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Midmarket Leverage Levels Rise | A Junk Debt Boom| Atlantic Street Seeks $850 Million
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Good day, Pro PE readers! As the week kicks off, Luis Garcia looks at how the boom in midmarket deal activity is pushing leverage in such deals to levels not seen since before the financial crisis. An abundance of dry powder to fund transactions, both in the private equity industry and the private credit world, is driving the trend along with a boom in junk debt issuance, which our Wall Street Journal colleague Sebastian Pellejero covers. Meanwhile, Preeti Singh has another fundraising scoop, this time involving lower midmarket firm Atlantic Street Capital, which is seeking $850 million for its newest fund.
Dive in for more details ….
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Investment firm LLR Partners backed midsize business JW Player this year. The video technology company’s logo decorates its New York headquarters. PHOTO: PHOTO: JW PLAYER
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Private-equity deal activity involving midmarket companies is running at full tilt as cash-flush lenders help buyout firms finance acquisitions, driving leverage to levels not seen since before the financial crisis, Luis Garcia reports for WSJ Pro Private Equity. Private-equity firms invested a total of $264.6 billion across 1,721 midmarket deals in the U.S. during this year’s first half, or more than two-thirds of the $393.5 billion invested across 2,662 deals in all of last year, according to research provider PitchBook Data Inc. PitchBook said the industry is on track to surpass the record annual total of $416.3 billion for the segment reached in 2019. The researcher defines the U.S.
“core” midmarket as businesses valued from $100 million to $500 million.
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The $3 trillion market for low-rated companies’ debt is having its best year ever, powered by a rebounding economy and investors’ demand for any extra yield, Sebastian Pellejero writes for The Wall Street Journal. U.S. companies including Crocs Inc. and SeaWorld Entertainment Inc. have sold more than $786 billion of junk-rated bonds and loans so far in 2021, according to S&P Global Market Intelligence’s S&P. That tops the previous high for a full year in data going back to 2008.
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Lower-midmarket-focused Atlantic Street Capital Management is targeting $850 million for its fifth fund, WSJ Pro Private Equity’s Preeti Singh reports, citing people familiar with the fundraising. If the Greenwich, Conn.-based firm reaches the target, Atlantic Street Capital V LP would be 70% larger than its predecessor, which wrapped up with $500 million in 2019.
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$100.5 Billion
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The amount raised this year through Friday by 294 traditional U.S. initial public offerings, the most for any full year since at least 2011 in both categories, according to Renaissance Capital data
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Inter Miami CF forward Robbie Robinson (19) kicks the ball against Toronto FC during the second half at BMO Field in a September game. PHOTO: JOHN E. SOKOLOWSKI-USA TODAY Sports
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Ares Management Corp. has invested $150 million in Major League Soccer's Inter Miami CF in connection with the buyout of two co-owners, SoftBank Group Corp.’s Masayoshi Son and Marcelo Claure. Ares acquired preferred equity in the team, whose other owners include soccer star David Beckham and construction executives Jorge and Jose Mas.
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Financial data provider Iress Ltd. in Australia said takeover talks with EQT have ended without agreement, five weeks after the Swedish firm increased its indicative proposal to an implied 15.91 Australian dollars, or roughly $11.61, per share, Stuart Condie reports for Dow Jones Newswires. A deal at that price would have implied a market value of about $2.25 billion for the publicly traded software and services company. Thomas Von Koch, EQT's chairman of Asia-Pacific, said the Stockholm-based firm hadn't come across any red flags during its due diligence, but hadn't been able to sufficiently confirm its investment hypothesis. Iress shares fell nearly 11% Friday to close at A12.08 each in
Sydney.
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Lightyear Capital is recapitalizing accounting firm Schellman & Co. to focus on information technology and cybersecurity compliance services, an area where it offers audit and certification. The deal provides an early exit for founder and Chief Executive Chris Schellman, who had announced plans to retire in 2027, according to a news release.
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Three Spanish pro-soccer teams plan to challenge a roughly $3 billion deal between CVC Capital Partners and La Liga, the top tier division of the sport in Spain, Reuters reported. Barcelona, Real Madrid and Athletic Bilbao all said on Friday that they would try to block the arrangement, which involves the set-up of a separate company to control commercial interests, including broadcast rights, in Spain’s top two soccer league divisions. CVC would acquire a 10% interest in that company under the deal. The deal values La Liga at around €24.25 billion, equivalent to about $28.53 billion.
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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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Investment firms Tiedemann Group and Alvarium Investments Ltd. are close to a deal to merge and go public through a special-purpose acquisition company, Amrith Ramkumar writes for the Wall Street Journal, citing people familiar with the matter. The combined investment firm would be called Alvarium Tiedemann Holdings and be valued at roughly $1.4 billion in the deal with the SPAC Cartesian Growth Corp., the people said. The merger could be announced as soon as this week.
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A Navigation Capital Partners-backed blank-check company, Berenson Acquisition Corp. I plans to raise $250 million through an initial public offering of shares, Stephen Nakrosis reports for Dow Jones Newswires. The special-purpose acquisition company aims to combine with and bring public a business with an enterprise value of more than $1 billion from the software and technology-enabled services industries.
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Foresight Group Holdings Ltd. closed its Foresight Energy Infrastructure Partners fund with €1.02 billion, equivalent to about $1.18 billion in commitments to the strategy, including €170 million for co-investments in sustainable energy infrastructure. The London-based firm said the comingled fund is 70% larger than its €500 million target, at €851.4 million.
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Frist Cressey Ventures, a healthcare-focused venture investment firm founded by former U.S. Senator Bill Frist and veteran private-equity investor Bryan Cressey, is seeking $200 million for Frist Cressey Ventures Fund III LP, according to a regulatory filing. The firm has already collected at least $10 million so far for the offering, the filing indicates. Mr. Cressey is also a partner and founder of healthcare focused private-equity firm Cressey & Co., where Mr. Frist is also a special partner.
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Blackstone Inc. said it has appointed Frederic Kerrest as a senior advisor at the firm, focusing on the firm’s growth equity investment platform. Mr. Kerrest is executive vice chairman, chief operator officer and co-founder of Okta, a company that provides technology that helps organizations and businesses verify user identities.
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Gatewood Capital Partners, a firm launched by former executives from Israeli financial institution Bank Hapoalim, said it has added Robert Zassman as a vice president at the firm. Mr. Zassman previously worked at Blackstone’s Strategic Capital Group, where he focused on investments in general partner stakes, according to a press release.
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