PE-backed companies turn waste into energy; BPOC buys time for 5 healthcare service providers

Good morning dealmakers, thank goodness it’s Friday.

It’s Obey Martin Manayiti here with the newsletter. To cap off the week, I have two interesting trends that caught our attention here at PE Hub this week.

I will start with three deals that are converting waste to renewable energy, a market that is expected to grow rapidly as the US moves to cut carbon emissions and bring a variety of renewable energy sources online.

Then, I’ll share Irien Joseph’s roundup of nine PE-backed deals in the education sector.

And I’ll share some news this morning about BPOC closing its first continuation fund. The deal involves five healthcare service providers.

Trash or treasure
Private equity firms are increasingly picking up investments in waste management and leveraging opportunities to turn waste into renewable energy, teeing off an additional revenue stream on top of waste management.
The sector is high growth and resilient, and it offers stable cashflow, sources told me.

Let’s look at some of the deals:

PurposeEnergy
Earlier this week, Quinbrook Infrastructure Partners acquired PurposeEnergy, a Windham, New Hampshire-based company that specializes in turning waste food into biogas for use in industrial processes, conversion to renewable electricity, or refinement to Renewable Natural Gas.

“Quinbrook is really excited to be moving into such a high growth and important sector that desperately needs more sustainable solutions that convert organic food waste into renewable power and biogas,” said managing partner and co-founder David Scaysbrook.

Circon
Through its portfolio company Covanta, EQT, the Stockholm, Sweden-headquartered PE firm, earlier this month agreed to acquire Circon, a La Porte, Texas-based provider of environmental services, including waste management, from Kinderhook Industries.

Covanta, a Morristown, New Jersey-headquartered waste-to-energy provider that manages about 21 million tons of waste per year from municipal customers and industrial customers. Most of the waste is used to produce renewable energy while the other portion is recycled or reused as green metals.

“We look for businesses where there is cashflow predictability and downside resilience,” Juan Diego Vargas, partner at EQT’s infrastructure team told me. “When you look at waste management and the volumes specifically from municipal solid waste or industrial waste for the past 10 to 15 years, you see remarkable stability, regardless of economic activity in the broader US economy.”

Divert
Earlier in March, Houston-based PE firm Ara Partners, ramped up its investment in Divert, a Concord, Massachusetts-headquartered company that turns wasted food into RNG.

Divert announced in March a $1 billion infrastructure development agreement with Enbridge, a multinational pipeline and energy company headquartered in Calgary, Canada. In addition, Divert secured $80 million in growth equity from Enbridge and another $20 million from Ara Partners.

“Renewable natural gas is an incredibly hot market from an acquisition standpoint,” said Ara partner Cory Steffek in an interview. “There is such a supply-demand imbalance of renewable natural gas, and that’s getting worse.”

Steffek said this project has attracted a lot of interest from many investors. So far Divert has signed an RNG offtake agreement with BP worth approximately $175 million.

Back to the books
With global demand for accessible education on the rise, private equity firms are increasing their engagement in the education segment, with a flurry of deals since the beginning of 2023 in Europe and the US.

After initially hitting a pause in 2022, there now seems to be a pickup in activity in the education sector with PE firms targeting online learning services and technical education companies, reported my colleague Irien Joseph.

Here are some of the deals Irien covered:
• New York City-based Coursedog, an academic operations platform for higher education, secured $90 million from JMI Equity in March.
Coursedog was founded in 2018 by Columbia University students Justin Wenig and Nicholas Diao.

In March, Carnegie, which is backed by New Heritage Capital, acquired Clarus Corporation, a provider of community college marketing.

Based in Westford, Massachusetts, Carnegie is a higher education enrollment marketing and strategy firm.

• Excolere Equity Partners acquired Nashua, New Hampshire-based EPS School Specialty, a developer of curriculum products and services that aim to enhance literacy and math skills for K-12 grade level students, in March.

As part of the acquisition, Excolere appointed Steven Guttentag as CEO of EPS. He is the former CEO of Reading Plus.

• In February, 95 Percent Group, a portfolio company of Leeds Equity Partners, acquired Oklahoma City-based Tools 4 Reading, a provider of literacy instruction.
Based in Lincolnshire, Illinois, 95 Percent Group is an education company that aims to help educators identify and address the needs of all readers.

Healthcare services
Chicago-based healthcare-focused PE firm BPOC announced the closing of its first continuation vehicle, a $425 million transaction co-led by investment funds from Apollo S3, Blackstone Strategic Partners and Five Arrows.

The continuation fund consists of five healthcare services companies previously held by Beecken Petty O’Keefe & Company Fund IV, L.P. and Beecken Petty O’Keefe & Company Fund IV-A, L.P. (together ‘BPOC Fund IV’), 2013 vintage funds with $503 million in combined total capital commitments, according to the press release.

The continuation fund will provide more time and, in certain cases, additional capital to assist each portfolio company in further accelerating its full growth potential. As part of the transaction, existing investors in BPOC Fund IV were provided with the choice to receive full liquidity or to fully or partially re-invest into the new continuation fund.

“We are grateful for the support of our new investors and believe this new vehicle will enable us to continue to create value at certain Fund IV companies, while providing liquidity options for our existing Fund IV investors,” said Gregory Moerschel, BPOC managing partner.

That’s it for me today. You can reach out to me at obey.m@peimedia.com.

MK Flynn will be back with the Wire on Monday.

Have a great weekend.

Cheers,

Obey