Francisco Partners picks up Weather.com from IBM; PE deals rebounded a bit in Q2

Happy hump day, dealmakers!

It’s Rafael Canton filling in for Chris Witkowsky for this Wednesday edition of the Wire.

This morning we have a look at Francisco Partners taking on the Weather Company from IBM.

Plus, we have some key points from a Q2 report from Ernst & Young that showcases a slight rise in PE activity.

We also revisit the role Generative AI is starting to play in dealmaking through a look back at a previous story that proved popular with our readers.

This forecast calls for deals
Francisco Partners has agreed to acquire The Weather Company assets from IBM in a deal that is set to close by the end of Q1 2024.

The assets involved in the deal include Weather.com, Weather Underground and Storm Radar. The Weather Company will also bring its forecasting science and technology platform to Francisco Partners. IBM will retain its sustainability software business.

“We have a long and successful track record of executing divisional carve-out transactions and look forward to helping The Weather Company drive crucial focus in executing on organic and inorganic growth strategies,” said Mei Shi, principal at Francisco Partners, in a statement.

Dealmaking uptick
Private equity is making a small rebound according to EY’s Private Equity Pulse: Takeaways from Q2 2023.

As we’ve heard throughout the year, add-on deals have become a significant form of dealmaking. Also, European deals saw an increase from the previous quarter.

Here’s a look at some key stats from the report.

PE activity sees an uptick in Q2, but challenges remain: Compared to Q1, PE activity climbed 15 percent in Q2, with firms announcing deals valued at $114 billion. That said, market volatility continued to take its toll – Through the end of June, PE firms announced deals valued at $213 billion, a significant drop from $545 billion in the first half of 2022.

European dealmaking grew: European firms amassed more than $38 billion in acquisitions, 4X the amount announced in Q1.

Add-ons and take privates remain solid strategies: Add-ons accounted for 55 percent of deals by volume in H1 and take-privates accounted for 42 percent of all PE deals in Q2.

Exit market moves higher on sales to strategics: Exits experienced a modest rebound in Q2, with firms announcing transactions valued at $84 billion, up 42 percent by value from Q1. Activity was driven by a marked increase in sales to strategic acquirers, which grew nearly 90 percent from Q1.

Generative AI still early
A topic we’ve been monitoring at PE Hub the past few months has been the use of Generative AI in dealmaking.

Earlier this summer, I spoke with deal-source service providers and dealmakers about how Generative AI could be used in deal sourcing.

“If a source servicing provider can boil the ocean for me and identify 100 targets that we feel really good about and I can get emails out to those people in 24 or 48 hours versus the olden days, the vault, the volume and the velocity that these tools can bring to deal sourcing is tremendously valuable,” Jessica Ginsberg, managing director of business development at lower mid-market private equity firm LFM Capital, said.

In speaking to firms throughout this summer, many said they’re still learning and feeling out Generative AI. Some firms are actively using or exploring Generative AI while others are still in the research phase of seeing how it can impact their business.

“None of us are experts on Generative AI,” John Oakes, partner at Trinity Hunt Partners said in June. “But it is something that I have been talking about with my peers. Right now, it’s more of an experiment today. People are observing from the sidelines and watching the technology mature. I do believe that it will impact our business. And that day will probably come sooner rather than later.”

That’s it from me today. MK Flynn will bring you the Wire tomorrow.

If you have any thoughts, please email me at rafael.c@pei.group.

Thanks,

Rafael