested in buying a stake in Deutsche Telekom AG's Dutch unit, T-Mobile Netherlands BV, which could be worth about €4.5 billion in a sale, Bloomberg News reported, citing people familiar with the matter.

* EQT AB (publ)'s EQT Infrastructure V fund will purchase Cypress Creek Renewables LLC from HPS Investment Partners LLC-managed funds and Temasek Holdings (Pte.) Ltd.

ELSEWHERE IN THE INDUSTRY

* Brookfield Business Partners LP and its institutional partners are acquiring auto parts maker DexKo Global Inc. from KPS Capital Partners LP in a $3.4 billion transaction.

* Brookfield Asset Management Inc. started a sales process for British port operator PD Ports Ltd., which could be valued at more than £2 billion, Bloomberg reported, citing people familiar with the matter.

* Veritas Capital Fund Management LLC will exit Alion Science and Technology Corp., which offers technology-based solutions for the global defense market, for $1.65 billion in an all-cash deal with Huntington Ingalls Industries Inc.

* Authentic Brands Group LLC, a brand management company backed by General Atlantic Service Co. LP, filed for an IPO of its class A common stock, with plans to trade on the NYSE under the ticker AUTH.

FOCUS ON: SPECIALTY CHEMICALS

* Platinum Equity LLC agreed to purchase specialty chemical company Solenis LLC from Clayton Dubilier & Rice LLC and chemical company BASF SE at an enterprise value of $5.25 billion. The new owner is expected to combine Solenis with another portfolio company, Sigura Water, for a combined transaction value of about $6.5 billion.

* Navis Capital Partners sold its controlling stake in Amazon Papyrus Chemicals to The Longreach Group Ltd.

* Polymer manufacturer Kraton Corp. could attract buyout interest from peers and private equity firms as it weighs a potential sale and other options, people familiar with the matter told Reuters.

* New Mountain Capital LLC bought specialty chemical company Ascensus Specialties LLC from Wind Point Advisors LLC.