Generative AI has for many been the buzzword of 2023 and private equity is no exception, with firms integrating the technology into their own processes as well as their portfolio companies. That latter point is the opening theme of the day, as we hear from Darren Abrahamson at Bain Capital Tech Opportunities, who says many of his firm’s portfolio companies are seeing 30-40 percent productivity gains from GenAI tools in their engineering teams.
Sticking with tech, we have some fresh deals to report on – CVC Capital Partners taking a minority stake in a service management software provider, TA- and Warburg Pincus-backed Epassi Group’s add-on of a corporate health and wellness benefit service provider and Nordic Capital buying a majority stake in a solar PV installer.
Lastly, I will highlight some data from S&P Global Market Intelligence that shows a 34 percent growth in the total value of global private equity and venture capital deals in November month-on-month.
GenAI in action
We have been hearing from different sources on how private equity firms have started exploring the use cases of GenAI tools in their transactions and investment thesis.
Adding more to the discussion, PE Hub Europe’s Craig McGlashan spoke with Darren Abrahamson, partner, Bain Capital Tech Opportunities, who said “nearly every company” in its portfolio has integrated GenAI tools into their engineering teams, generating productivity gains of 30-40 percent in many cases.
Here’s an extract from the interview:
Is GenAI going to change the world in 2024 or is it more of a long-time bet?
We believe GenAI will be one of the most transformative technologies of our lifetimes – and will impact almost every business and industry in quite profound ways. We’re in the early stages of understanding its full implications, along with associated risks and opportunities. Nonetheless, its significant impact is already visible in certain areas.
Nearly every company in our portfolio has incorporated GenAI tools across their engineering teams, and many are seeing productivity gains of 30-40 percent. This enables a pretty dramatic acceleration of development timelines and product roadmaps. We have seen some companies who have automated the majority of first-line customer support queries, which greatly enhances customer satisfaction and allows employees to tackle more complex – and more intellectually interesting – support issues.
And finally, all of our companies are exploring how to integrate GenAI into their products to increase value to customers and ultimately revenue, though the pace and impact of this varies quite a bit by industry, in part due to data privacy concerns. Across all of these dimensions – and others – we anticipate an even greater impact from GenAI in 2024 as the underlying speed and quality of AI models continues to improve, and as organisations figure out new ways to utilise the technology in new and different ways.
Here’s the full article, including Abrahamson’s tips on which sub-sectors he sees potential in and the firm’s deal pipeline for 2024.
Adding to a recent tech flurry, there are three new deals to report today.
First up is Epassi Group, backed by TA Associates and Warburg Pincus, acquiring Exercite, a corporate health and wellness benefit service provider, from Waterland Private Equity.
The transaction will give the combined company an enterprise value of over $1 billion, according to people familiar with the matter.
Exercite is based in Germany and the Netherlands and has three brands – Hansefit, Bedrijfsfitness Nederland and Fitbase. It provides digital services for on-demand fitness, wellness and occupational health management.
The combined group will serve around 20,000 companies across seven countries in Europe.
First external investment
CVC Capital Partners has agreed to buy a minority stake in service management software provider TOPdesk for around €200 million.
This is the first external investment in Delft, Netherlands-based TOPdesk, whose founders retain majority control.
Nordic Capital has picked up a majority stake in Sesol, a Swedish solar photovoltaic installer, in partnership with its founders and management.
SEB Private Equity, Sesol’s existing minority owner, will divest its stake as part of the transaction.
Sesol is based in Jonkoping. It has 1,000 employees with estimated revenue close to SKr3 billion ($286.9 million; €265.9 million) for 2023.
Finishing off today’s Dealflow with some numbers, as we have a new report from S&P Global Market Intelligence which stated that the total value of global private equity and venture capital deals increased for a second straight month in November to $47.07 billion, up 34 percent from the prior month. The data excludes add-on deals.
The aggregate deal value, on a year-over-year basis, fell 8.8 percent from $51.6 billion, it said. The number of deals during November stood at 848, down from 992 in October and 1,192 year-on-year.
Europe recorded the largest amount of PE investment in November with $24.72 billion, up from $14.17 billion in November 2022. Next in line was North America with $14.94 billion, up from $12.16 billion in November 2022.
Technology, media and telecom sector grabbed the top place in November with 306 private equity-backed transactions. Within the sector, application software companies saw the highest number of deals with 151, although deal count went down from 217 transactions in November 2022.