Carlyle execs weigh in on European dealmaking; Stride partner offers consumer sector outlook

Good morning, Hubsters. MK Flynn here with today’s Wire.

In the newsletter today, we’ve got an interview with Carlyle’s senior execs in Europe; a fierce contest between Bain Capital and Triton for a coveted target; and a 2023 outlook piece on the consumer sector from Stride.

European appeal. How are private equity firms finding opportunities for growth in Europe, the continent that has been hit hardest by a global slowdown and a deepening energy crisis?

That’s the question Private Equity International’s Carmela Mendoza recently posed to the Carlyle Group’s senior executives in Europe.

“There are a number of challenges, like the financing market, but on the purely macro side I think we are prepared for the worst,” Marco De Benedetti, co-head of the Carlyle Europe Partners (CEP) investment advisory team, told PEI. “There could be some positive surprises.”

He continued: “We have tried to price for the worst. I’m a bit more optimistic that, relative to everything that we hear, maybe things will not be that bad.”

Europe benefits from its currency and will continue to do so, De Benedetti said. “Europe is a relatively high export-based economy, certainly where the component of export is much higher than North America or other large economic areas. We believe this is an important element that makes Europe attractive today.”

In Europe, Carlyle is investing in companies involved in four themes: digitalization; healthcare; emerging global wealth; and sustainability and climate change.

“The investment themes we pursue are not entirely insensitive to the macroeconomic changes, but we think they show resiliency in difficult times,” said Jonathan Zafrani, co-head of CEP. “Companies will likely continue to invest in technology to improve their performance. Healthcare is a priority. Consumers and governments are investing more money in renewables.”

For more, read Carmela’s story here.

Limited time offer. For ongoing coverage of private equity dealmaking in Europe, visit PE Hub Europe.

We launched the website last summer to extend the renowned and respected North American deal coverage of PE Hub to the European market by leveraging the unrivaled access and knowledge of PEI Group.

Led by editor Craig McGlashan and including reporter Nina Lindholm and assistant reporter Irien Joseph, PE Hub Europe gets to the heart of the European private equity landscape by analyzing deals and the direction of the market and telling the stories of the people and firms making it all happen.

This week, Craig has been reporting on the battle heating up between Bain Capital and Triton Partners to take control of Finnish builder Caverion, including some potential antitrust ramifications.

Earlier in the week, Bain Capital upped the ante when it amended its offer for Caverion.

Read all about that compelling contest here.

Complementary access to PE Hub Europe will be ending soon, so sign up today!

Insurgent brands. To gain insights on the current climate for private equity deals, PE Hub and PE Hub Europe reporters have been asking a wide range of sources to share their outlooks for 2023. Our series continues today with Tim Burke, partner at Stride Consumer Partners, who spoke with reporter Aaron Weitzman. Burke has been with Stride since 2019. Previously, he was a partner at Castanea Partners.

Here’s an excerpt from the Q&A.

What were the highlights of your dealmaking in 2022?
It was a landmark year for Stride. In April, we closed our inaugural fund with $420 million in capital commitments to invest in consumer brands across the food and beverage; active lifestyle; beauty and personal care; and retail services sectors. During the year, we partnered with three exceptional companies in three of those four core focus areas: Chomps, Truewerk and Patrick Ta Beauty. We also grew the Stride team to a total of 16 investment professionals, nine of whom are at the partner level, which is a significant investment in resources on behalf of our LPs and our partner companies.

What was the biggest challenge to completing deals in 2022?
“Uncertainty” defined dealmaking in the latter half of the year. There were concerns across several variables – from inflation, to rising interest rates and lingering supply chain issues – that led many companies to press pause on any fundraising plans. These concerns led to the slowdown in dealmaking across all sectors. That, combined with the perception that valuations would come down, kept many premier brands with enough runway to wait out the uncertainty on the sidelines.

How do you expect the first six months of PE dealmaking in 2023 to compare with the last six months of 2022?
We anticipate it looking similar: companies will continue to navigate the uncertainty, weighing their options to decide the best path forward. That said, Stride is optimistic about the opportunities in 2023. Our team has invested together for decades and through multiple cycles. We chose categories within consumer that are highly resilient, and the companies we pursue have shown that they grow through broader macroeconomic cycles. These are the brands that consumers are passionate about and will give up last, even if they pull back on discretionary spending elsewhere. In fact, we’ve seen that macro disruption can accelerate shifts in consumer purchases away from large companies (who are spending less on marketing and product development) towards insurgent brands. Because we don’t rely on debt, we are able to be nimble when we find an attractive opportunity. Once a few of these insurgent brands raise capital at strong valuations, we believe that others will follow.

Read the full story here.

That’s all for now.

Tomorrow, PE Hub’s Obey Martin Manayiti will make his debut writing the Wire.

Obey joined us nearly a year ago. Previously, he covered the retail sector at the Financial Times, NYC office as a US Newsroom Diversity fellow.

At the Hub, Obey has been writing a lot about deals involving energy, infrastructure, financial services and the global supply chain. Tomorrow, he’ll be bringing us a tasty roundup of food and beverage deals.

He’ll be writing the Friday Wire on an ongoing basis. Feel free to reach out to Obey with story ideas at obey.m@peimedia.com.

I’ll be back on the Wire on Monday.

Happy dealmaking,

MK