Is your summer starting to slow down? Doesn’t seem like M&A activity is calming at all. Check out this report from Financial Times, based on Refinitiv numbers:
Buyout firms announced 6,298 deals since the first of the year, worth $513 billion, which was the strongest half-year result since at least 1980, according to Refinitiv data. Overall M&A volume hit an all-time high of $1.5 trillion this quarter.
“The level of deal activity is truly extraordinary, and beyond any of our expectations [last year],” said Cathal Deasy, global co-head of M&A at Credit Suisse.
About the frenetic deal environment, Jon Gray, Blackstone’s president and COO, said asset prices are “certainly not inexpensive”, but the firm was benefiting from low interest rates and was buying companies that stood to benefit from “long-term tailwinds”.
“We are big believers in the migration of almost everything online, the revolution in life sciences, the shift to sustainable energy, a shortage of housing since the global financial crisis, the global travel recovery and the continued rise of the middle class in China and India,” he said. Rising inflation was “the biggest risk on the investment horizon”, he added. Read it here on FT.
Exit: OMERS Private Equity is preparing a sale of Forefront Dermatology, working with Harris Williams as financial adviser on the process, writes Sarah Pringle on PE Hub today.
Forefront Dermatology has grown under the leadership of CEO Scott Breemen, since OMERS acquired the company in 2016 from Varsity Healthcare Partners, Sarah writes.
The process follows notable deals in women’s healthcare, gastroenterology and dental. That includes Partners Group’s almost $800 million deal for Axia Women’s Health; Altas Partners’ investment in Ares Management’s Unified Women’s Healthcare at $1.5 billion-plus; and OMERS’ purchase of Audax Group’s Gastro Health at a mid-$900 million value. Read more here on PE Hub.
Inflation: What frame of reference are you using to navigate this era of high prices and potential persistent inflation. Interestingly, private equity has not existed as an industry in a period of persistent inflation, the last of which occurred in the early 1980s, when PE was just starting out.
We asked this question and talked to GPs and LPs about how they are approaching the market with rising commodity prices. The common answer we heard from GPs is that, private equity is a long-term asset class, and managers need to find companies that can withstand short-term spikes of volatility and prices. The key is to find market leaders with purchasing power to adjust at times of rising prices.
Without hard evidence to reference on best practices during persistent inflation, the industry must use proxy examples over the past decade that can help shape the way forward, according to Jason Thomas, managing director and head of global research at Carlyle Group.
“The scenarios I look back to are not 1965 to 1979… we can look back to the way that inflation risk became a phenomenon in the last 10 years,” Thomas says. “Go back to the Taper Tantrum in 2013, go before that, in 2010 and 2011, the amount of people suggesting Fed policy was too accommodative and we were risking a massive surge in inflation. This was cause for concern for many investors.”
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