We’ve been exploring a trend lately of GPs tweaking and circumventing traditional ownership structures for ways to hold growing assets outside the confines of fund term limits. The philosophy is, why nurture and grow a company for a few years, and then sell, only to see the next owner, quite possibly a competing PE firm, reap the fruits of that hard work? More on this below.
Big deal: GHO Capital is buying NaviMed Capital’s Velocity Clinical Research, concluding a Harris Williams-run process that kicked off in January, Sarah Pringle writes today.
Velocity was the only multi-site company in the U.S. to conduct trials for all pharmaceutical companies included in the U.S. government’s Operation Warp Speed, plus Pfizer, Sarah writes. It recruited more than 10,000 patients for covid-19. Read more here on PE Hub.
Deal fever: A lot of deal activity didn’t happen last year after markets mostly shut down in the pandemic. Instead, firms kept their powder dry while waiting for markets to stabilize, and volumes began to creep back toward the back half of 2020.
But this year, firms came screaming out of the gates, aided by cheap debt and sellers motivated to unload target assets. PE deal values hit an all-time high of $250.6 billion in Q1, jumping around 116 percent over the same period last year, writes Karishma Vanjani this morning. The number of announced deals spiked to 2,800, up 57 percent compared to Q1 2020, Karishma writes, citing data from Refinitiv.
Part of what’s adding fuel to the mix is sellers willingness to transact. “We’ve had several multi-generational family-owned brands who have told us over the years, ‘Thanks for staying in touch, but we will never sell our company or bring [in] outside capital,’” said David Howitt, CEO of financial advisory firm Meriwether Group. “They are now calling us to find the right partner at the right valuation.”
For Howitt, the acceleration in deal activity is surprising, but it simply corroborates what he has already been seeing in the market: Business owners want to share the risk ahead.
“Cost of labor, rent and goods are increasing while clients are unable to raise cost of service,” Howitt said, pointing to troubling inflationary waves ahead.
Read it here on PE Hub.
Long hold: Clearlake Capital created a series of single-asset funds as a way to extend holds over certain assets beyond the term limits of its traditional private equity funds. The firm, which appears to be the first to use such a structure to achieve longer holds, has three single-asset vehicles so far, which it is calling its Icon series of funds.
The funds were created to hold Clearlake portfolio companies Ivanti, Precisely and Wheel Pros. Read our coverage here on Buyouts.
Clearlake’s innovation comes as GPs are finding ways to build flexibility into traditionally rigid private equity ownership structures. Managers have been using the secondary market in a proactive way to extend holds over even growing companies, rather than simply sorting out aging assets. Other firms like TA Associates and Insight Partners have created funds to reinvest into existing portfolio companies.
Notably, the trend we’re seeing in the market these days has very little to do with long-dated funds, which pursue different sorts of assets than the growth companies being extended in the current trend.
Read our ongoing coverage of the long-hold trend here. And hit me up with your thoughts on this trend at firstname.lastname@example.org.