Good morning, dealmakers. MK Flynn here with the Wire.
We’ve got a very busy morning for you, including a mega deal in the tech sector, a new quarterly report on PE deal activity from PE Hub and several stories from our new website, PE Hub Europe.
Take private. First up, Thoma Bravo just announced another multibillion-dollar deal, as the tech-focused private equity firm continues to take advantage of market conditions to scoop up software providers.
The firm is buying business spend management specialist Coupa Software in an all-cash take-private deal for $8 billion. The transaction includes a significant minority investment from a wholly owned subsidiary of the Abu Dhabi Investment Authority.
Thoma Bravo reportedly outbid other firms. Some investors in Coupa seemed wary that the current market conditions would yield the best deal.
The press release announcing the transaction seemed to allude to those issues:
“This transaction is the result of a deliberate and thoughtful process that included engagement with both strategic and financial parties,” said Roger Siboni, Coupa’s lead independent director. “The board evaluated the transaction against the company’s standalone prospects in the current macroeconomic climate and determined that the compelling and certain cash consideration in the transaction provides superior risk-adjusted value relative to the company’s standalone prospects. The board is unanimous in its belief this transaction is the optimal path forward and in the best interest of our shareholders.”
Thoma Bravo commented:
“Coupa has created and led the large and growing business spend management category,” said Holden Spaht, a managing partner with the PE firm. “We’ve followed the company’s success for many years and have been impressed by its consistent track record of delivering high levels of value for its global customer base.”
The San Francisco PE firm has had an exceptionally active year.
Thoma Bravo completed the purchase of identity security provider Ping Identity for $2.8 billion in October. The firm closed the deal for enterprise identity security provider SailPoint Technologies for $6.9 billion in August. And the firm completed the acquisition of business planning software maker Anaplan for $10.4 billion in June.
Earlier in December, Thoma Bravo closed its newest three funds on more than $32.4 billion, with its fifteenth flagship fund at $24.3 billion. The firm also closed its fourth mid-market focused Discover fund on $6.2 billion and its second small-cap Explore fund on $1.8 billion.
You can read about the new funds on Buyouts here.
Putting the year in perspective. There’s been a lot of talk about the slowdown in deal activity this year, but I took a close look at data provided by Refinitiv for a new series of quarterly reports we’re launching today on PE Hub, and I concluded that the year may not be as bad as it feels.
Studying global private equity acquisitions and exits from the first three quarters over the last five years puts the current lull in context.
Let’s start by acknowledging that 2021 was the best year for PE deals ever, so it’s not a fair comparison. If you are thinking 2021 is the benchmark, then no wonder you feel disappointed in 2022. And at the opposite end of the spectrum is 2020, when pandemic lockdowns halted dealmaking for a while. So that leaves 2018 and 2019 as the most recent years that reflect “normal” M&A activity.
When you look at how the first three quarters of 2022 stacked up against the same period in 2018 and 2019, this year comes out better by most measures.
When it comes to exits, the data on deal value tells a similar story to acquisitions, but the data on exit volume reveals some weakness. Exit volume for Q1-3 in 2022 fell below 2019 and 2018 levels.
More unsettling perhaps is the overall downward trend. By all four measures – acquisition volume and value, and exit volume and value – activity declined in each subsequent quarter in 2022.
Activity in the fourth quarter seems to be continuing the downward trend, based on interviews with dozens of PE sources over the last few months. As one sign of the slow times, we hear that investment bankers are gearing up for their first big winter vacations in years.
Check out the charts and tables in the quarterly report, published earlier this morning on PE Hub.
And to hear perspectives on the slowdown and how factors including rising interest rates are affecting private equity dealmaking, listen to our new podcast series, Private Markets and the End of Cheap Money.
PE Hub Europe showcase. We recently launched PE Hub Europe, which provides in-depth coverage and exclusive insight on European private equity deals.
Here’s a star-studded deal covered by the PE Hub Europe team today:
Mediawan, a content studio in Paris co-founded by actor Brad Pitt and backed by KKR and Atwater Capital, has agreed to take a “significant” stake in Plan B Entertainment, a film and television production company. Los Angeles-based Plan B’s credits includes The Tree of Life, Eat Pray Love, World War Z, 12 Years a Slave, Selma, The Big Short and Moonlight.
“Building leading businesses in this sector has long been a vision for KKR, with the take private of Mediawan as well as the founding of LEONINE Studios,” said Philipp Freise, partner and co-head of European private equity at KKR, and Franziska Kayser, managing director at KKR. “We are delighted to see Mediawan and Plan B join forces to continue our mission of creating the leading artist-centric global independent content platform, the first of its kind on such an international scale.”
For more details on the deal, turn to PE Hub Europe’s coverage here.
Other stories you’ll find today on PE Hub Europe today include:
Editor Craig McGlashan wrote about a deal by LDC, the private equity arm of Lloyds Banking Group, which announced a “significant investment” in capital markets technology firm Etrading Software earlier today.
Find out how LDC plans to grow Etrading here.
Reporter Nina Lindholm interviewed David Whileman, a partner at London PE firm Inflexion, about the growing trend of taking minority stakes in companies. The firm announced in August the sale of its minority stake in Phenna Group to Oakley Capital in a deal that valued Phenna at more $1.2 billion.
You may read Nina’s interview here.
We are currently offering complimentary access to PE Hub Europe. Sign in or register to start reading today!
As I said at the beginning, today is a jam-packed day. I’ll be back tomorrow with more.
Until then, happy dealmaking,