WHP Acquires Bonobos, Apollo Places Bid for THG, Carlyle in Talks with Manchester United
Private equity news for the week of April 17, 2023.
You’re reading Value Add, a newsletter for private equity operators. Subscribe here.
Insights
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: Q1 2023 was the third-slowest quarter in ten years for M&A deal volume; and with five consecutive quarters of deal decline, it’s the longest stretch in deal decline on record (Bloomberg)
Deal News
It’s been a busy week for deals in the retail industry …
Furniture retailer Sleep Country has acquired DTC mattress brand Casper Sleep’s Canadian operations for $20.6M. Casper has had a rough couple of years in both the public and private markets. The DTC darling was valued as high as $1.1B in a 2019 private fundraising round, then went public in 2020 at a $470M valuation, and then was taken private in 2021 at a $286M valuation by Durational Capital Management. (Source)
WHP Global which acquires and manages retail brands, will acquire Bonobos for $75M from Walmart, which originally bought the menswear brand for $310M in 2017. One of WHP’s other portfolio companies, the specialty retailer Express, will license the Bonobos brand from WHP and manage its operating assets. (Source)
Apollo Global Management has made a takeover bid for British eCommerce retailer THG (formerly known as The Hut Group), which owns Lookfantastic and Myprotein. THG, which is publicly-traded, is currently valued around $1.5B, down from over $12B in early 2021. Apollo says it will walk away if an agreement isn’t reached by May 15. The retailer has repeatedly missed revenue forecasts and profit targets which has attracted interest from private equity buyers. (Source)
In other deal news …
Carlyle Group is reportedly one of the final bidders in talks to acquire a minority stake in Manchester United Football Club. Other previously reported bids came from asset management firms Sixth Street and Ares Management, as well as several wealthy individuals. (Source)
Apollo Global Management is acquiring a $500M stake in ed tech company Cengage Group. Apollo has extensive experience in the education space having previously owned McGraw Hill. In fact, Apollo tried to merge McGraw Hill and Cengage in 2020, but the US Justice Department blocked the deal from going through. After the deal fell through, Apollo sold McGraw Hill to Platinum Equity the following year, but its investors have circled back for Cengage as they probably liked what they saw in the company. (Source)
Industry News
As credit tightens, private equity firms are requiring more favorable terms on deals such as deferred or performance-based payment. Earnout provisions help PE buyers reduce their risk on the limited capital they have to allocate in today’s capital markets. Last year we saw the number of M&A deals containing earn outs increase from 17% to 21%, according to SRS Acquiom. (Pitchbook)
Although many regional banks are still trading at a discount following the run on Silicon Valley Bank, buyout firms have been noticeably quiet in the banking sector. Also Warren Buffet continues to share his concerns about the sector and says more bank failures are “likely.” (Wall Street Journal)
Apollo Global Management is pushing its portfolio companies to diversify their supply chains by doubling the number of suppliers they source materials and other input costs from. While we’ve seen many individual companies take this approach following the supply chain bottlenecks of 2020-2022, it’s one of the first instances of a PE firm applying the strategy across an entire portfolio of companies to reduce risk. (PE News)
