You’re reading Value Add’s weekly briefing, the leading newsletter for the operating side of private equity. Here’s what you need to know this week, from insights for PE-backed executives and portco news to recent buyouts and investment trends. 

Insights

Chart of the Week: Recession indicators are starting to flash in the US, prompting private equity investors to evaluate potential risks in their portfolios. Consumer businesses, such as retail, are generally seen as riskier during economic downturns, but there are segments that can actually outperform during recessions. For example, our recent case study of BJ’s Wholesale (which was owned by Leonard Green & Partners between 2011-2018) saw its average monthly customer spend increase 25% during the 2020 recession. (Read More)

More Insights

• Why Do Smaller Buyouts Outperform Large Caps? Operations. (Read)
• How the Unwinding of the Yen Carry Trade Affects Private Equity (Read)
• PE Ownership Bears Some Blame for the Healthcare Cyberattack Crisis (Read)
• The Midmarket’s People Problem (Read)
• Private Equity Case Study: Catalent (Read)

Spotlight

On the double. Initial reports that Cinven was looking to offload JAGGAER, a B2B supply chain management software platform, were announced in May. A deal has ultimately been struck with Vista Equity Partners to offtake the asset. 

While the exact financial terms were not disclosed, sources said that the deal Cinven sought would value the asset at $3 billion including debt – double the $1.5 billion valuation Cinven gave JAGGAER when it bought a majority stake in the company in 2019 from Accel-KKR. 

The valuation has garnered over a 20x multiple on its EBITDA from the 12 months preceding the announcement of the sale process, which was $125 million. For that same period, JAGGAER had an overall revenue of $300 million.

Moves like JAGGAER. Cinven’s offloading of the asset wouldn’t be possible without five years of value creation. 

Human capital played a key role in Cinven’s strategy, with JAGGAER’s c-suite undertaking a massive overhaul:

• Andy Hovancik joined the firm as CEO in June of last year. Before that, he served as the president and chief executive of Sovos Compliance – a reporting software – for a little over a decade. Before Hovancik, the role was held by Jim Bureau, who was promoted internally when Cinven first acquired the asset in 2019. He stepped down in the wake of mass layoffs just three months before Hovancik joined.
• Dan Corazzi joined as CRO in 2021 after holding multiple senior positions at SAP. Before his appointment, the position of chief revenue officer did not exist at the company.
• Jeff Laborde was brought on as CFO and executive ESG sponsor in 2020. He previously served as chief financial officer of five different companies before taking on the role, and before that was a managing director at Goldman Sachs. 

Laborde’s hiring was not the only major move for JAGGAER in the ESG space. In 2022, the company released its first-ever ESG report, describing the realignment of its core goals under Cinven’s leadership to prioritize ESG best practices. One such goal includes a plan to reach net zero emissions by 2040. 

Finally, under Cinven’s leadership, JAGGAER launched JAGGAER One, a cloud platform that allows customers to collaborate on procurements across spend categories.

The view from Vista. Vista Equity Partners did not respond to requests for comment. However, as a software specialist, it’s likely that the firm’s value creation strategy for JAGGAER won’t differ much from those of its past assets. Beyond its famous “101 Best Practices” playbook, Vista also boasts synergies between its network of 85+ software companies as a key method of value creation. 

“JAGGAER is led by a high-performing leadership team with a demonstrated commitment to operational excellence and a bright vision for the future of AI-powered spend management,” Sam Payton, senior vice president at Vista, stated in a press release.

Buyout News 

Apollo Global Management and Rettig have together purchased a 94.5% stake in Purmo Group, a Finnish sustainable heating and cooling company. The firms have formed a joint venture where Apollo owns 80% and Rettig 20%. The joint venture plans to acquire the remaining stake in Purmo Group and take it private in the coming months. 

Apollo wasn’t the only PE firm looking to make sustainable deals in Europe last week. EQT is looking to acquire a majority stake in AMCS, an Irish software company focused on the waste management sector. Financial details have not yet been made publicly available, but the deal is expected to close in Q1 2025. 

More details are available on EQT’s bid for Property Guru, a Singapore-based online real estate platform. The take-private plan includes paying $1.1 billion cumulatively for outstanding shares, at a 52% premium over the closing price before rumors of an acquisition started swirling in May. Current minority shareholders include KKR and TPG, who are supportive of the deal.

And the software deals don’t stop there – Francisco Partners has managed to sell QGenda, a healthcare workforce management software provider, to media giant Hearst for over $2 billion, meaning it has made a 15x return on its eight-year-old investment. 

And finally, large corporate Carrier Global has sold its commercial residential fire business to Lone Star for $3 billion. The deal is expected to close by year-end and represents one of many deals carried out for Carrier’s divestiture program, which also saw the sale of its industrial fire business to Sentinel Capital Partners for $1.4 billion in March.