Corsair ‘cautiously optimistic’ for 2024; JRJ’s Marex files for IPO

Permira to buy GGW from Hg.

There are ever more signs that 2024 should see an uptick in deals, as Corsair’s Raja Hadji-Touma tells us that the bid-ask spread – which has been an impediment to investments and exits this year – is narrowing.

Next, we have another positive sign as a private equity-backed UK insurance brokerage starts the process of launching an IPO – an exit route that has been almost dormant in 2023 – although it is opting, like other UK companies this year, to list in the US.

We then finish with a look at Permira agreeing to acquire German insurance broker GGW Group from fellow private equity firm Hg – we’ve got the enterprise value on that deal for you.

Don’t mind the gap

A narrowing bid-ask spread should lead to a rise in dealmaking in 2024, Corsair partner Raja Hadji-Touma told PE Hub Europe in the latest of our Q&As with dealmakers on the outlook for next year.

Many sources had cited a valuation gap between buyers and sellers as a hinderance to deployment and exits this year – meaning activity could pick up if that gap narrows.

Here’s some extracts from the interview.

Do you expect a pickup in dealmaking in 2024 compared to next year? What’s making you optimistic about dealmaking next year and what are you worrying about?

Over the last 18 months, we have witnessed a material slowdown in deployment and exits. Investors have been grappling with the impact of the increased cost of debt, lower availability of financing and an uncertain macroeconomic picture, all of which have dampened overall appetite. The bid-ask spread in valuation has remained quite wide in 2023, except for prime assets which continue to trade at very attractive multiples. The bid-ask spread has started to narrow as the current market view settles on rates and macro.

I am cautiously optimistic for 2024 and expect a material uptick in transaction volumes from a low base. Interest rates seem to have peaked and inflation is coming down, providing a more stable outlook. Financing to middle market companies has been quite resilient for quality assets and is slowing coming back for larger buyouts.

There is a material backlog of assets being prepped for sale. A large number of businesses started preparing for an exit throughout 2023 with the view to potentially launch in 2024 as the picture normalises. GPs are under pressure to deploy after 18 months of reduced activity and others need to crystallise exits to deliver DPI.

I expect to see a larger number of companies come to market, in part due to an urgent need to recapitalise and alleviate debt and interest rate burdens. All of the above should result in more demand and supply of assets in the market. That said, the geopolitical events at play could result in a sustained slowdown in IPOs and an impact on exits.

What’s your outlook for exits in 2024? Do you expect a pickup in IPOs or will it be mainly financial and strategic sales next year?

I expect exit volumes will increase substantially for private equity owned businesses due to the pressing need to return capital to LPs after 18 difficult months. I also expect strategics will become more active given the more attractive valuation environment and their financing firepower.

IPO markets will likely continue to remain challenging due to the overall macro picture and the potential geopolitical overhang.

Here’s the full article, including Hadji-Touma’s tips on which sectors will do well next year and his review of 2023.

US bound

While Hadji-Touma still sees some difficulties for IPOs, some portfolio companies are opting to list – while being creative on geography.

Private equity-backed commodities broker Marex Group said it has confidentially filed a draft registration statement with the US Securities and Exchange Commission with a view to launching an IPO in the US, potentially joining a series of UK companies in listing outside its home country.

JRJ Group bought a majority stake in the company in 2009. It dropped an attempted listing on the London Stock Exchange in 2021, citing market conditions.

Microchip maker Arm Holdings was perhaps the highest profile UK firm to choose to list in the US this year, after it went public in September.

In case you missed it

I just want to quickly mention a deal that appeared at the unusual time of late Friday afternoon for any readers who might have missed it.

Permira has agreed to acquire German insurance broker GGW Group from fellow private equity firm Hg at an enterprise value of around €2 billion, PE Hub Europe understands.

The private equity firm aims to support GGW Group’s acquisitive business plan in the fragmented German and European insurance brokerage industry. GGW Group comprises more than 50 brokerage companies and services small- and medium-sized enterprises. It is headquartered in Hamburg.

The company was formed by CEO Tobias Warweg with Hg’s support in 2020.

“It started as an innovative and very entrepreneurial idea, building a high-quality business alongside a long-trusted partner, in a sector we’ve studied over decades,” said Hg partners Justin von Simson and Benedikt Joeris in a statement.

The exit is Hg’s 24th since the start of 2022. The realisations mean Hg has had liquidity from nearly half its total portfolio in that time.