Transom Acquires Bose Professional, KKR Acquires Stake in FGS, Banks Cautious

Transom Acquires Bose Professional, KKR Acquires Stake in FGS, Banks Cautious

Private equity news for the week of April 10, 2023.

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Private Equity is Helping Tech Companies Cut Costs. PE firms injected billions of dollars into the tech sector, now they’re helping the industry balance growth with financial prudence. (Read More)

Operating Partners Are Playing a Bigger Role in PE Firms. With borrowing costs on the rise, many PE firms are shifting their focus from financial engineering to operational improvements. (Read More)

Chart of the Week: Roughly 3 in 4 PE operating teams are organized by function or are some type of generalist, according to a recent study by Alvarez in Marsal. Seven years ago most PE operating teams were organized by portfolio company. This shows how private equity firms are building out capability platforms (e.g. cybersecurity, eCommerce, etc) that all portfolio companies can tap into as these specialized areas are being adopted across most industries.

Deal News

Transom Capital has acquired Bose Professional — the electronics maker’s commercial installation and conference business. (Source)

KKR has acquired a 29% stake in public relations firm FGS Global that values the company at $1.4B. FGS is majority-owned by advertising conglomerate WPP. (Source)

Industry News

Following the recent bank run on Silicon Valley Bank (the largest in history), banks are cleaning up their balance sheet by selling the debt of companies they’ve lended to. Private equity firms are now buying-up that debt at a steep discount, including debt for portfolio companies they already own – double-dipping in their investments. Advent and Elliot Management are two of the bigger PE firms that have been doing this recently. (Bloomberg)

Accounting firms are investing in their tech stack to attract private equity buyers. We’ve seen technology be a good investment in portfolio companies when used to automate tasks, reduce costs, enhance risk management, and increase customer loyalty. While investing in the tech stack has been a common playbook for consumer and retail portfolio companies, we’ll likely see more B2B companies employ this strategy as well. (CPA Practice Advisor)

The Wall Street Journal argues that private equity buyouts in the food and beverage industry have contributed to inflation at the grocery store. The argument is that some PE firms gave portfolio companies bad advice to take out variable rate loans and now the only way to maintain cash flow is to continue raising prices as long as the Fed keeps raising rates. Tropicana is one of the portfolio companies mentioned that has found itself in this predicament. (Wall Street Journal)

Here’s an interesting research paper that was just published about the relationship between University endowments and the private equity funds they invest in. The researchers found that University endowments are 70% more likely to be a Limited Partner in a fund managed by alumni from their own university. (Fuss, Moirkoetter, Oliverira)