Advent/Bain/TPG Make Subway Bid, PAI Acquires Nestlé's European Pizza Business

Advent/Bain/TPG Make Subway Bid, PAI Acquires Nestlé's European Pizza Business

Private equity news for the week of April 24, 2023.

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Insights

Private Equity Firms are Helping Portfolio Companies Manage the New ‘Normal’ of Uncertainty. As the global business landscape becomes more complex and interconnected, portfolio companies face a growing array of risks, which span multiple domains such as geopolitical, technological, and regulatory uncertainties. In response, private equity firms are increasingly getting involved in the operations of their portfolio companies to help them navigate these risks more effectively. (Read More)

Chart of the Week: The majority of private equity value creation in corporates now stems from operational improvements according to a recent study by Goldman Sachs, BCG, and IESE Business School.

Deal News

Advent International, Bain Capital, and TPG are reportedly discussing a joint bid to take over quick service restaurant chain Subway for $10B. Previously, it was reported that Goldman Sachs, TDR Capital, and Asda Stores were interested in pursuing the sandwich chain. Subway’s shareholders put the company up for sale in February after reporting eight consecutive quarters of same-store sales growth. It has one of the largest restaurant footprints globally with over 37,000 locations, but relatively low sales per store compared to similar chains, which could be a value-play for PE firms. (Source)

Investment banks Harris Williams and Sixpoint Partners have agreed to merge into a single firm under the Harris Williams brand name, offering M&A advisory services, capital solutions, and fund placement. Sixpoint founder Eric Zoller will join Harris Williams’ leadership team as head of private capital advisory (Source)

PAI Partners is acquiring a stake in Nestlé’s frozen pizza business in Europe, which includes brands like Wagner, Buitoni, and Garden Gourmet. The business unit generates approximately $350M in annual sales. PAI and Nestlé have a history of doing deals together - the PE firm invested in the CPG giant’s European ice cream brand Froneri in 2016 (Source)

Olympus Partners has agreed to buy International Wire Group Holdings for just under $1B from Atlas Holdings. The company is one of the largest copper wire manufacturers in the US, and will use the capital to commercialize its products in fast-growing segments like electric vehicles, electric charging stations, and data centers. (Source)

Industry News

Staple Street Capital is set to realize a 1,500% return on its investment in Dominion Voting Systems after the company won its defamation case against Fox News for making false claims about its voting technology. Staple Street helped Dominion, which generates about $45M in annual EBITDA, wage a sophisticated legal battle against Fox - demonstrating how PE firms can effectively deploy legal expertise in portfolio operations. (Bloomberg)

Private equity transaction volume was down -45% YoY in Asia as economic and political uncertainty weighs on investor outlook in the region. As we mentioned last week, we’ve seen a slowdown in PE deals globally. In fact, Q1 2023 was the fifth consecutive quarter of declining YoY PE deals worldwide, the longest on record. (S&P Global)

Another reason PE deals are likely down in Asia, is that US President Biden is preparing to restrict VC and PE investments in China - targeting the technology sector specifically. Biden has said that the restrictions are really a defense matter, as China’s tech sector is suspected of sharing user data with its military. (MarketWatch)

Private equity funds currently account for 24% of institutional investors’ portfolios but three in four investors (pension funds, family offices, etc.) plan to increase their PE holdings this year, according to a BlackRock survey. It’s a sign that although economic uncertainty is still high, investors are bullish on private markets which have seen a price correction in the past year. (WSJ)

Meanwhile, there’s a shift from growth to value-oriented strategies in private equity due to the price correction in private markets. Firms are able to raise big funds from LPs with the promise of going after distressed targets that have seen their pricing dislocated from valuation. (Mergers & Acquisitions)

PE firms went on a buying spree in the health care sector post-COVID and now control up to 30% of for-profit hospitals (Bloomberg)