EQT’s Eric Liu expects healthcare dealflow recovery; Godspeed, Lone Star and Orogen in deal action

Good morning Hubsters, Craig McGlashan here with the Tuesday Wire.

I hope those of you in the US enjoyed your Labor Day holiday – that’s one we don’t get in the UK, so I’ve been able to keep an eye on things for you while you’ve been away.

Rafael Canton opens things up with an outlook for the rest of the year in healthcare, as he speaks to Eric Liu of EQT.

Next, we take a brief look at the latest on SoftBank’s IPO of microchip maker Arm, before we feature a trio of deals.

First, Godspeed Capital Management has acquired a company working in architectural and interior design, planning, development, construction and contract management services.

Next, Lone Star Funds acquires a maker of engineered systems for industrial and transportation applications from One Rock Capital Partners.

And finally, The Orogen Group makes an investment in a New Jersey-based digital technology provider.

Thawing
Dealmaking in the healthcare sector is set to pick up in the coming weeks, Eric Liu, partner, head of North American private equity and global co-head of healthcare at EQT, told Rafael Canton in the latest of our interviews with dealmakers about the outlook for the rest of the year.

And in the stand-off on valuations between buyers and sellers, it looks like the latter are winning out, said Liu.

What’s your forecast for dealflow this fall?
There was a nine-month period between July of 2022 and March of 2023 where there were essentially no large-cap private equity deals announced in the healthcare sector by any major PE firms. Starting in April 2023, there were a few new investments announced and then a few more thereafter. Interest rates are still high, but we can feel the system starting to move again.

Sellers have not capitulated on valuation expectations, and buyers have realized they cannot wait for a correction in expectations before starting to invest again, because they might be waiting for a long time. Thus, PE firms are deploying selectively in situations where they think they can be good owners.

Heading into the post-Labor Day period, I think the market will continue to thaw. Although interest rates are higher than they have been in the past few years, the near-zero interest rate environment was also a historical anomaly. I think we will see a continued recovery in dealflow through the end of this year and into next year.

Read the full interview to learn more about EQT’s North American healthcare strategy.

Going public
Healthcare has not been immune to one of the biggest headaches for private equity managers over the last 12 months – a difficult exit environment, exacerbated by a moribund IPO market.

That’s why it’ll be interesting to see how SoftBank’s listing of UK microchip designer Arm on the Nasdaq fares. Arm put a range on its share price at $47-$51 this morning which at the upper end would give Arm a valuation of about $52 billion – a tidy sum, but a bit of a drop from the valuation of $64 billion implied by an internal transaction between SoftBank and its Vision Fund last month.

I’d love to get readers’ thoughts on whether the Arm IPO will act as a bellwether for the rest of the IPO market or if it’s too idiosyncratic to matter. Drop me a note at craig.m@pei.group

Design
Switching to confirmed deals now, and it’s a bit of an eclectic bunch.

Godspeed Capital Management has acquired Synalovski Romanik Saye Architects, a Florida-based design firm for architectural and interior design, planning, development, construction and contract management services.

SRS will join Zyscovich, a Florida-based architecture and design brand operating within Stratus, Godspeed Capital’s multidisciplinary engineering, architecture, and consulting business.

Transportation
Lone Star Funds has acquired Wisconsin-based CentroMotion, a maker of engineered systems for industrial and transportation applications. The seller is One Rock Capital Partners.

“With the scale and capabilities developed since the business was first carved-out of Actuant Corporation, CentroMotion has driven innovation and expanded its market reach to enhance its ability to serve customers globally,” said One Rock managing partner R. Scott Spielvogel in a statement.

Tech
The Orogen Group has made an investment in Brillio, a New Jersey-based digital technology provider.

Brillio is backed by Bain Capital Private Equity, which acquired a stake in the company in 2019. Bain Capital will stay on as a strategic investor.

That’s a wrap from me – Chris Witkowsky will be on Wire Wednesday duty tomorrow.

Cheers,

Craig