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Fundamental Aims for $1.5 Billion | Blackstone's Breit Tries to Rebound
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Good morning! Regulators are making waves on both sides of the Atlantic in ways that likely will affect private equity. A top official of the Bank of England warned U.K. banks about their exposure to potentially catastrophic risks connected with lending to buyout shops. Meanwhile in Washington, the FTC effectively banned the use of noncompete clauses in employment contracts. A legal fight is brewing in D.C. over the latter issue. But the BoE's warning could presage more rules on both sides of the pond. See our Industry News wrap below.
Meanwhile in fund news today, our Luis Garcia reports that distressed property specialist Fundamental Advisors has stepped onto the fundraising trail, seeking $1.5 billion for its fifth flagship vehicle to invest in municipally backed assets such as nursing homes and housing projects, despite rising public and regulatory concern over private investment in healthcare.
Also, Blackstone still hasn't seen its Blackstone Real Estate Income Trust property investment fund bounce back from a prolonged period in which it had to limit investor withdrawals from the vehicle set up by the firm to appeal to individual investors, as our Wall Street Journal colleague Peter Grant reports. Blackstone ended proration of redemptions in February, but investor withdrawals continue to greatly exceed new cash coming in.
We have these and many more deals, exits and fundraising developments summarized and linked for you below, so please read on...
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Fundamental Advisors sold its stake in Chicago’s Clare at Rush and Pearson, a high-rise apartment building designed as a senior housing community, in 2019 after acquiring its interest in the property out of bankruptcy in 2012. PHOTO: THE CLARE
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Distressed-property investor Fundamental Advisors aims to collect $1.5 billion to buy assets such as senior-care homes, where the credit specialist sees opportunities despite increased scrutiny of private-equity investments in healthcare, Luis Garcia reports for WSJ Pro Private Equity, citing people familiar with the matter. The New York firm seeks to raise slightly more for its latest flagship fund, Fundamental Partners V, than the $1.43 billion it collected for a predecessor vehicle that wrapped up in 2022, the people said. The firm has begun to pitch the new fund to prospective investors, they added.
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Blackstone Real Estate Income Trust, known as Breit, hasn’t bounced back to its previous robust levels of capital inflows after more than a year of coping with redemption requests that exceeded monthly or quarterly limits, Peter Grant reports for The Wall Street Journal. Breit returned to a more normal balance in February and fulfilled all redemption requests that month and in March. But investor withdrawals continue to greatly exceed new cash coming in, a sign of lingering worries about the backdrop for commercial properties, a sector where Breit holds assets.
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$107 Billion
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The minimum value of technology M&A deals in this year’s first quarter, the most since the second quarter of 2022, according to S&P Global Market Intelligence, citing 451 Research data.
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HashiCorp’s software helps companies set up their infrastructure in the cloud.
PHOTO: RAFAEL HENRIQUE / ZUMA PRESS
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A software maker whose backers have included the former GGV Capital, HashiCorp, is close to a deal to be acquired by International Business Machines, the Journal reports, citing people familiar with the matter. Should a deal come together in coming days, IBM is expected to offer more than San Francisco-based HashiCorp’s market value Monday of roughly $4.9 billion. As recently as a year ago, GGV Capital V held shares controlling almost 22% of the company’s voting power, a securities filing shows.
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Existing investor Coatue Management in New York led a $200 million growth investment in personnel software company Rippling, whose legal name is People Center, joined by new backer Dragoneer Investment Group as well as Founders Fund and Greenoaks Capital Partners, according to a company blog post. Rippling also said it has agreed to buy back equity valued at as much as $590 million from early investors and current and former employees. The transactions value the
San Francisco-based business at $13.5 billion, Chief Executive Parker Conrad said in the post.
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European buyout firm Mutares in Munich said it has acquired a majority stake in Sofinter Group, which designs and manufactures steam generators for various markets, including the oil and gas sector. The company operates factories in Italy and Romania, with around 680 employees and generated revenue of more than €200 million last year, equivalent to about $213.1 million.
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A growth-equity arm of London-based Apax Partners, Apax Digital Funds, said it is backing information-security industry adviser IANS Research, investing through the unit’s Apax Digital Fund II. The Boston-based company works with cybersecurity services providers and clients’ in-house teams to assist them in preventing hacks, complying with changing standards and requirements and dealing with talent shortages.
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Direct Capital in New Zealand said it has acquired consumer cleaning products maker Wet & Forget, investing from its Direct Capital VI fund. The New Zealand company makes its locally distributed products at a factory in Auckland and licenses production in the U.S. and Australia, where its cleaners are distributed by major retailers.
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New York-based midmarket firm Gamut Capital Management said it has agreed to acquire print services provider DEX Imaging from office supply chain Staples. The private-equity firm is partnering with the Doyle family, which founded the company in 2002 before Staples bought it in 2019.
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Serent Capital in San Francisco said it is backing occupational healthcare software supplier Medical Informatics Engineering with a growth investment. The Fort Wayne, Ind.-based company’s programs are used to manage healthcare data, records and compliance, among other aspects of patient services.
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Private-equity firm American Pacific Group said it is backing commercial textiles company C.F. Stinson. The Rochester Hills, Mich.-based company designs and produces interior fabrics used in industrial, healthcare and education markets.
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Buyout firm KKR & Co. in New York is acquiring a stake in Stockholm-based Immedica Pharma, a pharmaceutical company that commercializes medicines used to treat rare diseases. KKR will become an equal owner alongside Nordic healthcare specialist Impilo, an existing investor. Immedica’s portfolio and pipeline of drugs primarily focus on hematology and oncology applications as well as genetic and metabolic diseases for rare conditions. KKR is investing in Immedica through its KKR Health Care Strategic Growth Fund II, which closed with $4 billion in 2022.
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Infrastructure specialist firm True Green Capital Management said it is backing clean energy company Qcells as it develops solar-power projects with the capacity to generate as much as 450 megawatts from sites across the U.S. The Seoul-based company expects to install capacity to support industrial, commercial, community and residential users.
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Growth investor General Atlantic in New York said it has acquired a minority stake in sporting events streaming company LiveMode, investing alongside XP Private Equity. The Brazil-based company works with clubs, leagues and other groups to produce and distribute video streams of games and other events.
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European buyout firm PAI Partners said it is investing in professional audio mixing equipment company Audiotonix, acquiring a majority stake from Ardian, which remains a minority backer alongside company managers. The U.K. business makes sound boards, mixing consoles and related products used in recording, live events and theatrical performances. Ardian first backed the company in March 2020.
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Growth investor IK Partners in London said it is backing safety barrier systems maker A-Safe, acquiring a minority stake through the firm’s IK Partnership II fund. The firm bought its interest from the founding Smith family, who remain invested in the business as well. IK said the deal represents the final investment from the fund, which is now fully committed.
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Avesi Partners in Stamford, Conn., said it is backing substance abuse treatment center operator First Steps Recovery, partnering with the company’s managers. Fresno, Calif.-based First Steps provides detoxification treatment addiction recovery therapy from residential and outpatient settings in central California.
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Private investment firm Stephens Group in Little Rock, Ark., said it is backing aircraft cockpit smoke-mitigation systems maker VisionSafe. Based in Kaneohe, Hawaii, the company makes self-inflating enclosures that vent out smoke and let the pilot see flight controls and out the windshield in events where smoke fills the cockpit and impairs visual navigation during in-flight operations.
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Our add-on deal interactive tool allows you to sort and analyze volumes of add-on deal data compiled by WSJ Pro. View more.
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Houses and the skyline in Kuala Lumpur, Malaysia. Asia’s healthcare sector remains an attractive market for private-equity investors and companies seeking to expand their business in a region with significant demand. PHOTO: SAMSUL SAID / BLOOMBERG NEWS
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Buyout firm Affinity Equity Partners has started a sale process for one of Malaysia’s largest healthcare providers, valuing it at more than $800 million, P.R. Venkat writes for the Journal, citing people familiar with the matter. The first round of bids is due by mid-June for Penang-based Island Hospital, one of the people said.
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The parent of the ChaPanda tea shop chain in China saw its shares tumble 27% in their first day of trading in Hong Kong following the market’s biggest initial public offering this year, the Journal reports. Formally known as Sichuan Baicha Baidao Industrial, the company with more than 5,000 bubble-tea shops raised the equivalent of about $313.9 million in the IPO. Private-equity and venture backers of the business included CICC Capital and New Hope Group’s Grass Green venture arm, both based in Beijing, and Loyal Valley Capital in Shanghai, according to research provider PitchBook Data.
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Dutch private-equity firm Main Capital Partners said it is selling Dutch healthcare software provider Enovation to publicly traded Legrand, marking the private-equity firm’s largest exit to date. Main Capital initially backed Enovation in 2018. In a separate statement, Legrand said that Enovation's annual sales exceed €60 million, or more than $64 million.
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Digital infrastructure investor DigitalBridge Group has raised at least $3.38 billion so far for DigitalBridge Partners III and certain parallel vehicles, according to a regulatory filing. Investors that have disclosed commitments to the fund include the New York State Common Retirement Fund and the Virginia Retirement System. Boca Raton, Fla.-based DigitalBridge raised around $8.3 billion for the fund’s predecessor, according to a press release issued in early 2022.
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Vestar Capital Partners said it has raised $1.2 billion for a continuation fund to extend its hold on consumer behavior analytics and data company Circana. Blackstone’s Strategic Partners unit and HarbourVest Partners are backing the fund and the recapitalization of Circana, which Vestar jointly owns with the company’s management and fellow private-equity firms Hellman & Friedman and New Mountain Capital.
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Healthcare-focused GHO Capital said that Garry Menzel has joined the firm as an operating partner. Menzel most recently served as president and chief executive of immunotherapy company TCR(2) Therapeutics.
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Gaw Capital Partners in Hong Kong said it has hired HyunChan Cho as managing director, head of infrastructure and head of Korea and Elizabeth Di Cioccio as managing director, capital markets, EMEA. Cho previously headed infrastructure investment with IMM Investment while Di Cioccio was head of Middle East as a KKR & Co. managing director.
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Brad Heppner, left, the chairman and chief executive officer of Beneficient, in 2022. PHOTO: TIM CARPENTER / KANSAS REFLECTOR
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A trustee representing Beneficient’s defunct former parent company and largest shareholder sued the financial firm and its chairman and chief executive, Brad Heppner, alleging that he enriched himself through an “elaborate shell game” that involved backdated documents and false statements, Alexander Gladstone writes for WSJ Pro Bankruptcy. Publicly traded Beneficient said it "has robust defenses to these claims." Heppner didn't respond to a request for comment.
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The Federal Trade Commission on Tuesday banned employers from using noncompete contract clauses to prevent most workers from joining rival firms, achieving a policy goal that is popular with labor but faces an imminent court challenge from business groups, the Journal reports. The U.S. Chamber of Commerce is expected to sue the FTC over the move as soon as Wednesday. The Chamber has said that the FTC lacks the legal authority to govern the content of employment contracts.
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The U.K.’s top bank and international investment firm regulator, Rebecca Jackson, cautioned banks about their risk exposure to increasingly complex forms of financing tied to private equity, Justin Cash reports for Financial News in London. She cited “leverage-on-leverage” arrangements such as net asset value loans and secured financing backed by fund limited partner interests, as well as the rapid expansion of private-credit operations. Reflecting on results of a survey last year, she said “only a very small number of banks can consistently aggregate data in a manner that is appropriate to their exposures to the private equity sector.” Most banks have gaps in assembling and
understanding the data, she added. “Banks cannot holistically identify, measure, manage, or monitor the risks emanating from their private equity financing businesses,” she said. So much interconnection of risks can pose the possibility of banks being “open to severe, unexpected losses.” She concluded by saying that banks need to make significant improvements in their risk management.
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Tikehau Capital in Paris said it ended this year’s first quarter with assets of €44.1 billion, equivalent to about $46.99 billion and around 13% more than a year earlier. The firm raised about €6.8 billion over the 12 months ending in March and said its dry powder, or undeployed capital, declined 2.9% to €6.7 billion at the end of March from the end of December.
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