Global secondaries volumes reach record; high valuations drive bolt ons

S&P Global Market Intelligence offers our top picks of global private equity news stories and more published throughout the week.

Almost 70% of over 80 secondaries investors expect deal volumes to top $120 billion again in 2022, according to a report from investment bank Evercore Inc.

Volume in 2021 hit $134 billion, surpassing the previous record high of $80 billion recorded in 2019.

General partner-led deals accounted for a record 51% of 2021 secondaries transactions, totaling $68 billion.

The rise of general partner-led secondaries is one factor pushing the market to new heights, with private equity firms following in the footsteps of a number of high-profile buyout names that have completed continuation funds in recent years, said Sameer Shamsi, managing director and head of secondaries for global investment bank Houlihan Lokey Inc.

A snapback in deal activity in the second half of 2020 also carried elevated secondaries markets momentum into 2021, Shamsi said.

A rough patch in the public markets could hold private equity secondaries back from a $120 billion-plus year, Shamsi said. US fund managers typically produce valuations for portfolio companies once per quarter, Shamsi noted, adding that a jolt to the markets could put secondaries deals on pause while investors wait for managers to absorb the impact.

CHART OF THE WEEK: Growing valuations spur buy-and-build strategies

⮞ More private equity firms have adopted buy-and-build strategies as more funds seeking larger levels of capital are coming to market.

⮞ The prior private equity investors of around half of investment bank Baird’s private equity transactions in 2021 used the strategy, more than double five years ago. Most deals have an M&A story for the new private equity acquirer, said Vinay Ghai, managing director in Baird’s financial sponsor group.

⮞ In 2021, the average EBITDA multiple for all Baird deals bought by private equity acquirers was 15.0x, up from an average 11.8x in 2018.

FUNDRAISING AND DEALS

* Funds managed by Apollo Global Management Inc. affiliates will buy a majority stake in Novolex Holdings LLC from funds managed by The Carlyle Group Inc., which will remain a minority shareholder in the maker of packaging products. The deal is expected to be completed in the second quarter.

AP IX Alpha Holdings (Lux) SARL, an affiliate of certain funds managed by Apollo affiliates, also agreed to acquire up to 10.0 million common shares of ABC Technologies Holdings Inc. from Coliseum Capital Management LLC affiliates for C$6.25 per share.

* Blackstone Inc. reached a deal to purchase Australian casino operator Crown Resorts Ltd. at a valuation of A$8.9 billion. The transaction is set to close in the second quarter. Funds managed by the firm also bought a majority stake in India-based wealth management firm ASK Investment Managers Ltd. from Advent International Corp. and other shareholders.

* Bain Capital Pvt. Equity LP and Hellman & Friedman LLC affiliates finalized their $17 billion acquisition of athenahealth Inc. from Veritas Capital and Evergreen Coast Capital Corp., which will still own a minority stake in the cloud-based healthcare enterprise software solutions provider. Separately, Bain received a binding buyout proposal from D’Ieteren Group SA for its European automotive parts business Parts Holding Europe SA, also known as Autodistribution SA.

* Warburg Pincus LLC purchased patent search specialist Minesoft Ltd., together with information services and software platform MLM 2.

ELSEWHERE IN THE INDUSTRY

*Madison Dearborn Partners LLC-affiliated vehicles agreed to buy the entire outstanding common shares of digital peer-to-peer payments company MoneyGram International Inc. The approximately $1.8 billion all-cash transaction is expected to close in the fourth quarter.

* Little John & Co. LLC affiliates will divest Wellfleet Credit Partners LLC, which manages collateralized loan obligation portfolios, to Blue Owl Capital Inc.

* A consortium led by Blue Star Innovation Partners and Providence Equity Partners LLC sold financial technology company Payrix Solutions LLC to Fidelity National Information Services Inc.

* Asterion Industrial Partners collected €1.8 billion for its Asterion Industrial Infra Fund II FCR at final close, exceeding its hard cap of €1.5 billion.

FOCUS ON: REAL ESTATE

* Blackstone is reinvesting in Mileway BVvaluing the European last-mile logistics real estate company at $23.7 billion, Dow Jones Newswires reported.

* The private equity giant’s Blackstone Real Estate Income Trust Inc. will take over residential real estate investment trust Preferred Apartment Communities Inc. in an all-cash deal valued at $5.8 billion. The acquisition is set to close during the second quarter.

* Apollo-managed funds and clients will provide $1.4 billion in strategic capital to United Arab Emirates-based real estate developer and manager Aldar Properties PJSC in a transaction expected to wrap up by the end of the first quarter.

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