Toshiba in take-private deal; plus, women in PE share paths to partner

Good morning, dealmakers. MK Flynn here with the Wire.

A take-private deal for Toshiba tops the news this morning.

We’ve also got some more insights on how the collapse of SVB is affecting private equity dealmaking. Spoiler alert: There’s not a lot of impact.

Continuing our Women’s History Month coverage, we catch up with three women dealmakers we profiled in the past who have made it to partner.

Deal of the day
Toshiba’s board has agreed to a $15 billion take-private buyout led by Japan Industrial Partners, a Tokyo-based investment fund, and including about 20 companies, multiple news organizations are reporting.

If approved by shareholders and regulators, the transaction will mark Japan’s largest take-private deal.

Toshiba, which has struggled for several years, has been in play for about a year, ever since shareholders rejected a management plan to divide it into two parts. Foreign shareholders were reportedly in favor of selling to a private equity firm.

JIP has previously picked up assets from Sony and Olympus but has not bought a company of Toshiba’s size, points out the Financial Times.

Path to partner
Throughout the month of March, we’re focusing on women in private equity. Today, we take a look at what it takes to move up the ranks.

Although private equity relies on an apprenticeship model, the path to partner is not necessarily linear. Achieving that career level has been especially elusive for women, who hold only 12 percent of managing director roles, according to a 2022 McKinsey report.

Among the 60 women PE Hub and Buyouts have profiled over the years, several have transitioned into the role of partner since we profiled them. PE Hub’s Tara Lindenbaum caught up with three of them, Christine Hommes at Apollo, Tara Gadgil at Thoma Bravo and Katherine Wood at TPG, to discuss their careers and how they made their way to the partnership level.

“Working in private equity is an apprenticeship job where you learn more and more with every year that passes and every investment you make,” said Gadgil.

She noted that at Thoma Bravo, there is an emphasis on “coaching and growing the younger generation,” a responsibility that “becomes even more important when you’re a partner.”

For Wood, relationship building also played a role in her journey. “It’s very intellectually stimulating to get to work with and meet incredibly interesting and talented people,” she said.

The traditional path to partner can feel miles away at the start of one’s career. But, as Hommes pointed out: “By the time you are promoted to partner, it’s a very natural transition, because you’ve been doing it and looking at how the partners do it for such a long time.”

Don’t be afraid to make mistakes, Gadgil advised.

“I’ve probably made every mistake in the book,” she said. “Anyone in private equity has made every mistake in the book. If they are telling you ­otherwise, they’re lying.”

For more on women in PE, including profiles of 10 outstanding dealmakers, click here.

SVB fallout
We’ve been asking sources about the impact of SVB’s collapse on private equity.
PE Hub’s Obey Martin Manayiti asked Richard De Silva, founder and managing partner of Lateral Investment Management, for his perspective.

Are there any areas of private equity dealmaking that you think will be affected by the collapse of SVB?

I don’t think middle market PE firms will be affected by the collapse of SVB, which was a major lender to early-stage venture-backed companies. I think that the follow-on impact of SVB’s collapse on regional banks will affect small and medium-sized businesses who rely on these banks for lines of credit and term loans. The regional and community banks are likely to be forced to tighten their credit standards. For profitable independent middle-market companies, private equity solutions may become more palatable given reduced access to credit.

What, if any, impact might there be on loans for private equity deals? Is this, along with other factors such as higher interest rates, likely to make loans for PE deals more expensive?

I don’t think SVB or regional banks were major lenders for private equity deals so there’s unlikely to be a direct impact. Higher rates were making loans for PE deals more expensive anyway.

What are you advising your portfolio companies in the wake of the collapse?
We are advising portfolio companies to diversify their relationships and to make sure to have a relationship with a top 5 bank, even if it is not their primary banking relationship.

What kinds of questions/concerns are your LPs asking/expressing and how are you responding?

LPs have been asking about our exposure to SVB, and we have none.

How is the SVB collapse affecting the business of capital call subscription lines of credit?

Capital call lines were already becoming increasingly uneconomic with the increase in rates. I don’t think SVB had any unique edge in providing capital lines, so the business of capital lines is more a function of the rate environment than any specific provider.

Since rates have been going up, will GPs continue to use these facilities? Is this practice here to stay, or is it possible we’ve hit a point where it’s become too expensive and not worth the cost anymore?

I think the capital line business will be challenged while rates are high. Now that pricing on debt is being underwritten to risk, the institutional LPs should be able to get cheaper financing than the GPs except in the case of the very largest private equity firms. LPs are well aware that some PE fund returns have been artificially enhanced through these capital call lines and are not meaningful to the GP’s actual performance and track record.

We’re continuing to explore the impact of SVB on private equity. If you have insights to share, send them to me at mk.flynn@peimedia.com.

That’s it for today. Obey will be back tomorrow with Friday’s Wire, and I’ll see you on

Monday.

Happy dealmaking,

MK