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Sensing a shift in private equity fundraising; record PE dry powder

Editor's note: Private Equity Pulse will not publish Dec. 30. Your next issue will be Jan. 6.

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

After private equity funds reported record inflows from investors in 2021, fundraising quickly turned much more complicated in 2022. Change could be on the way in 2023.

First, a recap. The year opened with a crush of private equity fund managers coming to market, amping up the pressure on investors. That pressure only increased when a bear market hit, tanking the value of public market holdings in the portfolios of college endowments, public pension funds and other institutional investors and setting up a denominator effect that shrank whatever wiggle room was left in their asset allocation schemes. Some investors were forced to pare back commitments or wade into an uncertain secondaries market.

Now the pressure may be easing.

In a recent five-year outlook report, private markets data source Preqin predicted fundraising would slow significantly in 2023, citing the effects of a more sluggish economic growth and a decline in dealmaking on private equity fundraising cycles. Investors in a risk-off mood may shift money away from private equity, Preqin added.

Others are eyeing an opportunity and taking steps to seize it.

There is a widespread belief that times of economic turmoil also produce some of private equity's best vintages, Bart Molloy, a partner at Monument Group, pointed out in a recent conversation with S&P Global Market Intelligence. And from his seat at a private equity placement agent, a firm that connects investors with private funds, Molloy sees a shift happening. A small but not insignificant portion of institutional investors are making room for more private equity in their portfolios.

"I wouldn't say that's across the board, but it's meaningful enough if it's 25% of the folks we talk to saying they'll have a little bit more room next year," Molloy said.

Read more about the top 100 placement agents of 2022 through Dec. 15.

CHART OF THE WEEK: Dry powder hovers near a record

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⮞ Blackstone Inc. led the global private equity market with more than $43.92 billion in dry powder as of mid-December, according to S&P Global Market Intelligence data supplemented by Preqin.

⮞ Global private equity and venture capital dry powder stood at a record $1.96 trillion as of Dec. 15, according to a preliminary estimate from Preqin.

⮞ In its recently released five-year outlook report for alternative assets, Preqin projected dry powder would decrease to 25.3% of private equity assets under management in 2027 from 28.3% in 2021 due in part to a slowing pace of fundraising.

DEALS AND FUNDRAISING

* KKR & Co. Inc. agreed to acquire Bushu Pharmaceuticals Ltd., a Japan-based contract development and manufacturing organization. The deal with seller EQT AB is expected to close in the first quarter of 2023.

* Funds managed by Ares Management Corp., along with other investors, invested in Eagle Football Holdings Ltd. The investment is in conjunction with the acquisition of a significant controlling stake in French entertainment and media operator Olympique Lyonnais Groupe SA by an entity affiliated with Eagle Football Holdings.

* Investcorp is buying a majority stake in Eficode Oy, a Finland-based provider of software development and IT operations consulting and managed services. The transaction is expected to be completed during the first quarter of 2023.

* General Atlantic raised about $3.5 billion in capital commitments for its first climate-focused fund at closing. The fund, called BeyondNetZero, will invest in early-stage companies.

ELSEWHERE IN THE INDUSTRY

* Keensight Capital agreed to acquire Quanos Solutions GmbH from IK Partners. Quanos is a Germany-based developer of industrial aftersales and digital technical documentation software.

* Main Street Capital Corp. and a co-investor purchased a minority stake in electronic parts and components company World Micro Components. Main Street invested $18.1 million in a combination of debt and direct equity investment.

* A Peak Rock Capital LLC affiliate acquired Seagull Scientific Inc., a provider of software designed to support the production of labels, barcodes, documents and radiofrequency identification tags.

* Madison Dearborn Partners LLC affiliated funds agreed to purchase Wilmington Trust NA's collective investment trust business in a deal expected to close no later than mid-2023. Wilmington Trust is a unit of M&T Bank Corp.

FOCUS ON: RENEWABLE ENERGY

* EQT Infrastructure VI, a fund affiliate of Swedish private equity firm EQT, agreed to buy Madison Energy Investments LLC from affiliates of Stonepeak Partners LP. Madison Energy owns and operates solar and energy storage projects in the U.S. The deal is expected to close in the first quarter of 2023.

* Altius Renewable Royalties Corp. unit Great Bay Renewables LLC will buy an existing royalty agreement on a portion of an operating wind project in Texas from Apex Clean Energy Inc. for $18 million. Great Bay is jointly controlled by funds managed by Apollo Global Management Inc. affiliates and Altius Renewable.

* Actis LLP-backed Rezolv Energy s.r.o. and Low Carbon plan to develop a pair of onshore wind farms in Romania with a combined capacity of up to 600 MW. Financial close of the facilities is expected in the second half of 2023.