Elliott takes stake in Salesforce; Ardian invests in Assist Digital; PE firms focus on value creation

US PE firm MiddleGround opens new office in Europe.

Good morning, Hubsters. MK Flynn here with the Wire on a busy Monday.

Some of the stories we’re covering today include: an activist investor with an appetite for LBOs has taken a big stake in an enterprise software company; dealmaking in Europe continues apace; and private equity firms focus on value creation.

Tech talk. This morning, we’re keeping an eye on Salesforce, as activist investor Elliott Management Corp. has taken a multibillion-dollar stake in the business software developer, a move first reported by the Wall Street Journal, citing people familiar with the matter.

Like many tech companies, the San Francisco-based enterprise software maker is currently laying off about 10 percent of its staff. Chair and Co-CEO Marc Beniof has admitted the company hired too many people during the pandemic, when demand for its products increased.

“Salesforce is one of the pre-eminent software companies in the world, and having followed the company for nearly two decades, we have developed a deep respect for Marc Benioff and what he has built,” Jesse Cohn, managing partner at Elliott, said.

Last year, Elliott was involved in takeovers of enterprise software developer Citrix Systems and media ratings group Nielsen, two of the largest leveraged buyouts of the year, through its private equity unit Evergreen Coast Capital, the Financial Times points out.

Customer experience. In dealmaking this morning, one European announcement stood out. Ardian has entered into an agreement to acquire a majority stake of around 60 percent in Assist Digital, which provides end-to-end customer experience services. Assist Digital, headquartered in Milan, has offices in Italy, France, Germany, UK, Spain and Netherlands.

“Assist Digital’s target market remains resilient even in the current economic climate,” said Marco Molteni, managing director of Paris-based Ardian. “The company has significant organic growth potential as part of the trend towards outsourcing and digital transformation, which will be bolstered by its international M&A strategy.”

For more on the deal, including the roles played by Milan-based Progressio SGR and Paris-based BNP Paribas, read the full story by assistant reporter Irien Joseph on PE Hub Europe.

Next stop, the Netherlands. Private equity dealmaking continues to heat up in Europe, with more North American firms setting up shop in the region.

Today, MiddleGround Capital, headquartered in Lexington, Kentucky, announced a new office in Amsterdam. The operationally focused PE firm makes control investments in mid-market B2B industrial and specialty distribution companies.

The firm said it is expanding its operating capabilities “to meet the growing needs of global investors and portfolio investments,” a theme PE Hub and PE Hub Europe are hearing frequently in these economically challenging times.

“The European industrial sector is undergoing similar macroeconomic changes and secular manufacturing tailwinds as the United States market, resulting in similar pockets of opportunity,” according to MiddleGround.

“The new office in Amsterdam is a key location that allows MiddleGround to enhance its European efforts considering the city is in the heart of the firm’s key markets, while also ensuring a cultural fit given a shared prioritization of holistic individual wellbeing and work-life balance,” according to the press release.

MiddleGround also announced new hires to lead the new office, as well as several promotions. Alex van der Have is joining the firm and will serve as managing director and head of the investment team. Previously, he was part of the management team running the venture, growth capital and private equity business at Ingka Investments (part of IKEA group).

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Value creation. “Private equity firms are remaining proactive,” said Sean Mooney, the founder and CEO of BluWave, which provides a marketplace for services aimed at private equity professionals.

The company recently released BluWave’s Q4 /2022 Activity Index Report, based on activity across its client base of 500 mid-market PE firms.

The index “shows how top PE firms are finding ways to continue making deals and how they’re surrounding their portfolio companies with the means to not only survive, but thrive as the economy transitions,“ Mooney told PE Hub.

The index showcased several trends that PE Hub has been writing about lately, including:
• Value creation is at a record high: With deal activity down, PE activity has shifted from a 60/40 mix of value creation to due diligence in 2018 to 70/30, indicative of what the market is calling for: sound strategy in uncertain times.

• Human Capital dominates as the number one area of focus: Talent continues to be the biggest trend in PE representing 41 percent of all initiatives. Companies are adding talent at deeper levels within organizational structures for long term value creation.

• PE has embraced transforming companies rather than simply optimizing them, requiring wholly new skills sets driven by covid and an ensuing downturn.

• Technology activity increased 20 percent year over year.

• Sales & marketing activity increased 25 percent YoY.

One prediction BluWave is making: more private equity firms will hire chief marketing officers in 2023.

That’s all for today.

Tomorrow, Aaron Weitzman will write the Wire. It will be his last Wire, as he moves on at the end of the week. Aaron has done a great job as a reporter for PE Hub over the last year, and we wish him well.

Buyouts’ Chris Witkowsky writes the Wire on Wednesdays, and I’ll be back on Thursday.
Happy dealmaking until then!

All the best,