Advent Circles Back for Worldpay, KKR Wins Bid for Circor, Brookfield Tries to Land Annuities Operator

Advent Circles Back for Worldpay, KKR Wins Bid for Circor, Brookfield Tries to Land Annuities Operator

Private equity news for the week of July 3rd, 2023.

Insights

Chart of the Week: Although PE exit activity is at a multi-year low, exit deal sizes are not shrinking. This suggests that PE funds are holding on to portfolio companies for longer, rather than selling at a discounted valuation. The average PE exit in Q1 2023 was 2.5 times larger in size than the average PE buyout. (Read More)

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The State of Private Equity Exits (Read)

The State of Private Equity Buyouts (Read)

Deal News

Advent and GTCR are reportedly interested in acquiring a majority-stake in payment processor Worldpay at a $15 billion valuation. The company had $4.8 billion of revenue in 2022 and $2.3 billion of adjusted EBITDA. Worldpay is currently owned by FIS, which acquired the company for $43 billion in 2019, and recently signaled its intent to spin-off the business. FIS’s ownership of Worldpay has been marked by one setback after another. The Financial Times called the merger “misguided.” Employees at Worldpay suggested that the two businesses were incompatible, and that FIS had buyers remorse. FIS is undergoing management changes with its CEO stepping down after a 34-year career with the company. That’s apparently led to some soul-searching by the company and opened the door for dealmakers. If the new deal goes through it wouldn’t be the first time Worldpay has come under private equity ownership. Advent previously owned Worldpay together with Bain Capital between 2010 and 2015, eventually taking the company public at a $6 billion valuation. (Source)

KKR won a bidding war against Arcline Investment Management to acquire industrial manufacturer Circor in a $2 billion take-private deal. Arcline actually placed the higher bid, at $1 more per share, but KKR was able to offer all-cash terms which Circor’s board preferred. Circor specializes in flow-control products, such as pumps, valves, compressors, and meters for the oil & gas, industrial, defense, and aerospace industries. The company reported $803M in FY revenue trailing four quarters during its previous earnings report, up mid-single digits YoY. (Source)

Italian insurance giant Assicurazioni Generali is having a difficult time selling a $21.9 billion portfolio of insurance liabilities, according to Reuters. Rising interest rates have led to disagreements on the value of the portfolio and some dealmakers think the sale will lead to regulatory scrutiny as it could be too much risk for another insurance company to absorb in the current economic climate. Several private equity firms have portfolio companies that have been in talks to acquire the assets, including Elliot Management’s MedVida, Apax Partners’ GamaLife, and Apollos Athora. Meanwhile, the Del Vecchio family’s holding company, Delfin, received regulatory approval to increase its stake in Generali to over 10%. (Source)

Brookfield has offered to buyout retirement annuities operator and life insurer American Equity Investment Life (AEL) for $4.3 billion. Brookfield currently owns 20% of the company, which is one of the largest independent annuities operators in the US with more than $70 billion under assets. The two firms have been feuding for the better part of a year, as one Brookfield’s executives forfeited his board seat following a disagreement with senior management. AEL then fired back publicly, calling Brookfield a “competitor” after it acquired Texas-based life insurer American National for $5 billion in 2022. (Source)

Industry News

With public markets gaining strength (S&P is up +17% YTD), more private equity firms are now considering IPOs for portfolio companies. Kodiak Gas Services and Savers Value Village are among the PE-owned companies that recently completed successful IPOs. (Wall Street Journal)

Antitrust lawyers are warning buyout firms in the US that proposed changes to the Hart-Scott-Rodino Act (HSR) will lead the Federal Trade Commission and Department of Justice to block more buyout deals. The proposed changes would require dealmakers to disclose far more details about a potential acquisition, which government agencies estimate will add 100 hours of work to preparing HSR forms. The FTC and DOJ say the changes will give them more transparency into deals which could violate antitrust laws. (Financial Times)

The Bank of England’s Nathanael Benjamin warned banks of accumulating too much exposure to private equity and private credit. He said rising interest rates have caught some market participants off-guard (citing the recent blow-up of Silicon Valley Bank which was a major lender in the venture capital community) and that the lack of transparency in private markets requires banks to do their research and to not cut corners in today’s fragile economic environment. (Reuters)

A survey of more than 200 senior executives across corporates, private equity, and investment banking found that 56% of dealmakers are expecting “heightened” M&A activity in the back half of the year. Although dealmakers are optimistic, we came out of Q1 with buyout and exit activity still at a multi-year low. However, valuations have fallen in some areas (e.g. take-privates, middle-market, technology, etc) which could fuel more deals in 2H 2023. (Mergers & Acquisitions)

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