Dividend recaps may help reignite exit markets; Arcline expands engineered systems and components portfolio

Arcline acquires International Water-Guard.

Morning Hubs!

This is Chris, on for Wire Wednesday.

Some of the intel I’ve been picking up over the past week: some sources believe dividend recaps may make a comeback later this year, as the financing markets gradually open back up. This would be a first step in getting the exit environment back up and running, and would likely start in the middle market, only for certain assets and at certain leverage levels.

As exit activity remains muted, some LPs are choosing to take liquidity in GP-led continuation fund deals, not even bothering to assess the roll-over option to keep hold of an older asset. This is a result of the tight liquidity environment and many LPs’ need to get some capital flowing back to them through their PE programs.

It’s also a reflection of some institutions’ inability to properly vet CV deals in the time frame provided, making it easier to just take a pay out (some sources believe that is exactly what a GP wants in a CV deal, to cash out older investors and make room for new money).

Arcline Investment Management, a fund that has grown at a steady clip since its founding in 2019, acquired International Water-Guard, a provider and servicer of potable water systems and components used in business and commercial jet applications.

The company’s products range from water treatment units to parts like pumps, on-demand water heaters, tanks or structural details and complete water systems. The deal expands Arcline’s portfolio of engineered systems and components businesses for aerospace applications, the firm said.

Arcline, which closed its third fund earlier this year on $4.5 billion, focuses investments on industrials and industrial technology, targeting businesses with enterprise values of up to $1 billion.

Speaking of CVs
Secondaries Investor has the goods on a healthcare-related single-asset GP-led run by Calera Capital involving its portfolio company ImageFIRST, which it backed in 2018. ImageFIRST is a US healthcare laundry service company that the firm invested in through its Fund V.

Goldman Sachs is said to be leading the deal, with Strategic Partners, Portfolio Advisors and TPG co-leading the deal that could raise more than $700 million. The continuation fund is said to have a super carried interest component, though details were not available. Jefferies is working as secondary adviser on the deal. Read more here on Secondaries Investor.

Hidden River Strategic Capital, a new firm formed by ex-Boathouse Capital, LLR Partners execs, closed its debut fund on $245 million, the firm announced this week. The firm focuses investments on flexible junior capital for small business owners.

The firm invests $5 million to $25 million in US positive cash flow businesses usually generating at least $10 million of revenues. The firm is a Small Business Investment Co.

We’ve recently launched surveys for emerging managers and investors that back emerging managers. Both surveys should take no longer than 10 minutes to complete, and all participants receive a pre-publication, complimentary copy of the final report as well as entry into a prize draw to win a $100 Amazon voucher. Deadline is July 10.

That’s it for me. Have a great Wednesday. Reach me with tips n’ gossip, feedback or book recommendations at cwitkowsky@buyoutsinsider.com or find me on LinkedIn.