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Carlyle’s Diversity Push | M&A’s Covid Swoon | Secondary Market Slumps | Bain Capital's SPAC Deal
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Good day and welcome to the Private Equity Pro newsletter. The quarterly results from publicly traded private-equity firms always are closely watched as a bellwether of where the industry is going. The coronavirus pandemic has perhaps brought more attention than ever on these firms’ financial reports, as investors look to gauge the health of the industry. After a tough first quarter, the second-quarter results of Blackstone, Apollo and Carlyle could suggest a recovery.
In other Carlyle news, our William Louch writes about a deeper push for diversity and inclusion at the Washington firm. Elsewhere, Preeti Singh reports on the freeze-up in the secondary market this year, which seems likely to end a stretch of three consecutive years of record transactions. Ted Bunker reports on Bain Capital’s deal to take Cerevel Therapeutics public at an equity value of $780 million. Finally, I covered a new report showing private equity’s struggles in the M&A market in the first half of the year, and what firms are doing to adjust to the new environment. For more news, please read on...
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Kewsong Lee is co-chief executive at Carlyle Group and will soon hold the CEO position by himself. During an earnings call Thursday, he said the firm is in the judgment business, where diversity of thought and perspective provides an investment edge. PHOTO: ISSEI KATO / REUTERS
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Carlyle Group Inc. has introduced new measures aimed at improving diversity in its own workforce and at the companies it owns world-wide, WSJ Pro Private Equity’s William Louch reports. The Washington-based firm is implementing a new hiring policy that requires that at least one candidate interviewed for every new role be Black, Latino, Pacific Islander or Native American, a Carlyle spokeswoman said. The firm also is putting diversity and inclusion into the formal assessment process for employees and portfolios, making it a core management competency that will affect advancement and rewards, the spokeswoman said.
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The coronavirus pandemic halted many secondary transactions involving private-equity investments and drove down prices for deals executed during this year’s first half, reversing a trend of three straight years with record secondary volume, Preeti Singh reports for WSJ Pro Private Equity, citing a survey from investment bank Greenhill & Co. When the pandemic hit the U.S. in March, many secondary transactions were put on hold or even pulled from the market, and there was uncertainty over whether deals subject to a definitive agreement already in place would be completed. “The secondary market was generally frozen,” the report said.
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Bain Capital portfolio company Cerevel Therapeutics Inc. has agreed to be acquired and taken public by a blank-check company through a deal that implies an equity value of $780 million for the drug developer, Ted Bunker writes for WSJ Pro Private Equity. If concluded, the transaction through a company sponsored by New York's Perceptive Advisors would leave the Boston private-equity firm with a significant equity stake in Cerevel. Bain Capital co-founded the company with pharmaceutical giant Pfizer Inc. in 2018. The two would hold a combined 69% interest in Cerevel following the transaction, regulatory filings show.
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Deal making by private equity dropped sharply in the first half of the year, especially in the Americas region, a new report from Ernst & Young shows. The global decline was 36% compared with the first half of 2019, but that shot up to 63% for North and South America. While traditional deals were scarce, firms shifted to minority investments and PIPE deals, the report says.
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$5.5 Trillion
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The amount of capital raised worldwide in the first half of 2020, up 35% from a year earlier and the most for a first half since at least 1980, according to data from Refinitiv
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Workers in a Rhone Valley vineyard near Valence, France, where Amplitude Surgical is based. PHOTO: PHILLIPPE DESMAZES / AGENCE FRANCE-PRESSE
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Apax Partners-backed Amplitude Surgical SA is the subject of exclusive buyout negotiations with PAI Partners, the French company said Thursday. PAI aims to acquire a majority interest in publicly traded Amplitude, which provides surgical technology for lower-limb orthopedics. PAI would acquire Apax’s 41% stake, along with shares held by certain managers of the company for €2.15 ($2.55) per share, Amplitude said. That represents a nearly 33% premium over Thursday’s closing price of the shares in Paris.
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Ardian has acquired a majority stake in French insurance broker Finaxy, buying it from Equistone Partners Europe, which purchased the company in 2014. Finaxy has grown into one of the largest brokers in France, partly through acquisitions, Selin Bucak writes for sister publication Private Equity News in London. Finaxy plans to accelerate its buy-and-build strategy with Ardian’s investment.
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Corsair Capital has agreed to acquire a business-to-business payments systems operator from World Fuel Services Corp. Following the carve out, Corsair intends to set up the unit, called MSTS, as a standalone business specializing in commercial transaction management.
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Trive Capital Management in Dallas has agreed to a nearly 29% increase in the amount it will pay per share to acquire gaming machine operator Seven Aces Ltd. The price boost brings to 2.77 Canadian dollars ($2.05) per share from C$2.15 agreed to in June. The Toronto-based company operates machines in the U.S. state of Georgia.
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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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Banneker Partners and Permira have sold marketing technology provider Pepperjam LLC to Performance Horizon Group Ltd., a U.K. software-as-a-service company that does business as Partnerize. The combined business will serve more than 1,750 clients globally.
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MSD Partners, which invests through strategies developed by the family office of computer entrepreneur Michael Dell, has closed its MSD Special Investments Fund with about $825 million in commitments, well above the firm’s $500 million target. The fund’s strategy targets investments across the corporate capital structure, including liquid and illiquid credit opportunities, structured financing solutions and equities.
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Preservation Capital Partners closed its debut fund at its hard cap of £309 million ($405.1 million), Selin Bucak writes for sister publication Private Equity News. The London-based firm focuses on the asset-light financial services sector and aims to invest the new capital in three to five companies across Western and Northern Europe.
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H.I.G. Capital is targeting €1 billion ($1.18 billion) for its H.I.G. Europe Capital Partners III LP fund, a regulatory filing on Wednesday shows. The Miami firm’s filing indicates that it had yet to receive a commitment to the fund as of Wednesday.
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Helios Investment Partners in London has set a $1.4 billion target for its fourth flagship fund, a regulatory filing shows. The fund, Helios Investors IV LP, initially had a $1.25 billion target, an earlier filing shows.
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Apollo Global Management Inc. co-founder Marc Rowan, who oversees the firm’s insurance business, plans to take a step back from his day-to-day responsibilities and embark on a “semi-sabbatical,” Apollo Chief Executive Leon Black said Thursday on a call with analysts. Mr. Black said Mr. Rowan would continue to help guide Apollo’s strategic direction and remain on the boards of Apollo, Athene and Athora., Miriam Gottfried and Dave Sebastian write for The Wall Street Journal. Apollo co-President Scott Kleinman will assume day-to-day responsibility for leading the firm’s financial institutions and insurance activities.
Jim Zelter, the firm’s other co-president, will continue to focus on asset management and credit investing for insurance clients.
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Aerospace and transportation specialist ATL Partners has named Jerome Lorrain as a member of its executive board and also said he has been appointed as nonexecutive chairman of its Pilot Freight Services portfolio company. Mr. Lorrain was most recently chief executive of North America for CEVA Logistics.
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A blank-check company seeking to raise $250 million through an initial public offering plans to use the money to acquire a private-equity portfolio company, saying in a regulatory filing that it intends to “capitalize on inefficiencies” involving private equity-backed companies and the liquidity needs of investors.
The special purpose acquisition company, Forum Merger III Corp., is led by Marshall Kiev and David Boris. Mr. Kiev has been involved in deals in family office and private-equity settings, while Mr. Boris has worked on 15 deals involving blank-check companies, the regulatory filing says. Forum is based in Delray, Fla., and plans to list its shares on the Nasdaq Stock Market.
The executives have teamed up on two previous SPACs: Forum Merger Corp., which raised $172.5 million in 2017 and combined with technology company ConvergeOne Holdings Inc. in 2018; and Forum Merger II Corp., which raised $200 million in 2018 and in June agreed to acquire Itella International, which does business as Tattooed Chef.
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Golden Gate Capital’s California Pizza Kitchen Inc. is seeking chapter 11 bankruptcy protection, joining troubled dining chains that have succumbed to the coronavirus pandemic, Dave Sebastian reports for Dow Jones Newswires. The Los Angeles-based company filed for bankruptcy in the U.S. Bankruptcy Court in Texas, saying it aims to emerge from court protection within three months after closing unprofitable locations and reducing its debt.
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The New York State Common Retirement Fund posted a fiscal year loss of almost 2.7% as its total assets sank to $194.3 billion as of March 31, marking the first decline for the public pension fund since the financial crisis. New York State Comptroller Thomas DiNapoli blamed the fiscal 2020 decline on the coronavirus pandemic. He said Thursday the pension fund already has recovered much of the loss. Managers of the system had about half the assets in public equities and about 11.2% was invested in private equity, with a long-term expected rate of return of 6.8%. In the crisis years, the pension posted a 2.6% return for fiscal 2008 and a 26.4% loss for fiscal 2009, state data show.
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The coronavirus pandemic helped interrupt a seven-year upward trajectory in the number of private-equity buyout deals made during the January-to-June period, WSJ Pro Private Equity's Luis Garcia reports. The U.S. recorded 1,484 such deals in this year's first six months, down 7% from the same period of 2019, according to a report by financial market-data provider Refinitiv. It was the first decline in first-half buyout deal volume since 2013. Total buyout deal value, in turn, dropped 18% to $105.8 billion in the year through June 30.
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3i Group PLC’s private-equity portfolio showed resilience in the quarter ended June 30 despite significant disruption from the coronavirus pandemic, with the international investment manager posting an increase in net asset value per share to 858.0 pence ($11.18) at the end of June, up from 804 pence in the previous quarter. 3i’s total return for the period, its fiscal first quarter, came to 6.8%, Joe Hoppe reports for Dow Jones Newswires.
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A new survey shows most private-equity firms focused on making investments in their portfolio companies during the second quarter rather than cutting back operations and shedding jobs to cope with the coronavirus pandemic. BluWave, an advisory firm based in Nashville, Tenn., compiled data from more than 350 U.S. PE funds to produce its survey report.
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