Deal Boom Tests PE Dealing; cryptocurrency demand drives blockchain funding

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Private equity firms have refined how they interact with advisers after the deal boom in 2021 tested the industry’s capacity.

Professional services firms have been hit by staff shortages due to absences and turnover, just as private equity activity has ramped up after a coronavirus-induced pause in mid-2020. Private equity deal volume grew 40% year-over-year in 2021, with 24,722 deals worth a total of $1.2 trillion announced worldwideaccording to S&P Global Market Intelligence data extracted in January.

Managers relied on their personal relationships with advisers to secure their contracts, calling favors as advisers prioritized work for existing long-term clients.

Another key was identifying deals in the pipelines that managers “really wanted to do early,” bringing in commercial due diligence providers and starting to spend the money to do it, said IK’s Tom Salmon. Partners.

A partner at the law firm said a client flagged a deal, told the firm not to hire a team, and got back in touch when the deal kicked off aggressively. “If we didn’t have the relationship with the client to be able to have that [conversation] first, and then for them to be blunt and honest in saying, actually, it’s going to start now, that would be more difficult. But I think because we’re able to have these conversations, it’s helped,” said the partner, who advises large-cap clients.

Although macro headwinds are expected to slow deal flow from last year’s numbers, levels should remain solid as private equity has large volumes of dry powder to spend.

The law firm partner said there are so many opportunities in private equity that increasing the number of partners and associates dedicated to the industry is something he does on an ongoing basis, not just “for crazy times”.

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CHART OF THE WEEK: Ccryptocurrency demand drives investment in blockchain

⮞ After raising a record $18.4 billion in 2021, blockchain companies have attracted an additional $5.03 billion in 2022 as of March 24, largely driven by cryptocurrency demand, according to data from S&P Global Market Intelligence.

⮞ The largest blockchain funding round announced globally since 2010 was for FTX Trading Ltd., which raised $900.0 million in Series B funding from investors including Insight Partners and Thoma Bravo LP in July 2021.

⮞ Blackstone Inc. and its affiliates have entered into the largest blockchain deal to date, acquiring Indian company Mphasis Ltd. in August 2021.

FUNDRAISING AND OFFERS

*Apollo Global Management Inc.’s hybrid value strategy raised approximately $4.6 billion for Apollo Hybrid Value Fund II LP at Final Closing, The Wall Street Journal reported.

Separately, Apollo Global and Mitsubishi UFJ Financial Group Inc. will invest $775 million in Israel-based Liquidity Group, an artificial intelligence platform for credit decisions, Dow Jones Newswires’ MarketWatch reported. Apollo, Mitsubishi UFJ and Spark Capital Partners LLC also injected an additional $50 million into Liquidity Group in the form of a SAFE rating, bringing the latter’s assets under management to more than $2 billion.

* Brookfield Business Partners LP and its institutional partners are buying automotive retail technology company CDK Global in a roughly $8.3 billion deal that could close in the third quarter.

* Thoma Bravo LP amassed $3.3 billion for Thoma Bravo Credit Fund II, its largest credit fund closure to date. The company also closed its strategic growth investment in User Zoom Inc., valuing the digital user experience information platform at $800 million.

* Advent International Corp. acquired European payment solutions provider Mangopay SA from Crédit Mutuel Arkéa.

ELSEWHERE IN THE INDUSTRY

* Blue Wolf Capital Partners LLC closed its Blue Wolf Capital Fund V LP at its hard cap of $1.1 billion.

* Franklin Resources Inc., also known as Franklin Templeton, acquired Lexington Partners LP in a deal that closed on April 1.

* Actis LLP sold Echoenergia, a Brazilian independent renewable energy platform, to Equatorial Energia SA.

* Lone Star subsidiaries completed the acquisitions of Japanese structural building materials company Senqcia Corp. and process solution provider SPX FLOW Inc. in two separate transactions.

FOCUS ON: HEALTH

* Funds managed by Stone Point Capital LLC are buying Tivity Health Inc. in a deal valued at $2 billion. The acquisition is expected to close in the third quarter or earlier.

* Audax Management Company LLC has increased its investment in Aspen Surgical Products Inc. through a single-asset continuation fund. Sponsors anchored in funds managed by Goldman Sachs Asset Management LP and Hamilton Lane Inc. will support the fund.

* York Private Equity, through its York Special Opportunities Fund III LP, has invested in Healthcare Linen Services Group.