Good morning, dealmakers. MK Flynn here with the Wire.
We’ve got more thoughts on how the collapse of Silicon Valley Bank may be affecting private equity firms, but first …
Let’s take a moment to enjoy what an active week this has been in dealmaking – despite all the questions that have been swirling about the US banking system.
On the private equity side, PE Hub has covered several big deal announcements:
Silver Lake and Canada Pension Plan Investment Board announced they’re buying customer experience management software developer Qualtrics for $12.5 billion.
Apollo agreed to buy specialty chemical and ingredient distributor Univar for $8.1 billion, including debt.
Blackstone said it would buy events tech provider Cvent from Vista for $4.6 billion.
And in corporate dealmaking, the pharma sector has been especially active this week, with Pfizer agreeing to buy cancer drug developer Seagen for $43 billion, and Paris-based drugmaker Sanofi saying it will buy diabetes treatment maker Provention for $2.9 billion.
So much for the slowdown!
We’re continuing to follow the fallout from SVB by asking folks in the private equity world for their thoughts.
For insights on how private equity firms are reacting, I turned to Jeremy Swan, managing principal of the financial sponsors and financial services industry practice of CohnReznick, a New York firm that provides advisory, assurance, and tax services to growth-focused businesses.
Here’s my brief Q&A with Swan:
How will fallout from the SVB collapse affect the ability of emerging technology companies to access private equity capital?
Following the failure of SVB, the biggest challenge many emerging companies seeking venture debt will face will be the cost. Through broad client relationships (deposits, lending and wealth management), SVB was able to lend at below the raise of other private non-bank lenders. In terms of equity capital, it is too early to tell what the impact will be, but what we do know is that until we see the longer-term impact of the loss of SVB, capital will be at a premium.
How might the SVB collapse affect PE dealmaking?
Venture debt for borrowers will become more expensive. For the PE funds, subscription lines may become harder to line up as one of the main lenders (from a sinking lender base) has been removed from the market.
What are PE firms advising their portfolio companies in the wake of the collapse?
PE firms are recommending, and in some cases mandating, a review of treasury/cash management processes. This means ensuring that are no bank or other provider concentration concerns. Ensuring that no one lender, depository institution or other key component to the treasury process presents a systemic risk to the portfolio company.
If you have insights on how the SVB collapse is affecting private equity deals and portfolio companies, I’d love to hear them. Shoot me an email at email@example.com.
One trend we’ve been following at PE Hub is the uptick in PE firms bringing on board experienced executives, either as partners or advisors.
This movement has been going on for the last several years, but we noticed an acceleration of the trend earlier this year, reflecting the importance of cost cutting and operational efficiencies in this era of high inflation and high interest rates.
PE Hub reporter Obey Martin Manayiti rounded up seven people moves involving operational experts announced in January alone. You can see that story here.
In keeping with the trend, this morning, Clayton, Dubilier & Rice named John Hayes as an operating advisor.
Hayes is the former chairman and CEO of Ball Corporation, a supplier of aluminum packaging solutions as well as aerospace and other technologies and services. Hayes led the company’s acquisition of Rexam for $8.5 billion in 2016.
In his role at CD&R, Hayes will focus on the industrials sector, supporting CD&R’s investment teams and the management teams of the funds’ portfolio companies, while leveraging his sector expertise to promote strategic and operational initiatives across these businesses.
When Irish eyes are smiling …
Obey will be back tomorrow with Friday’s Wire, and I’ll be on board on Monday.
In the meantime, here’s wishing you a Happy St. Patrick’s Day.