LONDON: Private-equity firms clinched more than US$30bil of deals around the world last week, raising hopes for a recovery in mergers and acquisitions (M&A) following a slow first half of the year.
TPG Inc and CVC Capital Partners Plc announced two purchases apiece in the span of a few days, while Brookfield Asset Management and EQT AB moved forward with major buyouts of public companies. Advent International, Cinven and PAI Partners were among those making significant divestments, showing they’re able to return capital to investors at a time when many other sale processes are floundering.
While overall M&A deal volumes are up around 14% at the midway point of 2024, they still lag the 10-year average for a first half by more than US$300bil, according to data compiled by Bloomberg.
Supportive financing markets are now helping spur a sudden flurry of activity, with private-equity firms working hard to both clear out old assets as well as deploy their mountains of unspent capital.
“A number of sponsors have kicked off early work on transactions, which bodes well for activity levels in the second half, and going into 2025,” said Alastair Brown, a partner at Freshfields Bruckhaus Deringer. “Buyers and sellers both realise the valuation gap still needs to be addressed in order to get transactions away, and are looking for creative ways to bridge the gap.”
Take-private deals continue to gather pace as investment firms hunt for bargains in the public markets. A Brookfield-led consortium signed an agreement with Neoen SA’s major shareholders to buy a 53% stake in the French renewable developer, moving it closer to a full takeover set to be valued at US$6.5bil.
Meanwhile, London-listed video game services company Keywords Studios Plc said last Friday it’s likely to accept a revised US$2.5bil bid from EQT.
TPG’s dealmakers were busy splashing out on tech. The buyout firm said last Monday it will acquire Aareon, a German real estate software business backed by Advent International, for over US$4bil including debt. Last Thursday, its Asian fund agreed to a US$1.5bil deal for digital business-services firm Altimetrik Corp.
Meanwhile, CVC last Thursday unveiled a £1bil deal to buy British infrastructure contractor M Group Services from fellow private-equity firm PAI Partners.
A day later, CVC sealed a purchase of Partner in Pet Food from Cinven, in a transaction valuing the company at around 1.5bil, according to people with knowledge of the matter.
“It’s a tough market, but good assets can be sold at attractive valuations,” said Basile Benoit, head of industrials for Europe, the Middle East and Africa at Deutsche Bank AG, which advised on the M Group sale.
The pickup in M&A is welcome news for private-equity firms, which are still struggling to monetise assets through initial public offerings. Permira shelved Golden Goose Group SpA’s Milan share sale earlier this month. Tendam, a clothing retailer backed by CVC and PAI, has also decided to postpone plans to list this summer in Madrid, Bloomberg News has reported.
Cinven said last Friday it’s buying European online real estate platform Idealista from EQT, while KPS Capital Partners sold packaging maker Eviosys to Sonoco Products Co.
China Merchants Capital agreed to buy a US$870mil stake in Hong Kong billionaire Richard Li’s fibre business. TDR Capital bought Italian discount retailer Acqua & Sapone from H.I.G. Capital in a deal valued at about 1.7bil, according to people with knowledge of the matter.
The divestments should bring fresh momentum after some struggles by private-equity firms to exit their investments. Cinven recently shelved a £1bil-plus sale of British business-services firm JLA, while Partners Group Holding AG is considering other options for Techem GmbH after receiving disappointing bids for the German metering company, people with knowledge of the matter have said.
The energy space was another active spot this week, with private equity-backed XCL Resources announcing a deal to sell US$2.6bil of shale assets in Utah. Bloomberg News also reported that investment firm Quantum Capital Group will buy Denver-based explorer Caerus Oil & Gas in a US$1.8bil transaction.
The rest of the year promises to get even busier. Buyout firms are lining up bids for Sanofi SA’s US$20bil consumer-health division ahead of a deadline in mid-July, Bloomberg News reported last week.
Deutsche Bahn AG is getting private-equity interest in its DB Schenker logistics unit, which could fetch over 15bil, while investment firms are competing for a stake in US$15bil international-school operator Nord Anglia, people with knowledge of the matter have said.
“Sponsors all have assets to sell, as well as targets to buy, and so see the pricing challenges from both sides of the table,” Freshfields’s Brown said. “The bid-ask spread is narrowing, in part because of greater certainty around the macro environment and greater confidence in the M&A market returning, but there is still road to run.” — Bloomberg