Private equity industry figures talk outlook as SVB sold; AnaCap exits insurance broker

Good morning Eurohubsters, Craig McGlashan here. I hope you had a good weekend.

The morning breaks with US regulators finding a buyer for the deposits and loans of Silicon Valley Bank, which collapsed earlier this month. We take a brief look at that after we’ve taken a deep dive into the dealmaking outlook for the rest of the year, with input from practitioners across banking, law, accountancy and consulting. The topic of SVB’s collapse – as well as Credit Suisse’s takeover by UBS – of course colours that outlook.

Next, we feature an exit from a minority investment by AnaCap and reports that Brookfield is in exclusive talks to buy a majority stake in a data centre company.

Business as usual?

With the end of the first quarter fast approaching, PE Hub Europe talked to leading figures in investment banking, law, accountancy and consulting about the dealmaking outlook.

The news was generally positive, with the amount of dry powder available likely to trump headwinds such as the rising cost of debt and threat of inflation.

That said, the rescue of Swiss banking giant Credit Suisse by compatriot UBS in mid-March added to those headwinds, said Lee Castledine, a partner in the transaction services team at accountancy firm RSM, although the rapid takeover with “business as usual” messaging from government and regulators prevented the potential for a shock in the market.

It is too early to say if the broader turmoil of this and the collapse of Silicon Valley Bank (SVB) will have a tangible impact on mid-market M&A, according to Castledine. “Global businesses are ultimately constrained by GDP, but in the mid-market we can often see businesses growing their market share in double digit rates, benefiting from being more agile or from being in a particular growing market niche.”

Elsewhere in the outlook, Allan Bertie of Raymond James warned of potential “indigestion” in the market as firms rush to do deals when the market fully reopens.

“Some will do a pre-process without formally putting deals on the market to reduce this impact,” he said.

Sabina Comis, global managing partner-elect at law firm Dechert, backed that view during a breakfast roundtable in London in early March.

“That’s why we’ve seen pre-emptive deals, trying to get in there before the auction process,” she said. “People will jump on the same deals.”

Her colleague Christopher Field, co-head of Dechert’s global private equity practice, suggested that the market could bifurcate, with very healthy activity in highly sought-after assets, while others struggle to gain attention.

Meanwhile, Graham Elton, chairman of Bain & Company’s EMEA private equity business, hoped that the market will be steady, rather than one of boom and bust like the last few years. “How do you price in an environment like that?”

Here’s the full article.

Takeover

Switching back to SVB, US regulators announced on Sunday that First-Citizens Bank & Trust Company will acquire the collapsed lender’s deposits and loans.

SVB had been a major lender to private equity and venture capital portfolio firms. Its failure earlier in March had caused concern in private equity circles, with Andera Partners’ Olivier Litzka telling PE Hub Europe that it was “a problematic setup for investing in the life science area, especially in earlier stage development companies”.

HSBC had already bought SVB’s UK arm.

Insurance deal

AnaCap Financial Partners will sell its minority stake in MRH Trowe (MRHT), an owner-managed commercial lines insurance broker, to TA Associates at a 4.3x money multiple.

MRHT, headquartered in Frankfurt, Germany, has over 1,100 employees. The company aims to deliver more than €150 million of revenue in 2023.

MRHT’s founding managers will remain the largest shareholder group post the sale and will be backed by both AnaCap and TA Associates, according to a release.

AnaCap invested in MRHT in 2020. MRHT has demonstrated a strong double-digit organic growth rate during this period, the release added. MRHT completed 21 bolt-on acquisitions during AnaCap’s investment period.

“This transaction not only gives AnaCap and its investor base a very impressive return of a 4.3x money multiple but it also allows for significant further growth of the business,” said Tassilo Arnhold, co-managing partner at AnaCap.

“The combination of its holistic client approach, organic growth and best-in-class integration enables MRH Trowe to deliver superior client service while also enjoying sustained growth,” said Chris Parkin, managing director and co-head of financial services at TA Associates.

The completion of the transaction is subject to EU antitrust approval.

Majority stake

Finally, Reuters reported that Brookfield Asset Management is in exclusive talks to buy a majority stake in Paris-headquartered data centre operator Data4. The potential acquisition would value the firm at close to €3.5 billion, including debt, according to people familiar with the matter.

Data4 is majority-owned by Axa Investment Managers.

We’ve asked Brookfield for comment.

That’s it from me – I’ll be back with you again tomorrow.

Cheers,

Craig