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Chart of the Day: In the past five years, there have only been two private equity acquisitions in the retail industry exceeding $1B, according to a forthcoming research report by Value/Add. Both deals were in 2021, when Michaels Stores was acquired by Apollo Management for $5B and Morrisons Supermarkets was acquired by Clayton, Dubilier & Rice for $13.7B. It's not just private equity that's grown apprehensive of retailers, the overall retail industry accounted for just 2.2% of M&A activity in Q1 2023.
Blackstone is in talks to acquire billboard operator New Tradition Media at a valuation between $500M-$750M. The firm was founded in 2010 and owns major out-of-home (OOH) advertising properties in San Francisco, Washington D.C., Las Vegas, and New York City (including the iconic 1 Times Square billboard). It’s the second major OOH advertising company PE dealmakers have been circling, as Clear Channel Outdoor is also reportedly weighing exit options instigated by activist hedge fund Legion Partners. (Source)
In other news relating to Blackstone, the firm announced it has acquired jewelry certification company International Gemological Institute (IGI) for $530M. IGI was founded in 1975 and specializes in certifying diamonds, gemstones, and other jewelry, with 29 laboratories and 18 gemology schools across 10 countries. The company is expanding its certification business for lab-grown diamonds, which Blackstone believes will be a major growth opportunity. (Source)
Mizuho Financial Group has agreed to acquire investment bank Greenhill & Co. for $550M. Greenhill will maintain its brand and become the M&A and restructuring advisory business of Mizuho. It’s the latest deal in what some expect will be further consolidation of private market banks, funds, and other investment managers. To that point, just last week we reported that TPG would acquire asset management firm Angelo Gordon. (Source)
TPG and Francisco Partners are in talks to acquire software firm New Relic for more than $5B in a take-private deal. The company has been exploring a sale since July of 2022, after being targeted by activist hedge fund Jana Partners. New Relic specializes in DevOps tools, that help developers measure the performance of software applications. Shareholders believe the company is underperforming peers in the DevOps segment, although its stock price is near the 52-week high at the moment. TPG and Francisco Partners have worked together on similar deals in the past, such as the buyout of Dell Technologies’ cloud business for $4B in 2021. (Source)
Fortress Investment Group, Soros Fund Management, and Monroe Capital have agreed to acquire Vice Media’s assets out of bankruptcy for $225M and take-on $1B of the company’s liabilities. It’s worth noting that Fortress is itself in the process of being sold by SoftBank to Abu Dhabi sovereign wealth fund, Mubadala Investment Company. Vice Media, which launched in 1994 as a provocative culture magazine, grew into a digital media giant valued as high as $5.4B in 2017. Since then, Vice has been embattled by declining advertising revenue, layoffs, and management changes. (Source)
Silver Lake is acquiring a $660M minority stake in Italian enterprise software firm TeamSystem. Hellman & Friedman, which originally acquired the firm in 2016, will stay on as majority shareholder. TeamSystem’s earnings are forecast to grow to $325M this year, up from $254M in 2021. (Source).
We’re continuing to see private equity strategies shift from buyouts to lending in the current economic environment. The Wall Street Journal points out that in recent earnings reports, PE firms disclosed major loans in private markets (Source). For example, KKR financed a $550M loan for solar panel manufacturer SunPower, and Brookfield Asset Management backed a $250M loan for a residential construction project in Long Island City. We reported earlier this month that private credit was perhaps the most-talked-about topic at the Milken Conference this year, as banks have left a major void in credit markets since tightening their lending requirements. (Reuters)
Speaking of private credit, KKR announced that Dan Pietrzak, has been promoted to Global Head of Private Credit. Previously, he shared the position as Co-Head with a colleague who is leaving the firm. (Source)
Recruiting firm IMSA Search Global Partners says executive searches at PE-backed portfolio companies have intensified over the past year as funds try to attract deals and funding. The vast majority of these PE-sponsored hires are external as they typically seek expertise in at least one turnaround specialty that is not the portco’s core competency (e.g. digital, automation, M&A, etc). In fact, 75 percent of CEOs at PE-backed companies are outside hires, according to Harvard Business School Professor Paul Gompers, whereas 72% of CEOs at S&P 500 companies are hired from within. (Hunt Scanlon)
The SEC is close to finalizing a rule that would force PE firms to seek “fairness opinions” when determining the valuation of portfolio companies that are being rolled over into secondary — or, so called continuation — funds. We’re seeing PE firms hold on to portfolio companies for longer periods, especially in today’s higher-interest rate environment which has put a damper on valuations and exit opportunities. The SEC hasn’t specific how the ruling would be applied in practice, but it has some lower- and middle-market firms worried as it’ll come with a big price tag, as M&A law firms can charge up to $300k for fairness opinion. (Bloomberg)
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