Good morning. As companies continue to grapple with the effects of tariffs, including in the pharmaceutical and biotechnology sectors, private-equity firms such as Bain Capital and Kohlberg are betting contract drugmakers can offer a hedge against the market uncertainties, WSJ Pro’s Maria Armental reports.    

Meanwhile, Journal’s columnist Jason Zweig looks at the liquidity crunch facing the endowments of elite universities such as Brown, Yale and Harvard—and the lessons they should have learned.

We also have a Take column about how the rising number of initial public offerings can be a harbinger for a long awaited rebound in private-equity exits, according to a pair of researchers who use IPOs as a proxy for buyout activity.

Now onto the news ...

Pharmaceutical and biotechnology companies have long turned to contract manufacturers to help them bring medications to market faster and cheaper, and lately private-equity investors see the sector as an investment opportunity, Maria Armental reports for WSJ Pro. Bain Capital, Kohlberg, Novo Holdings and Arlington Capital Partners are only a few of the firms that have backed contract manufacturing businesses. Such transactions illustrate private capital’s growing grip on pharmaceutical outsourcing operations as blockbuster weight-loss and diabetes drugs such as Ozempic exacerbate manufacturing constraints.

Elite university endowments such as Brown, Columbia, Harvard and Yale find themselves once again in a liquidity pinch, thanks partly to high allocations in illiquid private markets as the Trump administration threatens to cut off their funding. As Wall Street Journal columnist Jason Zweig writes, many of these same endowments faced similar liquidity squeezes during the financial crisis of 2008-09, but failed to embrace the lessons of that era about putting too much cash in investments that don't trade publicly.

The market for initial public offerings has rebounded this year and a pair of researchers are betting that if the momentum continues, sales of private-equity portfolio companies are likely to follow. The IPO market remains a bellwether of buyout dealmaking even as IPOs represent a declining share of private-equity exits, according to Gregory Brown, research director at the Institute for Private Capital at the University of North Carolina’s Kenan-Flagler Business School. He and a fellow researcher have created a model that forecasts IPO activity with the goal of providing investors more clarity on exit activity.

KKR led a $230 million investment in security intelligence software provider Ontic to accelerate the company’s investment in artificial intelligence. Other investors backing the latest funding include JMI Equity, Silverton Partners, Ridge Ventures and Ten Eleven Ventures.

Partners Group has invested $65 million of new equity for a significant minority stake in restor3d, an AI-driven additive manufacturer of surgical implants. The investment is part of a broader $104 million transaction that also includes $39 million from existing shareholders.

General Atlantic has invested 640 million Brazilian reais, or more than $115 million, in Florianopolis-based enterprise software provider Starian, following the company’s June carveout from its corporate parent Softplan.

Aranda Principal Strategies, STORY3 Capital Partners and Nexus Capital Management are backing a recapitalization for Rent the Runway that will convert about $243 million of the company’s debt to equity and lower its debt load to $120 million while extending maturities out to 2029.

Our add-on deal interactive tool allows you to sort and analyze volumes of add-on deal data compiled by WSJ Pro. View more.

Warburg Pincus has raised at least $2.19 billion so far for Warburg Pincus Financial Sector III Partners and related parallel vehicles, according to a regulatory filing. One investor that has disclosed a commitment to the new fund is the New York City Employees’ Retirement System. The fund’s predecessor closed in 2021 with $2.6 billion. Warburg invests its financial services-focused funds across financial services sub-sectors such as asset and wealth management, banks, exchanges, financial technology and insurance, as well as payment processing, private banking and consumer finance, according to the firm’s website.

Whistler Capital Partners, a Nashville, Tenn.-based private-equity focused on healthcare, has raised at least $256.8 million so far for WCP Healthcare Fund I, according to a regulatory filing. The amount raised puts the fund at nearly three quarters of a $350 million offering amount indicated in the filing. However, the latest offering amount is lower than the $500 million goal indicated for the fund in a separate regulatory filing back in 2024.

Law firms are increasingly open to private equity investment, fearing they may miss out on an important source of capital that is currently focused on professional services, sister publication Financial News reports in an interview with Adil Taha, the former chief executive of litigation law firm Rosenblatt. Taha recently formed a new consulting firm with Jonathan Watmough, former managing partner of London law firm RPC.

Private-equity firms are holding portfolio companies for increasingly longer periods, but the trend is more pronounced in some sectors than in others, according to investment-research provider With Intelligence. For example, average holding periods this year rose to 5.7 years in the industrial sector, while remaining or dipping below five years, closer to historical averages, in industries such as businesses services and technology, With Intelligence's data show.

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