Happy Monday! It’s Isabel O’Brien here with Value Add, a free weekly newsletter from Privitas covering the latest private equity operations news. Here’s what you need to know this week.

Done Deal

Taken for Grant. The bidding war is over – after launching the process this summer, Cinven has emerged victorious, landing Grant Thornton UK at a valuation of £1.3 billion ($1.63 billion) – far below the £2 billion the firm was hoping for this summer and the revised £1.5 billion figure it floated last month. 

Cinven beat out competitors EQT, Permira, and Grant Thornton US (backed by New Mountain Capital), the latter of which merged with Grant Thornton Ireland last month and was hoping to do the same with its UK counterpart. 

Accounting for the past. Two recent assets Cinven has exited in the financial services sector are Guardian Financial Serves and Premium Credit.

For the former, Cinven bought the asset in 2011 from Aegon at a valuation of £275 million and sold it in 2015 to Admin Re at a valuation of £1.6 billion. The growth came via M&A, with Cinven leading three add-on acquisitions in the four years it owned the asset: Phoenix Group’s in-payment pension annuities and other pension annuities, as well as the life insurer Ark Life. Cinven also brought in new senior management to the firm.

A more recent exit for Cinven’s financial services strategy was its 2022 sale of Premium Credit to Towerbrook at a valuation reportedly over £600 million. It acquired the specialty finance provider from GTCR in 2015 at a valuation of £462 million.

Cinven’s value creation strategy at Premium Credit was mainly to focus on key customers and change leadership at the top. For example, one of the first actions the manager took was to replace Premium Credit's CEO. The firm actually did that twice – once in 2015 and a second time in 2019. Cinven also invested in new products and digital transformations for the company.

The chopping block. Human capital changes have already been put in place at Grant Thornton’s US counterpart, which alerted 1.5% of its workforce (150 employees) that they were to be laid off last week. New Mountain Capital bought Grant Thornton US in May of this year.

Whether or not Grant Thornton UK will implement workforce changes remains to be seen. Cinven partners Maxim Crewe and Rory Neeson commented in a press release that the firm was excited to work with Grant Thornton UK’s existing CEO and partners in its “next phase of growth”, which would be ushered in by a “significant opportunity to support the business in meeting the growing needs of clients, including through investing in technology-enablement, attracting and developing top industry talent and supporting the development of the Grant Thornton International Network.”

Cinven did not respond to request for comment.

Portco News

PE portcos also saw some full and partial exits last week, as well as some exits-to-be… Here are a few:

• Vista Equity Partners sold stakes in its portfolio company LogicMonitor, an AI cybersecurity platform, for $800 million, valuing the firm at $2.4 billion (including debt). The buyers include PSG and Golub Capital.
• Arlington Capital sold BlueHalo, a defense technology company, to AeroVironment for $4.1 billion.  
• Advent International agreed to exit Manjushree Technopack, an Indian packaging firm, to PAG in a deal that values the company at nearly $1 billion.  

Meanwhile, portco M&A was in full swing:

• Protective Industrial Products Inc., owned by Odyssey Investment Partners, bought Honeywell’s personal protective equipment business for $1.3 billion in cash. 
• Talan, Towerbrook’s technology consulting group, added on ThinkMax Consulting, a Microsoft Dynamics 365 service provider. 
• Harrington Process Solutions, one of Bain Capital’s portcos, acquired Fluid Gauge Company to expand its metal control solutions portfolio. 
• Nordic Capital’s Regnology acquired VERMEG’s regulatory reporting division. Both companies are regulatory software providers.

And here are some key people moves:

• CD&R appointed Bill Galvin as an operating advisor. Galvin’s most recent post was the chief executive officer of Anixter, a global electronics distributor. He will advise CD&R’s industrials team.
• Permira replaced the CEO at its cloud cybersecurity portfolio company Sysdig. Suresh Vasudevan, who joined as CEO in 2018 (three years before Permira’s investment), is stepping down, to be replaced by William Welch, the former president and COO of Talldesk. 

There was one restructuring last week: snack maker Hearthside Food Solutions filed for Chapter 11 bankruptcy due to its crippling $1.9 billion in debt. The company makes popular food items like Lucky Charms and Cheetos and was embroiled in a child labor scandal last year after a New York Times investigation. The company has been owned by Partners Group and Charles Bank since 2018.

Speaking of PE food poisoning…

Hot Take

Meal deal? Investors getting into the restaurant business are going to be left with a bitter taste in their mouths.

And this is no shade to Blackstone or its $8 billion Jersey Mike’s Subs deal… I’ve never had their sandwiches, anyway. I don’t know their internal financials. And maybe Blackstone’s Ops team has the chops (or cutlets) to create real value there.

But, I was honestly shocked by the deal – I was under the impression that PE was getting out of chain dining. Bankruptcies are way up in the industry, according to Axios, and two high-profile recent examples – TGI Fridays Chapter 11 filing and Hooters' impending restructuring – are private equity-backed. TriArtisan Capital Advisors and Sentinel Capital Partners own TGI Fridays, while TriArtisan also owns Hooters (alongside Nord Bay Capital). 

Change your order. I was raised in the back kitchen of my mom’s cafe and spent the entirety of my teens bussing tables there, so I know a thing or two about restaurant operations. Heed my warning when I say they’re nearly impossible. 

First, the human capital element is incredibly challenging. According to the Substance Abuse and Mental Health Services Administration, the restaurant industry is the most at risk for employee illicit drug use in the US. This is one of many reasons why employee turnover is so high, at nearly 80% annually for 2023. For the rest of the private sector, that number was 17.3%.

Not only is human capital difficult to deal with, but financial margins are incredibly slim – and getting slimmer. Pre-Covid, margins per venue for franchises averaged at 20%. Now, they’re in the single digits – at least that's what Alix Partners’ Charlie Braley, a managing director in the firm's turnaround and restructuring services practice, told Axios. 

And given that the incoming administration’s tariffs are likely to raise prices for food and alcohol, let’s hope those margins stay even in the single digits. 

More from Privitas

• Portco IQ: Technology 2024 (Read)
• Top Tech Exits in 2024 Were to Strategic Acquirers (Read)
• Exits Are Back, But Different (Read)
• Sponsor-to-Sponsor Exits 2024 (Read)
• The Unexpected Impact of Family Offices on PE Portco Operations (Read)

That’s all for this week – thanks for reading. Have questions? Email isabel.obrien@privitas.com