Generative AI in your dealflow; TA backs healthtech; family office survey

Good morning, Hubsters. MK Flynn here with the Wire.

Score another point for ChatGPT and generative AI.

Nvidia, which makes chips used in developing AI and other computing-intense applications, earlier this morning announced $11 billion in sales for the current quarter, making it the best ever quarter for the chip maker.

“The computer industry is going through two simultaneous transitions — accelerated computing and generative AI,” said Jensen Huang, founder and CEO.

“A trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process.”

At PE Hub, we’d love to hear how you’re looking at generative AI in your dealflow.

Have you started taking advantage of the technology yet in your deal sourcing and/or due diligence? How do you plan to counteract the errors the technology will inevitably make with human intervention?

I’d love to hear your thoughts on how you’ll be using AI in your dealflow. Email me at mk.flynn@peimedia.com.

And now back to our regularly scheduled programming on today’s PE deal news….

TA Associates just revealed an interesting healthtech transaction earlier this morning. Details below.

And BlackRock is out with the results of a survey about how family offices are reevaluating their exposure across asset classes, especially private markets, “in response to a new market environment defined by heightened volatility, rising interest rates, geopolitical tension and rising protectionism.”

Let’s get to the deal news.

Medical coding complexity
TA just announced a significant growth investment in Alpha II, a provider of revenue cycle management (RCM) software to healthcare providers.

Founded in 1983 and headquartered in Tallahassee, Florida, Alpha II’s offerings aim to help healthcare providers identify coding errors to ensure appropriate reimbursement, minimize denials and increase staff productivity.

“As medical coding complexity grows and providers demand increasingly advanced solutions, we aim to support the expansion of Alpha II’s product suite via organic and acquisition-driven growth, while continuing to deliver ROI for our customers,” said Mark Carter, managing director and co-head of the North America healthcare group at TA.

For more insights on why PE firms are investing in healthtech, see Irien Joseph’s story from earlier in the week.

Strong preference
Family offices have become more professional and more important in the world of private capital in recent years. For PE firms, family offices can play many roles in dealmaking, including seller, buyer, partner and co-investor.

But most family offices keep a low profile – and keep their cards close to their vests – so insights into their strategies and sentiments are valuable.

So I’m delighted to see BlackRock is out this morning with the results from a survey that includes participation from 120 family offices who overseeing AUM of $243 billion collectively.

“The sharp fall in public markets in 2022 exacerbated the denominator effect, pushing many institutions to reduce their private market allocations,” the report says. “In contrast, family offices continue to show a strong preference for private markets, with most looking to maintain or increase and diversify their allocations.”

Average allocations to alternatives (40 percent) exceeded allocations to public equities (37 percent), BlackRock reports.

“Nearly half of family offices intend to make more tactical adjustments to their portfolio allocations in response to the current market environment,” according to the survey.
In 2023, family offices intend to increase allocations to several private market asset classes, particularly private credit (28 percent), private equity direct deals (23 percent), private equity funds (22 percent) and real estate (8 percent).

The report points to opportunities for PE firms and service providers to partner with family offices.

“Family offices are seeking external resources to unlock opportunities,” the report said. Key challenges cited include: getting access to the best direct deals and managers (41 percent), high fees (40 percent), liquidity constraints (35 percent) and lack of transparency (30 percent).

“Family offices recognize that internal resourcing and technology are key constraints and are the areas they need the most assistance with. As such, many are looking to external partners to help them capture opportunities across a broader range of potential investments.“

That’s it for today.

Obey Martin Manayiti will be back with tomorrow’s Wire, and then we’re off for the Memorial Day weekend and the unofficial start of summer.

Note: There will be no Wire on Monday. I’ll be with you on Tuesday.

All the best until then,

MK