Advent International eyes proprietary deals as auctions ease back

Advent International is relying more on its network to generate deal leads rather than chasing competitive auctions run by investment banks, according to a key executive at the firm’s new $13 billion flagship fund, Advent International GPE VIII LP.

To help strengthen its ties to existing and future portfolio companies, Advent has grown its investment staff to 130 for Fund VIII from about 100 for Fund VII, which closed on $10.8 billion in 2012.

Dave McKenna, managing partner, said the firm is working on transactions in its core areas of business and financial services, health care, industrial, retail, consumer and leisure, as well as in technology, media and telecom.

“It’s not white hot in terms of investment banks running structured processes – that deal flow is down,” he said. “There aren’t as many deals coming from Wall Street into heavily competitive auction processes. But with our resources and sector focus, we have the ability to go into the market and catalyze investment opportunities.”

McKenna didn’t elaborate on the reason for the sluggish deal pace in early 2016, but market participants have cited tighter credit conditions for some deals, along with uncertainty about China growth and depressed prices in the energy sector.

The firm keeps a proprietary list of companies it would like to own and tracks each one for years at a time.

“If you keep those dialogs going year after year and you’re really diligent about that, you may find some opportunities where others may not … and that’s really important,” McKenna said.

The firm deploys team members focused on its five sectors and its investment geographies in North America and Europe, with investments in Asia and Latin America.

In the North American health-care sector, the investment theme of lowering costs stands out, he said. In Europe, Advent sees potential in payment- processing companies, as well as other sub-sectors.

While the firm is aware of economic headwinds in the energy sector, slower growth in China and other challenges, it looks past macro conditions into sub-sectors to find pockets of opportunity, he said.

Some of Advent’s recent investments include Ammeraal Beltech of the Netherlands and Istituto Centrale delle Banche Popolari Italiane of Italy in Europe; Distribution International in North America and Crompton Greaves Consumer Electricals and QuEST Global Services, both of India, in Asia.

Advent plans to continue its 25-year tradition of focusing on its five target sectors, with deal sizes ranging from the middle-market to larger buyouts.

Action Item: Investment memo for Advent Fund VIII, http://bit.ly/1RiP4FG

Photo of Dave McKenna courtesy of Advent International