PE HUB Wire Highlights, 10.28.19


private equity, mergers, M&A

Ex-Ontario Teachers’ exec forms search fund, Conduit seeks buyer for BenefitWallet

Happy Monday!

This is Chris, on the Wire for Luisa, who is in Las Vegas for the Money 20/20 conference. She lives and breathes fintech.

Thesis: A few recent deals are proving the trend that will be the focus of our upcoming cover feature, focusing on why and how GPs are finding ways to hold certain companies longer. We’re exploring this trend on the M&A side, where GPs are taking minority stakes in certain assets even as they sell those same assets out of older funds. We’re also looking at it from the fundraising side, with the rise of long-life funds, and through secondaries with the rise of single-asset deals.

Earlier this month, Astorg invested in eResearchTechnology, joining existing investors Nordic Capital and Novo Holdings A/S. Nordic sold down part of its stake out of Fund VIII and re-invested through Fund IX. Novo initially took a controlling 70 percent stake in the company in 2016, and now holds an equivalent controlling stake alongisde Astorg, healthcare guru Sarah Pringle wrote. Check out her story here.

What’s interesting is this is happening even as average investment hold times has gone down. GPs are selling investments even quicker as they try to cash in on the high-priced environment. But again, there are certain assets — described to me as those that have met return goals, but have more room to grow — that are perfect for longer holds.

“If I have an asset I believe will compound value at an attractive rate over many years, there’s a strong incentive to keep that position for many years,” Hugh MacArthur, partner at Bain & Co., told me in a recent interview. “If [a GP] still believes in the future of an asset and new deals are scarce, why not keep invested in that asset.”

This is not a new trend, at least on the M&A side. Managers have long taken or retained minority stakes in companies they exited. But it’s happening a lot more today in the high-priced environment. Reach me if you’ve seen this type of thing and what you think about it at cwitkowsky@buyoutsinsider.com.

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