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

Sky-high for CI. Mubadala Capital, the asset management wing of the Abu Dhabi sovereign wealth fund, announced its intentions to take CI Financial, a Canadian wealth management and consulting firm, private for C$4.7 billion ($3.4 billion). 

At $32 (in cash) per share, the deal represents a 33% premium over CI Financial’s last closing price and a 58% premium over its 60-day volume-weighted average trading price. It values the firm at $8.7 billion.

One reason on CI Financial’s side for the acquisition was that Mubadala will buy it out of a restrictive financing deal it struck with Bain in 2023 to buy Corient Capital. 

Meanwhile, a spokesperson for Mubadala Capital stated that the firm chose to invest in CI Financial due to its “strong franchise built on providing the highest-quality investment products and advice.” 

The spokesperson added, “Bringing together our long-term approach and capital with CI’s strategy and talented team will give management greater ability to reinvest into the overall business and do even more for its clients and stakeholders.”

Hands off? When asked if Mubadala has major operational changes planned for CI Financial, the spokesperson said that “Mubadala Capital is fully aligned with the strategy and direction of the firm,” they explained. “Mubadala Capital’s long-term approach will create a stable, well-funded platform for CI to continue to grow, allowing management greater ability to reinvest into the overall business and strategy.”

When asked which former portfolio companies would influence Mubadala’s ownership of CI Financial, the spokesperson declined to comment. CI Financial will be Mubadala’s only investment in wealth management which is currently in its portfolio.

When it comes to growing other wealth advisory businesses, GTCR demonstrated with its portco CAPTRUST that M&A is key. However, with a cooling of the M&A market due to oversaturation, this may prove hard to pull off for CI Financial. Indeed, the firm hasn’t engaged in much M&A activity since 2021. 

Portco News

PE portcos also saw some full and partial exits last week:

• Permira sold the professional services business of British accounting firm Evelyn Partners to Apax for £700 million ($886 million).  
• Insight Partners sold a portion of its majority equity stake in Tricentis, a software testing company, to GTCR for $1.33 billion (valuing the enterprise at $4.5 billion). The two firms will have equal board representation. 
• Clearlake sold TEAM Tech, a healthcare supply chain services provider, to Arlington Capital Partners for an undisclosed amount.
• Blackstone bought JJ Tools, a South Korean industrial cutting tools manufacturer, from domestic PE firm Kamur Private Equity. Financial terms of the deal were not disclosed.
• Parcel2Go, an eCommerce shipping platform, was sold by its owner EQT to an undisclosed “new investor group.” 
• TDR Capital exited its majority stake in Norwegian cruise line operator Hurtigruten to a consortium of investors led by Arini Capital Management, AlbaCore Capital, Barings, and Cyrus Capital Partners. The consortium will inject €500 million ($525 million) in new capital into the company while decreasing its debt by over €1 billion to approximately €400 million.
• Equistone exited French sneaker retailer Groupe Courir to JD Sports Fashion for €520 million ($546 million).

Meanwhile, portco M&A was in full swing:

• Thoma Bravo’s cloud cybersecurity asset N-able bought competitor Adlumin. 
• Exclusive Networks, a cybersecurity company in the process of being acquired by CD&R and Permira, bought Cloudrise, a security services provider.  
• SK AeroSafety, a Bridgepoint-backed British firm offering maintenance, repair, and overhaul services to aircraft, acquired John Cameron Aviation, an Australian engineering consultancy focused on the aviation industry. 
• Blackstone’s Indian hospital chain, Quality Care India Ltd, plans to merge with competitor Aster DM Healthcare Ltd to create one of India’s largest hospital chains. The new entity will be valued at approximately $5 billion. 

Hot Take

Tin foil hat. Why all the interest in RIAs from private equity? Of course, there are steady, recurring cashflows, but industry growth is projected to stagnate. I can’t help but wonder if there's another reason driving private equity interest.

While private equity has snatched up more and more wealth management assets, wealth managers have, in turn, allocated more and more money to private equity. Since 2023, private wealth has doled out an additional $2 trillion in capital to private equity fundraises. Over the next six years, the growth in fundraising seen from this portion of investors is due to more than double the size of the global private equity industry to $12 trillion.

Could it be a coincidence? Sure. There are other reasons behind the rise in fundraising, such as the proliferation of evergreen vehicles. But it could also be a sign that PE-backed RIAs are more likely to recommend private equity funds to their clients – both funds from their own sponsors, as well as those from other firms.

Fund pushers? This isn’t just happening in theory – in 2022, private credit firm Kennedy Lewis pressured its portco Sanctuary Wealth to recommend its $28 billion private credit fund, KLCC BDC, to its clients. 

Could it happen in PE? There’s nothing stopping it. KKR’s Beacon Pointe Advisors’ policy states that recommending KKR funds to its clients is not off the table, while firms such as Mariner Wealth Advisors (Leonard Green & Partners), Captrust (GTCR and The Carlyle Group), Mercer Advisors (Altas Partners, Harvest Partners, Genstar Capital and Oak Hill Capital), Hightower (Thomas H. Lee Partners), and Waverly Advisors (HGGC) did not make any disclosures to the SEC about conflicts of interest related to recommending their sponsors’ funds.

Of course, there are many other reasons why wealthy individuals want to get in on PE – higher dividends, more diverse portfolios, the list goes on. It can’t all be about fundraising…

But also, maybe part of it is?

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• 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)

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