KKR on opportunities in testing and measurements; newbie Coalesce Capital makes first deal

Coalesce Capital makes inaugural investment in compliance firm.

Morning Hubs!

This is Chris, on for Wire Weds. Big stuff going on today!

There are a bunch of GP-led continuation fund deals slated to hit the market after Labor Day, with some agents having already introduced them over the summer in anticipation of a crowded market in the second half.

CV deals, like regular M&A, have remained challenged because of the ongoing gap between buyer and seller expectations. The real challenge is not inventory but actually getting a transaction to the finish line.

In this environment, a group of mid-market level CV deals ($300m to $500m range) have found their way to final close. There are also many deals left swinging in the breeze, finding it tough to find a lead investor, to syndicate out to a larger investor group or that get killed at the LP level during LPAC consent, or from a lack of LP selling, sources told me.

There’s a lot to look at, but buyers remain strict in what they are choosing to do. With this in mind, there is a crop of deals out there moving along. Here’s one:

Elliott Management is leading a deal to move specialty chemicals business Opta Group out of an older Speyside Equity fund and into a continuation pool for more time and capital to grow the business. The deal is said to be in the range of $500 million, sources said.

Jefferies is working as secondaries adviser on the transaction.

Speyside first invested in Opta Group in 2016. As is usual with such deals, LPs in the older fund have the option to sell their interests in the asset or roll into the continuation fund. It’s not clear if rolling LPs have the ability to keep the same terms they had in the older fund, known as a status quo option.

KKR recently completed its previously announced buyout of Industrial Physics, which aims to “protect the integrity of packaging, products, and materials for manufacturers, production lines, and laboratories all over the world,” as its website puts it.

PE Hub reporter Obey Martin Manayiti spoke with Brandon Brahm, a partner at KKR, and Barry Lyon, the newly appointed CEO of Industrial Physics, about the growth opportunities for the company. Read the full interview here on PE Hub.

KKR’s Brahm sees opportunities in the fragmentation of the testing and measurement industry.

Industrial Physics is a “very attractive” business to use as a platform to consolidate the sector. He said KKR is seeing M&A opportunities, not just in the US, but in Europe and elsewhere around the globe in this sector.

“The marketplace is very fragmented because the use applications are fragmented, and so we can acquire companies that may be small, but they are still going to be a market leader in the specific niche application that they serve,” Brahm explained.

First deal
A new manager we’ve been tracking is Coalesce Capital, formed by ex-Warburg Pincus dealmaker Stephanie Geveda. The firm has been targeting $750 million for its debut fund.

Coalesce is announcing its first deal this morning. The firm is recapitalizing Examinetics, which provides occupational health compliance testing services. Coalesce is making the investment alongside existing Examinetics shareholder Freedom 3 Capital, according to a statement. Financing for the deal is being provided by the Bank of Montreal.

The deal comes after Coalesce held a first close on its debut fund in May on around $328.6 million, pushing through the fundraising in the tough markets.

The challenge of raising a first fund was exacerbated in the sluggish fundraising environment, with LPs mostly turning to their deepest relationships and focusing on re-ups. Check out the extensive emerging manager database on Buyouts that tracks new shops and how they are navigating the tough markets.

In memoriam
Sad news out of Apollo. The firm’s co-head of impact investing, private equity, Marc Becker, has died after battling pancreatic cancer. He was 51. Becker was employee number 14 at Apollo, having joined in 1996.

On Becker’s passing, Apollo said in an internal announcement, “With his passing, we have lost a larger-than-life presence who made an indelible mark on Apollo. Marc’s legacy can be seen in everyone who he touched as a colleague, mentor, and friend. We will remember him as a dedicated and loyal class-act, who was gracious and generous to all, and helped create and enhance some of our most well-known Apollo traditions, such as the ski trip, top 10 lists, and many others.” Read more here on PE Hub.

That’s it for me. Have a great rest of your day! Hit me up with tips n’ gossip, feedback, rumors and signs and wonders at cwitkowsky@pei.group or find me on LinkedIn.