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Q1 PE: Deal Values Set Post-Crisis Record

By Armie Margaret Lee | Published on March 29, 2018

Private equity firms began 2018 on a strong note, with deal values hitting a first-quarter record post-financial crisis.

There were 1,023 PE-backed buyout deals globally with a total value of $116 billion announced in the first three months of the year, according to Preqin.

“One thing we’re hearing from a lot of our clients is that they’re upping the size of the targets they’re looking at,” said Bill Stoffel, U.S. private equity leader at Ernst & Young LLP, in an interview.

Topping the list of PE-backed buyout transactions for the quarter was JAB Holding Co.-backed Keurig Green Mountain Inc.‘s deal in January to buy Dr Pepper Snapple Group Inc.for $21 billion, according to Preqin.

Other deals included carveouts such as Blackstone Group LP (BX)-led group’s $11 billion agreement in January to buy Thomson Reuters Corp.‘s (TRI) financial and risk business. The consortium, which includes Canada Pension Plan Investment BoardGIC Special Investments and Canson Capital Partners, will own a 55% stake in the business, with Thomson Reuters retaining a 45% ownership.

Another was Carlyle Group LP (CG) and GIC’s deal in March to acquire Akzo Nobel NV‘s specialty chemicals unit for an enterprise value of €10.1 billion ($12.5 billion). The specialty chemicals division was formed by Akzo Nobel as part of a strategic review last year that followed Elliott Management’s campaign to push for a merger with PPG Industries Inc.(PPG).

Stoffel said he expects to see more carveout deals by PE firms in the months ahead. “There are a lot of carveouts coming down the pike that people are getting pretty excited about,” he said.

Some PE firms, together with co-investors, are exploring carveout opportunities in the $10 billion to $20 billion range, Stoffel said.

The first quarter also saw take-private transactions including Silver Lake and P2 Capital Partners’ deal in January to purchase payment card provider Blackhawk Network Holdings Inc. (HAWK) for $3.5 billion. Also in January, Clayton, Dubilier & Rice LLC said it will acquire Ply Gem Holdings Inc. (PGEM) for $2.4 billion and combine it with fellow building products manufacturer Atrium Windows & Doors.

In March, a consortium including Stone Point Capital LLC agreed to take insurer AmTrust Financial Services Inc. (AFSI) private in a deal valued at about $2.7 billion. The group will purchase about 45% of AmTrust issued and outstanding common shares not owned by the Karfunkel-Zyskind family and affiliates.

The string of public-to-private deals could continue in the coming months.

“As price-to-EBITDA multiples paid in the private markets converge with valuations in the public markets, more public companies become potential take-private targets,” said consulting firm Bain & Co. in its Global Private Equity Report 2018 issued in February.

To get a sense of potential take-private activity this year, Bain took a look at U.S. publicly traded firms possessing an enterprise value of up to $50 billion and identified nearly 800 firms trading at multiples of nine times Ebitda or below. It did further screening based on potential for revenue and margin expansion and came up with 72 companies “that seem ripe for conversion,” according to the report.

“For large GPs eager to put big sums of capital to work, the public markets are likely to offer a fertile field in 2018,” Bain said.


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