The best of 2022 in stories; Vestar, OEP and Corsair talk high rates and inflation

PE Hub takes a look back at 2022's best stories.

Good morning, Hubsters! Aaron here filling in for MK.

As there are just a handful of days left in the year, we are going to look back to PE Hub and PE Hub Europe’s greatest hits of the year.

I am going to highlight a story from each member of the team. We are thankful for all of our readers and proud of the work we did in 2022. Here are each of our favorite articles this year, starting with North America and then followed by our colleagues across the pond.

Rising rates. If you missed it, the first episode of PEI Group’s podcast series Private Markets and the End of Cheap Money drops, focusing on M&A was hosted by MK Flynn, as she spoke with a wide range of dealmakers, including private equity firm leaders, lenders and investment bankers, about the impact of high interest rates and other factors like high inflation on private equity-backed transactions.

Click here to listen to thoughts from Norm Alpert, founding partner at Vestar Capital Partners; Greg Belinfanti, senior managing director of One Equity Partners; Marc Leder, co-founder and co-CEO of Sun Capital Partners; Ignacio Jayanti, CEO of Corsair Capital; Milwood Hobbs Jr, managing director and head of North American sourcing and origination at Oaktree; Michelle Handy, managing director and head of portfolio and underwriting of First Eagle Alternative Credit’s direct lending platform; and Peg Jackson, managing director, software, internet and digital media at Stifel.

Pandemic pets. Like home services, pet care is another market that has proven itself to be recession resistant. Last year, this sector racked up $123.6 billion in sales, an industry milestone, reported the American Pet Products Association. Of that number, $50 billion was spent on pet food, accounting for about 40 percent of all sales within the industry.

If you know me, I am a big animal lover – especially dogs. Iris Dorbian wrote about how private equity leveraged this boom in pandemic-era pet ownership with a slew of deals whose momentum has not ebbed this year.

Back in June, Rainier Partners capitalized on the pet ownership boom by investing in Pet Food Express, a California-based pet retail chain that sells everything from pet foods and supplements to services like pet washes. PFE’s growth and profit potential attracted the Seattle lower-middle-market PE firm to make its first-ever investment in the company.

“Not only does PFE align with Rainier’s investment focus in the consumer services sector,” said Rainier co-founder and Managing Partner Alex Rolfe, “but the company’s commitment to doing what’s best for pets and their potential for growth elevate this partnership into something truly exciting for everyone involved.”

Click here to read the whole story.

Onshoring. In April, Obey Martin Manayiti wrote about how private equity firms have begun to think local when it comes to the supply chain, as they had been trended toward globalization, but now the pendulum is swinging the other way.

Private equity firms are seizing the opportunities to invest in companies that aim to minimize supply chain disruptions, nearshore parts and services and leverage technology to create more efficient and cost-effective approaches. To learn more about PE supply chain strategies, PE Hub spoke with several investors and consultants.

Over the past few years, the weaknesses in the global supply chain have been glaringly apparent.

“We had the pandemic, we had the shutdowns, there was the Ever Given blockade in the Suez Canal, there are shutdowns in China because of covid,” TBM Consulting Group vice-president Ken Koenemann explained. “We are seeing the Ukraine-Russian conflict, and these are all factors that are impacting major elements that go into lots of goods and services around the world.”

Click here to read the whole story.

Ridiculous return. Switching over to PE Hub Europe. Back in November, Nina Lindholm reported on Nordic Capital and Five Arrows exit of The Binding Site to Thermo Fisher Scientific in a deal valued at £2.25 billion ($2.6 billion; €2.6 billion). The exit yielded 19x Nordic Capital’s initial investment in The Binding Site, according to sources close to the matter, who added that it made it the firm’s best investment to date, Nina wrote.

“Of course, we thought Nordic Capital bought a fantastic business with great potential, but the fact that it would be owned for more than 11 years and have such a fantastic development and return on our investment – that exceeded our initial expectations,” said Jonas Agnblad, partner and co-head of healthcare at Nordic Capital.

Nordic Capital opted to extend the holding period of The Binding Site in 2018 with the use of a continuation fund, as the firm saw further opportunities to drive sales earnings and value. “Continuation vehicles are a great way for active owners like Nordic Capital to continue to drive value for a longer period,” he said. “It’s really a win-win.”

Growth for The Binding Site was “not driven by M&A in any way, shape or form”, according to Agnblad. Nordic Capital invested “significantly” in the business during the ownership. Areas such as organisational and operational footprint were especially targeted and The Binding Site more than doubled its number of employees.

Click here to read the whole story.

Geographical growth. Earlier this month, Craig McGlashan caught up with Thomas Rajzbaum, managing director and head of EQT’s French infrastructure advisory team about how EQT will leverage its tie-up with Baring Private Equity Asia to grow the geographical footprint of Trescal, a provider of regulated calibration services for testing and measurement equipment.

EQT’s Infrastructure V fund entered exclusive negotiations in late November to take a near 75 percent stake in Trescal. EQT will leverage its tie-up with Baring Private Equity Asia to grow the geographical footprint of Trescal, according to Thomas Rajzbaum.

“The beauty of Trescal as a global leader is that it can serve global clients who want a one-stop shop for their global calibration,” said Rajzbaum. “But they also serve local clients.”

The calibration sector attracted EQT for several other reasons.

“This is a mission-critical service that serves an industry where most of the production facilities need to be calibrated at a regular interval through specialists,” said Rajzbaum. “This makes it extremely resilient and means that calibration is not volume dependent.

“It makes it very recession-proof. With covid, even though in many countries factories were closed for three months, when they reopened, they had a backlog of calibration to be done.”

Click here to read the whole story.

That’s a wrap for today. Chris Witkowsky will be with you for Wire Wednesday tomorrow and I have the honor and privilege of writing the last two editions of this year on Thursday and Friday. As a reminder, we will be off next week and returning in early January.

Cheers,

Aaron