SFW banks on predictive maintenance with RDI recap; last chance for 40 under 40

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

Let’s kick things off with a call to action. Today is the last day to get your entries in for Private Equity International’s fourth annual rising stars of private equity list. PEI’s 40 under 40: Future Leaders of Private Equity will be published online and in the Future of Private Equity Special in early May. Submit your nomination by end of day today.

Predictive maintenance. “Businesses have learned that it is much more cost effective to search for and find problems early on rather than wait for things to break,” SFW Capital Partners’ Ahmad Sheikh told PE Hub in an exclusive interview. “The decrease in downtime more than pays for the investment up front.”

The PE firm announced this morning that it has completed a majority recap of RDI Technologies, which makes sensors that use camera technology and video-processing software to monitor a wide range of industrial and engineering equipment. I asked Sheikh what’s driving demand for RDI’s offerings? “There are two main drivers. At the macro level, it’s the trend of predictive maintenance,” he said. “Then there is the advancement in vision technology that enables better communication between technicians and management. In the past, these issues would need graphs that require a trained technician to understand. RDI makes understanding issues with machinery much easier and, if you can show someone the problem, you can get an immediate fix.”

As for the future, Sheikh sees opportunities for strategic acquisitions. “There are some interesting opportunities for RDI with other video-based measurement technologies like 3D analysis that can do real-time modeling and provide data on physical properties,” he said. “We would also be looking at companies working in machine learning and the Internet of Things (IoT).”

I also asked about the long-term exit plan. “We believe RDI will be a very attractive target once we build the business by expanding its offerings and growing its global footprint,” he answered. “In addition, RDI is developing a very robust data asset, because leveraging real-time data from manufacturing operations has huge value that goes beyond predictive maintenance to business strategy and optimization.”

All-weather approach. Both Apollo and Ares are nearing closes of their latest special opportunities offerings after vigorous fundraising late last year, Kirk reports for Buyouts. In its fourth quarter and 2021 earnings call, Apollo reported securing more than $4 billion for Apollo Hybrid Value Fund II as of the end of December. Ares reported similar momentum for Ares Special Opportunities Fund II in its fourth quarter and 2021 earnings call. The sophomore funds are “part of a fairly new niche strategy that appears to be gaining popularity among LPs,” Kirk explains. “Broadly known as special opportunities, it was pioneered just over a decade ago by Blackstone’s Tactical Opportunities, today a $36 billion platform. While special opportunities programs vary in their details, they often share key characteristics, such as a focus on dealflow beyond the scope of a manager’s existing flagship funds. Other common features are the flexible provision of bespoke, non-control debt, equity and hybrid capital solutions and an all-weather approach to deal sourcing and investing.”

Power play. Infrastructure deals are expected to get a boost this year from the passage of Infrastructure Investment and Jobs Act late last year. Yesterday, KKR announced the addition of Neil Chatterjee, former commissioner and chairman of the Federal Energy Regulatory Commission (FERC), as an industry advisor to the firm’s global infrastructure team. In addition to advising on KKR’s strategy in the sector, Chatterjee will support the firm’s portfolio companies. During his tenure at FERC, Chatterjee “championed efforts to enhance the resilience and reliability of the U.S. power grid and increase renewables’ ability to compete in regional power markets,” according to the press release. Before that, Chatterjee served as a long-time political advisor on energy to former U.S. Senate Majority Leader Mitch McConnell, “supporting a bipartisan approach to energy and infrastructure legislation.” Chatterjee also worked previously for the U.S. House Committee on Ways and Means, the National Rural Electric Cooperative Association, and House Republican Conference Chairwoman, Deborah Pryce.

That’s all for now.

Until tomorrow,

MK