PE represents large portion of terminated deals; Hamilton Lane talks AI

Good morning, Hubs!

This is Chris, on for Wire Wednesday.

Interesting research from S&P today: Private equity accounted for 14 terminated deals in the first six months of the year out of 104, totaling about $19.94 billion. Just in the second quarter, PE had six terminated deals, S&P found.

Also, as of June 30, there were five canceled deals with PE backing worth at least $1 billion each, according to the report. The canceled deals, all of which targeted publicly listed companies, had a combined value of just over $20 billion, the report said.

This happened on the acquisition side, as well as the exit side. PE firms were the sellers in three canceled deals in the second quarter, a buyer in one, and were involved in both sides of the transaction in two terminated deals, S&P said.

The news comes as M&A activity continues to decline through this year as lending activity remains muted amid high interest rates. Federal funds rate climbed to 5 percent to 5.25 percent in over a year, increasing the cost of borrowing and slowing the pace of dealmaking.

Around 3,838 deals were agreed in the second quarter, a decline of 30.4 percent during the same period in 2022. Total transaction value fell 39.6 percent year-over-year to $270.5 billion.

Much of the deal activity this year has focused on add-on activity, as opposed to platform investments, sources have told me. But even the pace of add-ons has slowed.

“Any time there’s high valuations, the natural thing is to do accretive add-ons,” a GP source told me recently. “Funds right now are thinking, ‘I thought I had this amount of capital remaining, before I need to raise a new fund, but now I need to make it last longer’. People are thinking about the pace of deployment.”

To adapt to the tougher environment, sellers are bringing assets to market with much more information. “People are adapting, companies are coming to the market more prepared, with more diligence done already, more third party reports done on Day 1. They know they’ll need it,” the GP said.

AI
Hamilton Lane is teaming up with fintech startup TIFIN to develop an AI-powered “assistant” for investors that will blend the firm’s private markets data and intelligence with the software company’s technology, writes Rafael Canton on PE Hub today.

PE Hub spoke with Griff Norville, a managing director and the head of technology solutions at Hamilton Lane. Norville outlined how the upcoming product will work and what it is expected to provide for clients.

The product, which has not yet been named, is still in development. It functions as a chatbot, with customers asking it questions. Customers will be able to interact with the chatbot about three areas: portfolio construction, investment selection and education.

The new product will be integrated into Hamilton Lane’s software for its wealth management customers.

“It’s seamless for them, because they don’t have to log in to anything new,” Norville said. “Now, they’ve got a chat interface where they can use natural language questions to ask for information.”

Iron man
Michael Fisch, CEO of American Securities, talked to Kirk Falconer at Buyouts about how he uses IronMan Triathlon races to “relax.”

How do you relax when you’re not working?
“I love spending time with my four grown children. I also enjoy endurance athletics – Ironman Triathlons in particular – although I’m not sure others would consider this relaxing.”

Read more here on Buyouts.

That’s it for me! Have a great rest of your day. Reach me at cwitkowsky@pei.group or find me on LinkedIn with feedback, tips n’ gossip or book recommendations.