CD&R's $2.3B Take-Private of Veritiv, KKR's Final Bid for Simon & Schuster, EQT Sells Schülke

Insights

Chart of the Week: Breaking out private equity exit deal activity over the past 10 years shows just how much more quickly deal activity is picking up in Western Europe compared to North America.

In fact, Q2 2023 was the first time ever that Western Europe produced more private equity exits than North America (going back to at least 2006). Usually, North America produces about +20% more exits than Western Europe. (Read More)

Reports

Last Week: We published the Private Equity Exits Report: Q2 2023. The 20-page report examines private equity exits globally, as well as by region and sector. (Read)

Don’t Miss: Two weeks ago we published the Private Equity Buyouts Report: Q2 2023. (Read)

Up Next: North America Private Equity Report: Q2 2023.

Deal News

Clayton, Dubilier & Rice has agreed to acquire packaging manufacturer Veritiv in a $2.3 billion take-private deal. The company makes shipping supplies like boxes and bubble wrap, as well as product packaging such as glass bottles. The valuation is a +31% premium over the company’s 30-day weighted average price, sending its stock to all-time highs. Veritiv’s earnings were in line with analyst expectations in FY 2022 but missed revenue targets the past two quarters as brands and retailers have reduced inventory in anticipation of a recession. The backdrop to the deal is that the packaging industry is undergoing widespread consolidation at the moment with PE accounting for 44% of packaging buyouts in 2022 and 60% in 2021. (Source)

KKR is reportedly in talks to acquire Simon & Schuster for roughly $1.7 billion. The publisher had a great year in 2022, topping $1 billion in sales for the first time as a standalone company, and operating income grew +16% to $248 million. The publisher’s audio and e-book operating groups both reported double-digit sales growth. HarperCollins has also been in the bidding, although a strategic acquisition in the publishing space is unlikely. Last year, regulators blocked Penguin Random Houses’s attempted takeover bid for Simon & Schuster. (Source)

EQT has agreed to sell healthcare supplies manufacturer Schülke to Munich-based family office Athos for $1.5 billion. The company makes hospital-grade cleaning solutions that are used in healthcare offices throughout 80 countries. Under EQT’s ownership, Schülke has reported double-digital annual revenue growth and nearly doubled EBITDA in its core business. EQT acquired the company in 2020 through the carve-out from French multinational Air Liquide. (Source)

Francisco Partners and Symphony Technology Group are reportedly in talks to acquire software company Avid Technology. The company makes professional music and media editing software that is used by the entertainment industry. Although a buyout price has not been mentioned, Avid currently has a market cap of about $1.2 billion. The company missed earnings expectations in Q1 2023 even though its revenues grew +8% YoY to $228 million and paid subscriptions increased +22% YoY. (Source)

KKR has agreed to acquire a minority stake in satellite-maker OHB SE and take the company private. The Fuchs family, which founded the company more than two decades ago, will end up with 70% ownership. The family was apparently frustrated with how public markets valued the space technology manufacturer and think it will be better suited operating as a private company. The buyout deal values OHB at approximately $1.1 billion. (Source)

Nautic Partners haș agreed to acquire healthcare company Tabula Rasa for $570 million and merge it with portfolio company ExactCare Pharmacy. The valuation is a +34% premium to Tabula’s closing stock price on August 4, but still down -61% from a 2021-high. (Source)

Industry News

KKR beat analyst expectations in its Q2 2023 quarterly report, despite earnings down -23% YoY. Fee-related earnings were up +31% YoY thanks to the increase in assets under management and record-high dry powder that the PE firm is sitting on. However, with higher interest rates and lower valuations, KKR hasn’t been able to realize as many exits. (Bloomberg)

Bankruptcies among PE-backed companies are on track to reach a 13-year high in the US. That said, we’ve seen an uptick in bankruptcies overall — it’s not a PE-induced trend. Healthcare and Consumer sectors are being hit hardest by bankruptcies at the moment. (S&P Global)

Apollo CEO Marc Rowan says it’s the “end of an era” in private equity that has benefitted from fiscal stimulus and low interest rates over the past decade. Rowan’s sentiments echo that of Jeffrey Jaensubhakij, chief investment officer of Singapore sovereign wealth fund GIC, who said private equity’s tailwinds “aren’t coming back any time soon.” (Financial Times)

With low valuations and quiet deal-making, PE firms are extending the life of their portfolio holdings by rolling more companies over into new funds — so called, continuation funds. Insight Partners recently closed a $1.3 billion continuation fund for its Technology holdings and Calera Capital closed a $750 million continuation fund for its Services holdings. (Bloomberg)

Former Burberry CEO and Apple executive Angela Ahrendts is joining Kim Kardashian’s private equity firm as an operating partner. The buyout firm has yet to close its first deal but it will be targeting takeovers in the Consumer and Media sectors. (Wall Street Journal)

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