Private equity firms are busy wrapping up deals before the holiday season gets into full swing, although not all of them are likely to be on Santa’s nice list.
While Inflexion is “really excited” about taking a £434 million stake in the healthcare business of GlobalData, Apax Partners appears to be taking a hit on its sale of online retailer Matches.
Mutares is also making an exit, from a temperature-controlled logistics company. While that might have been a useful acquisition for a Lapland-based toy manufacturer, the buyer is instead a German freight company.
We’ve also got two outlook pieces for you this morning, as Blackstone’s Paul Morrissey chats about the prospects for growth equity in 2024 and Tikehau Capital’s Roberto Quagliuolo explains why dealmaking should enjoy a stabler economic backdrop next year.
Rounding things out, Apollo’s take-private of the Restaurant Group reaches its end.
Just a couple of days after PAI Partners managing partner Frédéric Stévenin suggested carve-outs will be an area to watch in dealmaking in 2024, we have just such a deal.
Inflexion has agreed to carve out GlobalData’s healthcare division as a standalone entity at a valuation of £1.1 billion (€1.2 billion; $1.3 billion) or a 22x multiple of the division’s June 2023 LTM EBITDA.
Inflexion is investing £434 million in the healthcare business via its minority equity strategy Partnership Capital Fund for 40 percent of the division
GlobalData will retain 60 percent of the division, which will remain a subsidiary of the company.
The healthcare data business is the largest division of AIM-listed GlobalData and employs over 1,000 people across 10 countries. GlobalData’s subscription service offers data for customers across large global pharma, pharma and biotech, pharma suppliers, professional services and medical devices manufacturers.
Inflexion will work together with GlobalData to accelerate organic growth primarily through securing new clients globally and cross-selling to existing clients, continuing to invest in the product and content, as well as pursuing selective M&A, according to a press statement.
Out of fashion
Apax Partners looks to have taken a hit after selling Matches, a luxury online retailer, to Frasers Group.
Retail group Frasers is paying around £52 million ($66 million; €60 million) for the business, including senior and junior debt. But PE Hub Europe understands that Apax paid around £1 billion for Matches, then called Matchesfashion, in 2017.
Matches’ gross assets were around £170 million on 31 January, according to a statement from Frasers. It added that the adjusted LBITDA for the year to 31 January was £33.5 million.
Apax declined to comment.
Mutares has agreed to sell Frigoscandia, a provider of temperature-controlled logistics in the Nordic market, to German freight company Dachser.
Frigoscandia had more than €300 million of revenue this year. Mutares acquired the Helsingborg, Sweden-based company from Posten Norge in 2021.
This is Mutares’ eighth exit this year.
Going for growth
The gathering pace of digitalisation, impact of generative AI as well as market and economic conditions should lead to an “exciting 2024”, Paul Morrissey, senior managing director and head of Blackstone Growth Europe, told PE Hub Europe in the latest of our 2024 outlook series with senior dealmakers.
A normalisation of valuations in 2023 was healthy for the growth equity market and the valuation gap should narrow further next year, he added.
“Less liquidity means companies were much more focused on profitable growth in 2023 in comparison to a more ‘growth at all costs’ mindset which was more prevalent before 2023,” he said. “Many of the most interesting companies we spent time with this year showed margin growth which was significantly in excess of revenue growth in 2023.”
Check out the full interview for more on Morrissey’s 2024 outlook.
Going for growth (part II)
As an extra treat for Dealflow readers, I also got the thoughts of Andrew Houghton, partner at law firm Proskauer, on the outlook for growth equity in 2024.
In 2024, growth has the potential to be a robust and active sector for diligent investors with a number of opportunities. One of the problems over the recent past is that as it has been such an active space some of the investors have been going into growth for the first time without suitable levels of diligence or appreciation of potential risks. For the investors that are experienced growth capital investors, given the lack of leverage and demand for capital from companies that have recently matured into the growth segment or have deferred funding, it has the potential to be a good 2024 provided they do proper diligence.
We expect we will continue to see a lot of SaaS products and other platform businesses, in particular in the financial services sector, including insurance and wealth management. As well as this there should be opportunities in other expanding sectors such as ESG, health-tech and artificial intelligence/automation. We’ve undertaken a number of transactions in the ESG space and this in particular is becoming more and more important for organisations, who are considering it at the C-suite levels.
We expect there will continue to be challenges with valuations, but this can be overcome and we’ve seen investments where the valuation gap is effectively deferred by linking the investor’s economic return with valuation on a future exit, with a higher valuation lowering the investor’s pro rata stake and therefore their pro rata economic return and vice versa, which has helped to bridge the gap between the investor’s desire not to crystallise a higher entry price and the company’s desire not to give away too large a stake.
Energy transition, aerospace and defence, and agriculture are sectors to watch for private equity in 2024, when dealmaking should rise thanks to a stabler economic backdrop, Roberto Quagliuolo, deputy head of private equity and co-head of Italy at Tikehau Capital, told PE Hub Europe in another of our outlook Q&As with senior dealmakers.
Here’s a snippet:
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?
We anticipate a pickup in activity in 2024, primarily driven by a more stabilised economic environment. This positive shift is also likely to be accentuated by the increasing liquidity requirements of many investors. These investors may prioritise returning capital to their LPs, rather than maintaining their latest evaluation markets. The trend is indicative of a broader focus on financial prudence and strategic capital management as market participants recalibrate their priorities in response to the evolving economic landscape.
Check out the full interview for more of Quagliuolo’s outlook.
Finally, Apollo’s take-private offer for the Restaurant Group is nearing its end after winning court sanction yesterday. The company is now set to be delisted.
You can read more on Apollo’s offer here.