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As competition intensifies for private equity to show meaningful and differentiated value creation in portfolio companies, operating teams are increasingly leveraging AI and advanced data analytics in their portfolio improvement strategies. Carlyle, Vista Equity, EQT, and Accel-KKR are all using AI in their operating teams. (Read More)
Chart of the Week: A new survey conducted by Value Add found that nearly two in three private equity firms are actively helping portfolio companies integrate AI capabilities in their business operations as of April 2023. The survey found that the largest PE firms (i.e. mega-funds) were 2x more likely to be using AI in portfolio operations than middle-market firms.
JP Morgan bankers managing the Subway sale process have secured a $5B debt financing package for whoever acquires the sandwich chain. Bids for the company have ranged between $8.5B to $10B, according to Reuters, and the bankers are hoping the financing package will help close the deal. PE firms that have shown interest in acquiring Subway include Advent International, Bain Capital, TPG, and TDR Capital. (Source)
Endeavor Group has sold sports academy IMG Academy to EQT’s Asia unit for $1.25B. The media and entertainment investor acquired IMG in 2014. In other news, Endeavor’s Ultimate Fighting Championship (UFC) and World Wrestling Entertainment (WWE) have agreed to merge into a newly listed company worth $21B. (Source)
PE firm L Catterton has had a busy week … the firm announced investments in restaurant brand Urban Egg (Source) and cosmetics brand DIBS Beauty (Source). L Catterton also closed the merger of its blank check company, L Catterton Asia Acquisition Corp, with luxury electric vehicle-maker Lotus Technology. (Source)
Apollo-backed Yahoo has acquired a betting app called Wagr for an undisclosed amount. Wagr launched in 2020 and raised $16M from Greycroft, Alexis Ohanian (Reddit Founder) and Kraft Group (owned of the New England Patriots). Fantasy sports and sports betting is one of Yahoo’s largest business segments. (Source)
Industrial manufacturer Honeywell has agreed to acquire Compressor Controls Corporation from PE firm Clayton, Dubilier, & Rice for $670M — 15x EBITDA. The acquisition expands Honeywell’s product and patent portfolio in the controls segment. (Source)
Soundbites from the Milken Institute Global Conference:
Apollo Global Management CEO Marc Rowan covers recent market news, including risks in regional banking and commercial real estate. Rowan also made a prediction about the shift from equities to alternative assets: “I believe high net worth investors will be 50% allocated to alternative assets in the next five years.” He specifically mentions credit as a very compelling asset class right now. (Bloomberg)
BlackRock’s Global Head of Alternatives Edwin Conway also says he’s seeing a lot of interest in private markets at the moment, especially private equity and credit. Within private equity, Conways says there’s been a correction in venture capital which has hurt startup valuations but large company valuations remain surprisingly resilient. (Bloomberg)
New Mountain Capital’s CEO Steve Klinsky says now is the time for private equity firms to get creative with finding value, and says we could see corporate carve-outs come back en vogue. He also says firms will get a lot more operational over the next decade and gave an example of how his firm had 10 operating partners doing due diligence on their most recent deal for PerkinsElmer. (Bloomberg)
All the “interest” that private equity execs keeps referring to appears to be materializing in deal activity. PE deal volume was up 5x in March vs January 2023, according to Ernst and Young. (EY)
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