Trade tensions choke venture dollar flow to China; PE fundraising trends lower

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

Tensions between two global superpowers continue to take their toll on US venture capital investment in China.

Participation by US-based venture capital firms in funding rounds for China-headquartered businesses declined for a second consecutive year in 2023 and hit the lowest annual level in a decade.

Based on nearly five months of data, it is tracking for a third consecutive decline in 2024.

US venture capital firms participated in just 29 funding rounds for Chinese startups between Jan. 1 and May 20, according to S&P Global Market Intelligence data. Those rounds had an announced value of $330 million in the aggregate, or less than one-tenth of the $3.93 billion full-year total in 2023.

National security concerns prompted the US in 2023 to restrict outbound investment in China's technology sector, which venture capital has tended to favor. An executive order issued in August of that year identified three categories of "sensitive technologies" facing new investment regulations: semiconductors, quantum computing and AI.

Read more about venture capital investment in China.

CHART OF THE WEEK: Private equity fundraising lags last year's pace

⮞ Capital commitments totaling $361.1 billion were raised by 659 private equity funds in the market this year through May 27, according to Preqin data.

⮞ As of that date, global private equity fundraising was on track to fall short of 2023's $1.1 trillion total and to post its third consecutive annual decline since setting a record in 2021.

⮞ Institutional investors typically recycle distributions from fund managers into new fund commitments, though those distributions have dwindled amid an ongoing slowdown in private equity exits.

TOP DEALS AND FUNDRAISING

– Birch Hill Equity Partners Management Inc. and Homesteaders Life Co. agreed to buy Park Lawn Corp. in an all-cash transaction valuing the Toronto-based funeral company at about C$1.2 billion, including debt. Park Lawn shareholders will receive C$26.50 per share, a 62.1% premium to the company's June 3 closing price.

– MFG Partners LLC raised about $299.2 million at the first and final close of its debut private equity fund. MFG Partners Fund I will invest in US-based companies in the manufacturing, value-added distribution and industrial service sectors.

– Sound Growth Partners secured $275 million at the close of its first buyout fund. Sound Growth Partners Fund I LP will invest in lower-middle-market companies.

– Brandon Capital Partners obtained A$270 million for Brandon Capital Fund VI at first close. The vehicle will invest in life-sciences startups in Australia and New Zealand.

MIDDLE-MARKET HIGHLIGHTS

– RockWood Equity Partners LLC closed an investment in energy consulting service provider Energy Renewal Partners LLC.

– ONCAP Management Partners LP agreed to sell its stake in Quebec City-based engineering and environmental services firm EnGlobe Corp. to Colliers International Group Inc.

– Banyan Capital Partners, through Banyan Committed Capital LP, completed its purchase of Canadian audiovisual production company Stagevision Inc.

FOCUS ON: ADVERTISING

– Global Brain Co. Ltd. was the lead investor in a funding round for Japan-based vehicle advertising platform Essen Co. Ltd.

– Summit Partners LP led an investment round for direct-mail marketing company MailSnail Inc., doing business as PostPilot.

– RockBridge Growth Equity LLC made a majority investment in digital marketing and advertising solutions provider Vici Media Inc.

______________________________________________

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.