Private equity energy investors seize the day; Blackstone attracts individual investors

Good morning, Hubsters. MK Flynn here with today’s Wire.

We’ve got a full roster of stories for you, starting with a close look at investing in the energy sector, followed by a new platform investment for ATL, an interview with Blackstone on individual investors in private equity and fundraising news from Sixth Street.

Deep dive. PE Hub reporter Obey Martin Manayiti has been writing about private equity-backed deals in the energy sector all year, and now he’s written a cover story on the sector for the November issue of Buyouts.

Oil and gas private equity investors are seeing a resurgence, as rising prices – driven by the Russian invasion of Ukraine – have changed the equation for the sector after a decade of underinvestment, Obey writes.

It’s a remarkable moment for PE investors in energy.

“This is our 25th year in business, and the last time we saw opportunities with the same kind of risk-adjusted returns were back in the late 1990s to 2001,” said Wil VanLoh, founder and CEO of Quantum Energy Partners.

Beyond traditional sources of energy, alternative energy sources are also seeing increased interest from private equity. That’s thanks in part to the Inflation Reduction Act, which was signed in August and includes $400 billion targeting renewables.

“We have never had stimulus anything close to this size,” said Doug Kimmelman, founder and senior partner at Energy Capital Partners.

These forces are working in tandem to create what could be historic opportunities for energy PE investors, on both sides of the sector. While traditional energy investors are looking for ways to cash in on the upheaval, those supporting energy transition may have to tread lightly in a tougher environment. Where it all plays out will determine which firms will lead the strategy in the future.

Read Obey’s story here.

Taking off. Earlier this morning, Obey broke the news that New York PE firm ATL Partners has made a majority investment in Aero Accessories & Repair, a Miramar, Florida-headquartered company focused on servicing cargo and commercial airplanes.

Built-up demand for airplane maintenance, repair and overhaul services (MRO) is whetting private equity’s appetite to invest in the sector, ATL co-founder and partner Paul Teske told Obey in an exclusive interview.

“Right now, on the commercial side, we are seeing a lot of activity in the aftermarket space, and our expectation is that it is going to continue,” Teske said. “Cargo activity has remained strong throughout Covid, and it was a nice balance to the portfolio when the commercial side took a hit.”

Add-on acquisitions are on the horizon for Aero.

“The company has never executed strategic M&A, so we will bring our expertise to support this area of growth. Specifically, we see opportunities to expand in North America, Europe and in new markets, such as defense,” Teske said.

Read the full story.

Individual investors. Our colleagues at PE Hub Europe have been reporting recently about how private capital is attracting cash from individuals like never before.

Editor Craig McGlashan spoke with Rashmi Madan, head of EMEA for Private Wealth Solutions at Blackstone, about the trend. Madan, who is based in London, was previously chief operating officer of institutional client solutions (ICS) in Europe as well as head of ICS Europe for Blackstone Credit.

“In the current environment, what worries most people are these three dynamics: high inflation, rising interest rates, and market volatility,” Madan said. “Private markets can provide unique protections against each of these. With private real estate, having the option of rent adjustments, the asset class has the potential to provide protection against inflation. With private credit, floating rate credit may protect against rising interest rates. And market data proves that private market solutions are far less volatile than publicly traded counterparts. These are reasons why we see a lot of individuals turn their attention to private markets in the current environment.”

You can read Craig’s full interview here.

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Investing in growth. In fundraising news, Sixth Street, spun out of TPG in 2020, has secured $4.4 billion for a pair of funds earmarked for investing in late-stage growth companies, Buyouts’ Kirk Falconer reports.

Sixth Street Growth Partners II and Sixth Street Mid-Stage Growth Partners, launched last year, hit their combined hard-cap this month, the San Francisco firm said. The capital pool is twice that of the strategy’s debut vehicle, closed in 2019 at $2.2 billion. Sixth Street Growth Partners II, the larger of the two, raised $3.6 billion, ahead of a $3.4 billion target, disclosed by New Jersey Division of Investment. Sixth Street Mid-Stage Growth Partners landed $800 million against a $750 million target.

Co-headed by partners Michael McGinn and Bo Stanley, the growth platform was established by Sixth Street to provide bespoke capital solutions to mostly US-based mid-to-late-stage companies with revenue of at least $20 million. Growth-oriented sectors of interest include business services, data infrastructure, enterprise software, fintech and healthcare IT.

To date, more than $9 billion has been invested in over 70 companies under Sixth Street’s growth banner. Investments made by Fund I include Airbnb, Bloomreach, Datavant, Fullsteam, Kaseya and SnapLogic. Fund II is already doing deals, last month putting up to $200 million to work in Atlas, an employer-of-record solutions and tech provider. Earlier this year, it also led a $400 million financing of Contentsquare, a digital experience analytics business. The mid-stage sidecar around the same time co-led a $170 million financing of Guesty, a property management platform.

For more, see Kirk’s story here.

How’re we doing? Before I sign off, I’d like to invite you to participate in PE Hub’s reader survey.

Let us know what you think of our coverage of private equity-backed deals by taking the survey here.

And as always, I’d love to hear your insights on dealmaking: How are you getting deals done in today’s challenging environment, with rising inflation and interest rates and a potential recession on the way? What are the challenges, and what are the opportunities for PE investments? What’s keeping you up at night? Send me email at mk.flynn@peimedia.com

Tomorrow, Aaron Weitzman will write the Wire, and I’ll be back on Monday.

All the best until then,
MK