Good morning, Hubsters. MK Flynn here with today’s Wire.
There’s a lot of private equity deal news this morning. Ares is betting on tech-driven fixed income asset management, as it takes a stake in BlueCove. Thoma Bravo has closed its $8 billion acquisition of Coupa.
And we’ve got a final interview in our Black History Month series. Let’s get to it!
Going mainstream. Ares Management Corp. announced this morning that it is acquiring a minority equity stake in BlueCove. The deal includes an option for Ares to acquire control of the business over a multi-year term.
Based in London, BlueCove specializes in “scientific” fixed income asset management.
“BlueCove immediately stood out as an ideal partner in this sector, given its specialized team across investment, research, and engineering capabilities and institutional infrastructure,” Boris Okuliar, partner and co-head of liquid credit at Ares.
Ares expects BlueCove to play a significant role in making scientific investing a mainstream investment style.
“Scientific investing provides investors with both a complement and an alternative to the traditional, active discretionary investment process that has dominated active fixed income management for decades,” according to the deal announcement. “Potential advantages for investors include an increased probability of repeatable outcomes, a technology-enabled increase in investment breadth, increased investment process transparency, excess returns that tend to exhibit a low correlation with those of discretionary managers, and a medium-term opportunity to harvest natural alpha from an underrepresented investment methodology.”
The transaction, for undisclosed terms, is expected to close in the second or third quarter of 2023 and is subject to customary closing conditions, including regulatory approvals. Upon closing, Okuliar will BlueCove’s board of directors.
Taking private. Thoma Bravo continues its prolific dealmaking streak, closing the $8 billion deal for Coupa Software, a pioneer in the Business Spend Management category. The deal, which includes a significant minority investment from the Abu Dhabi Investment Authority, was announced in December.
“Coupa created the Business Spend Management category and is well-positioned to capitalize on this large and expanding global market,” said Holden Spaht, a managing partner at Thoma Bravo. “Our partnership with Coupa will leverage Thoma Bravo’s deep software expertise to help accelerate growth, drive continued investment in product innovation, and better serve the company’s world-class customer community.”
Thoma Bravo has been on a roll. The tech-focused PE firm took advantage of the declining valuations of public technology firms to close some really big take-private deals last year, including acquiring business planning software provider Anaplan for $10.4 billion and business payments tech provider Bottomline Technologies for $2.6 billion, as well as buying identity management enterprise software developers SailPoint Technologies for $6.9 billion and Ping Identity for $2.8 billion. Among Thoma Bravo’s firm’s exits was the sale of K-12 administration software provider Frontline to Roper Technologies for $3.7 billion. And in December, the firm closed its newest three funds on more than $32.4 billion, with its 15th flagship fund at $24.3 billion.
I interviewed Spaht for PE Hub’s Outlook 2023 series back in January. You can read that Q&A here.
Inspiring the next generation. Throughout the month of February in observance of Black History Month, PE Hub has been featuring interviews with private equity professionals who are Black.
Today, we conclude our series with a Q&A with Nick Jean-Baptiste, founder and managing partner of Jacmel Growth Partners.
Headquartered in Brooklyn and founded in 2015, Jacmel invests in family-operated, lower-mid-market companies. The firm focuses on “combining traditional private equity best practices with low-cost, high-impact strategies that promote growth while also benefiting employees and their communities,” according to its website. “Since inception, the Jacmel team has invested in eleven companies across five platforms, achieving strong growth, while progressing a range of inclusive economy initiatives, including workforce development, increased Board representation of BIPOC leaders, and educational benefits for employees.”
Here is an excerpt from my interview with Jean-Baptiste:
What’s the biggest mistake PE firms make when it comes to underrepresented groups?
It’s promising that many private equity companies are signing pledges, but there isn’t always long-term thinking. But many firms are only focused on new talent, versus a more concerted effort to attract future private equity firm leaders. One key point is that when you have diverse leaders at the highest levels of a company, then you can inspire the next generation of diverse talent. There is progress being made here as well, as tracked by National Association of Investment Companies.
Finally, another area of improvement is within the portfolio companies owned by private equity firms. If DEI is truly a core value for private equity firms, then they can push for substantial diversification within the companies they acquire across senior management and junior ranks.
It’s Black History Month, and PE Hub is showcasing Black leaders in private equity. Please tell us about someone you admire.
I’ve been blessed to have interacted with so many of the Black leaders in finance, and more specifically private equity. The person who has had the largest influence has been and remains Ray McGuire, the former co-head of investment banking at Citigroup. He has been an incredible sounding board, has provided introductions at the best times, and provided advice on how to show up at my highest level.
In addition, I highly admire Derek Jones at GCM Grosvenor. As lead for the private equity diverse manager practice at GCM Grosvenor, Derek holds a very influential seat in the emerging manager private equity ecosystem. It’s been incredible having such a trailblazer as a mentor and friend.
As a private equity investor who is Black, are there any experiences or insights you want to share with PE Hub‘s audience?
The biggest challenges for minority investors are overcoming the status quo and combating implicit biases. This can be hard for everyone to understand, but the additional roadblocks are unfortunately felt by nearly all diverse executives within the industry.
This issue can’t be solved overnight, and it’s great to see all the steps taken to embrace diversity and hopefully create a new class of successful diverse-led firms, where this type of implicit bias is no longer felt or important.
Do you have any advice for PE firms that want to recruit, retain, and develop private equity professionals who are Black?
While DEI affinity groups are a great place to start, private equity firms can make a more concerted effort in inspiring and grooming the next generation of diverse leaders. It should not be a check-the-box exercise. Rather, employers should be very intentional on career paths to see long-term success in retention.
For more PE Hub Black History Month interviews, see our Q&As with:
• Chad Strader, managing partner and co-founder of Red Arts Capital
• Milwood Hobbs, Jr, managing director and head of North American sourcing and origination, Oaktree Capital Management
• Tarrus Richardson, CEO of IMB Partners
That wraps things up for today.
Tomorrow, Buyouts’ Chris Witkowsky will write the Wednesday Wire.
All the best,