Happy New Year! 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 happened over the 2024-25 holiday season:

Done Deal

A wrap on 2024. When it comes to memorable years for private markets, 2024 is one for the books. Interest rates seemed to be the influencing factor in nearly all key trends. For example, fewer exits (and fewer deals in general) occurred due to the rise in borrowing costs. This also contributed to smaller deal sizes – the deals that did go through were only those that could afford to have minimal debt financing. 

In fact, megadeals were nearly obsolete this year, with only a few exceptions. 

Another PE staple that waned in popularity was the old method of value creation. Before 2022, most firms played a scale game, financially engineering profits by loading assets up with debt. However, high rates made this nearly impossible. As such, firms have had to rely on their operational “secret sauce” to create alpha. 

As interest rates have gone down, however, we haven’t seen a quick return to the old way of doing things. In fact, operations have retained their importance in the PE value-creation process. Whether or not that sticks in the coming years remains to be seen. 

Portco News

Was 2024 a rough year for exits… until the very end? It’s debatable. The last weeks of December and the first of January were jam-packed with last-minute sales:

• BC Partners sold Synthon, an international pharmaceutical company, to Goldman Sachs Alternatives’s private equity business for €2 billion ($2.06 billion). BC Partners bought the firm at an EV of €750 million in 2019 and will retain a 25 percent stake post-sale.
• Madison Dearborn, HPS Investment Partners, and a subsidiary of the Abu Dhabia Investment Authority diluted their stakes in the Ardonagh Group to sell a stake in the company to Stone Point Capital. The deal values the insurance firm at $14 billion. 
• KKR and Hg diluted their stakes in the Citation Group for Harbourvest to take a minority stake. Financial terms of the deal were not disclosed, but the capital injection will be used to help the compliance tech provider expand into international markets. 
• Partners Group-backed Vishal Mega Mart, an Indian low cost convenience store chain, IPO’ed on the National Stock Exchange of India and the Bombay Stock Exchange at just under $1 billion. 
• CD&R sold a majority stake in greeting card maker American Greetings to Elliot Investment Management. CD&R will retain a significant minority stake. Financial terms of the deal were not disclosed, but in August it was reported that CD&R was seeking $1.5 billion for the asset.
• TDR Capital finalized plans to exit for its Norwegian ferry operator Hurtigruten. The asset is being restructured as it faces a mounting €1.4 billion in debt. The process will force TDR to cede its stake to Hurtigruten’s creditors, which includes Arini Capital Management, AlbaCore Capital, and Barings, at a €300 million loss. 
• Nordic Capital sold a minority stake in its portco Regnology, a regtech solutions provider, to Canada Pension Plan Investment Board for $690 million.  
• TPG also brought on a minority investors for its asset Veeam, a data protection software provider for cloud services. New investors include Temasek and Neuberger Berman. The secondary offering totaled at $2 billion and valued the company at $15 billion. 
• MidEuropa, a midmarket PE player focused on central and eastern Europe, sold its portco Profi, a Romanian chain of grocery stores, to multinational retail and wholesale company Ahold Delhaize for €1.3 billion. The deal is the largest private equity deal in Romania to date.

Meanwhile, portco M&A was in full swing:

• WHP Global, a brand management firm backed by Oaktree Capital, Ares, Solus, and BlackRock, bought designer brand Vera Wang for an undisclosed sum. 
• Innova Capital-backed STX Next, an IT services provider, merged with BrainHub, a Polish software development firm.
• GTCR’s wealth management asset Captrust acquired both Campbell Wealth Management and TruNorth Wealth Partners, adding $2 billion in assets under management. 
• Sila Services, Goldman Sach Alternatives’ HVAC services provider that manages multiple regional HVAC brands in the US, bought John Nugent & Sons, a provider in the Northern Virginia area, for an unspecified amount.  
• Summit Partners’ Later, a social media-focused marketing solutions provider, bought Mavely, an influencer marketing platform, for $250 million.

And here are some key people moves:

• Alexander Fraser, the head of the US at Temasek’s 65 Equity Partners left the firm, which is currently searching for his replacement. Fraser formerly served as co-head of tech at Bridgepoint. 
• CVC Capital made plans to install Richard Flint, the former chief executive of Sky Betting and Gaming, as the chairman of the board of directors of its new portco, Hargreaves Lansdown, replacing Alison Platt, who has only held the position since October 2023.  
• Contrary to the headlines, Kim Kardashian has not fully stepped away from the private equity firm she co-founded in 2022 with ex-Carlyle dealmaker Jay Sammons, SKYY. While formerly serving as a managing partner, she has transitioned into the role of a senior operating advisor. Her mother, Kris Jenner, has left the firm, though, stepping down from her role as a senior advisor. 

Hot Take

Crystal ball. We don’t have perfect clarity into what the next year will bring the industry, but here are some key predictions from the Privitas team:

1. Exitability will remain key: The exit drought of 2024 will lessen greatly in the coming year, and we’re not the first to predict that. However, the pain felt from the backlog created over these past two years will not be soon forgotten. GPs will have to start paying more attention to exitability when making investment decisions – and indeed, large buyout shops including Brookfield have already begun the process of formally integrating this into their acquisition processes. 
   
2. AI hype will turn into modest implementation: artificial intelligence will definitely have an impact on the value PE firms are able to create on a portfolio level. However, the hype about its short to medium term applicability will die down greatly, which will in turn decrease pressure on portco operations executives to integrate new software into every step of their company’s day-to-day operations. One major reason behind this is that 2025 will highlight the major challenges that stand in the way of widespread AI adoption, the most important being power. 
   
3. The impact of a new SEC chair will be vast – and unknowable: Trump’s SEC pick Paul Atkins will be friendly towards private markets in 2025 if he’s confirmed. However, it’s his friendliness towards cryptocurrency that will have the biggest impact on PE. As PE players look to retail investors as the next frontier in fundraising, the ability of those in capital formation to create tokenized products that are registered with the SEC and easily tradeable will open up an immense amount of capital. A capital influx could bring more megadeals, higher valuations, and more favorable exit terms for PE firms. 

Those are just some of our 2025 predictions, and only time will tell if they come true. One thing we know to be certain, however, is that Privitas looks forward to covering these topics and more in the new year.

More from Privitas

• Portco CFOs Key to Successful Roll-Up Strategies (Read)
• Technology: Value Creation 2024 (Read)
• M&A Is Risky, But Operating Partners Choose It Anyways (Read)
• Could Unhappy Employees Be Good For Tech Exits? (Read)
• Portco IQ: Technology 2024 (Read)

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