Take-private deals flourish; Alfar and Walter forge ambitious Canadian MSP; plus 40 under 40

U.S. PE firms go bullish over the UK.

Good morning, dealmakers.

MK Flynn here with the Wire.

US private equity firms increased acquisitions of UK businesses by 35 percent last year, according to new research out this morning from international law firm Mayer Brown.
It’s a trend we’ve been tracking closely at PE Hub – and it’s one of the reasons we launched PE Hub Europe last summer.

Today, we’ve got a Deep Dive into take-private deals led by US interest in UK-listed companies.

In addition, as we’ve reported previously, we’ve noticed a wave of PE firms setting up shop – or expanding their shops – in London. We’ve got another firm to add to the list.
Earlier this morning, we had an exclusive on an ambitious Canadian managed service provider deal.

And our colleagues at Private Equity International have named a dozen dealmakers to the 40 under 40: Future Leaders of Private Equity.

Corridors of Canada
PE Hub’s Obey Martin Manayiti was the first to report that Alfar Capital and Walter Capital Partners have completed the acquisition of MSP Corp – a managed service provider group – from BDC Capital and MSP Corp co-founders Ravi Ramharak and Jason Dacosta, in a deal valued at more than $100 million.

MSP Corp is also merging with Groupe Access, another managed service provider.
The combined entity, which continues to use the MSP Corp name, brings together 15 companies and creates a national Canadian platform of managed services that its investors said is poised to lead the industry in digital transformation, cloud computing and cybersecurity solutions.

BDC Capital retains a minority stake in the new entity through its Growth Equity Partners Fund II.

Groupe Access CEO Habib Malik is leading the combined MSP Corp.

Ramharak, who previously served as chief executive of MSP Corp, will become the chief mergers and acquisitions officer and retains a stake in the company.

Dacosta is exiting the business.

Management and employees will own more than 10 percent along with the ownership stakes retained by the CEOs of the two merged entities.

Ramharak answered some of our questions about the deal:

What’s the significance of today’s announcement?
The main goal of MSP Corp has always been to become a pan-national entity and now with the acquisition by Walter/Alfar Capital and the merger with Groupe Access, we cover all major corridors of the Canadian market. MSP Corp has also been looking for a CEO that could lead the company, and Habib Malik from Groupe Access was the perfect fit. So we got two major wins in one transaction.

What will future growth of the company look like?
MSP Corp will continue to acquire for inorganic growth but will also turn its focus to organic back-office integration synergies in payroll/HR/benefits and a national sales strategy.
We’ll be watching to see how the company grows.

Let’s dive in
Take-private deals are back in vogue for European private equity, with US interest in UK listed companies very much the height of fashion, writes Craig McGlashan, editor of PE Hub Europe. But with many of the underlying conditions driving the trend having been in evidence for several months and the debt market still far from full strength, why the glut of deals now – and how are they being financed? And does the trend have further to run?

PE Hub Europe spoke to senior figures across the private equity industry to find out.

Here’s an excerpt from our story:
The large piles of dry powder in the hands of private equity firms, coupled with low public market valuations, had for several months been tipped to spark a rush take-private bids on European markets, particularly from those with dollars as that currency grew in strength.
But despite a few take-privates reaching the announced stage, it was only in April that private equity firms really started opened their wallets, even as the dollar’s dominance was slipping.

Firms were likely biding their time to see whether the collapse of Silicon Valley Bank (SVB) and takeover of Credit Suisse by its compatriot Swiss bank UBS, both in March, were idiosyncratic or the beginnings of a full-blown banking crisis, said several sources. When they decided it was the latter, they were ready to move – particularly in the UK, where economic data has been improving and the political outlook stabilising, said Michael J Preston, partner at law firm Cleary Gottlieb, who advises private equity sponsors on their investments.

“There’s now a consensus forming that it’s a good time to strike while valuations are still low and sterling is relatively low,” he said. “There’s a sense sterling might appreciate and these deals are getting more expensive to do. The mini-bank crisis wasn’t as bad as people thought. SVB wasn’t calamitous. Bidders have been hovering and all these things combined to shift the risk-reward needle. Then when one or two go, it gives confidence to the rest of the market.”

The nature of these deals means such confidence is even more important than when manoeuvring for a private company, according to Christopher Field, co-head of law firm Dechert’s global private equity practice.

“One of the historic perceptions around take-privates is that they are much more complicated to execute with a more uncertain outcome because of the additional regulatory compliance and the greater risk of putting the company into play, which is never great if you’re a buyer,” he said. “But then as more take-privates are successfully executed, people decide it isn’t such a risk. Over time that can create a snowball effect.”

As Preston suggested, sterling has been one of the better performing currencies over the last few months. It plunged in September following a mini-budget by the then UK government, nearing parity with the dollar, but has since climbed to be worth $1.25. But longer -term considerations have also hit valuations, added Field.

“The pound is becoming weaker in a very long-term trend,” he said. “There are quite a lot of companies listed in London that have an international business, so you get that arbitrage between the listed value in sterling and the underlying value. So that may drive stronger premiums. There is a perception that this is a good time, overall, to take advantage of those perceived cheap valuations. And determining the valuation isn’t as opaque as it would be on a private deal.”

Read Craig’s full story on pehubeurope.com for more on the trends, plus some data-packed charts.

London Town
Another sign of the increasingly cross-border nature of private equity is the number of US firms setting up European offices, with local knowledge becoming ever more vital in navigating the potential complications.

Back in March, PE Hub Europe’s Nina Lindholm rounded up several PE firms that opened or expanded new offices in London. Blackstone, Thoma Bravo and One Rock Capital are among the firms strengthening their positions in London.

You can read that story here.

And this week, the trend continues with Great Point Partners, a Greenwich, Connecticut-based private investment firm that’s opening an office in London.

With the move, Great Point aims to expand its ability to help growing healthcare companies reach transatlantic scale.

“Our London office will enable us to strengthen our partnerships with entrepreneurs to build global health care businesses,” said Jeffrey Jay, MD, founder and managing partner of GPP. “This expansion is a testament to our success in helping United States-based companies expand into European markets and vice versa.”

Rising stars
Private Equity International spotlights up-and-coming talent in the 40 under 40: Future Leaders of Private Equity list.

At PE Hub, we’re showcasing profiles of 12 featured dealmakers, including:
• Evelyne Dioh, 37, managing partner, WIC Capital
• Rajan Shah, 35, principal, L Catterton
• Aaron Sobel, 36, partner, private equity, Apollo Global Management

Check out their full profiles on our website.

That’s all for today. Tomorrow, Buyouts’ Chris Witkowsky will bring you the Wednesday

Wire, and I’ll be back on Thursday.