Isabel O'Brien

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?


More from Privitas

 * Could Unhappy Employees Be Good For Tech Exits? (Read)
 * 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 

Daily Insights

Mubadala Plans 'Long-Term Approach' for $8.7B CI Financial

Cooper Smith

This 15-page report examines the value creation strategies of PE-backed technology companies that exited in 2024.

Technology: Value Creation 2024 Report

What's Included

 * Portfolio Operations Analysis: Detailed insights into the three most prominent value creation strategies—Mergers & Acquisitions (M&A), Product Innovation, and Market Expansion—employed by PE-backed technology companies, including their effectiveness, holding periods, and risks.
 * Performance Benchmarks: Key metrics such as enterprise value growth, exit grades, and holding periods, derived from the Portco IQ: Technology Index, offering a data-driven look at the outcomes of each strategy across $1B+ technology exits in 2024.
 * Actionable Insights for Operators: Practical recommendations tailored for PE operating partners and portfolio company executives, with case studies and operators' tips to enhance strategic execution and maximize exit outcomes.




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"report": "Technology Value Creation 2024.pdf",
"excerpt": "Technology Value Creation 2024 Excerpt.pdf"
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Published Research

Technology: Value Creation 2024

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

It’s textbook. General Atlantic is due to take Learning Technologies Group (LTG) private in a deal valued at £802.4 million (just over $1 billion). Shareholders will receive $1.27 per share, a 34% premium over its 26 September closing price. 

The deal aims to invest in LTG’s product innovation. The firm is a leading provider of corporate training programs and is looking to integrate AI into its solutions.

Learning curve. This isn’t General Atlantic’s first foray into edtech – the firm has a storied history in the sector. Quizlet, Unacademy, Fluency Academy, and Kahoot are all edtech companies currently in General Atlantic’s portfolio. 

The firm’s biggest claim to fame, though, in the edtech sector is Duolingo. The firm invested $10 million in the platform in April 2020 and upped its position in November of that year during a $35 million funding round that valued the company at $2.4 billion. General Atlantic then led the company’s successful IPO the following year, where it closed 36% above its initial asking price within its first day and was valued at $5 billion.

General Atlantic has slowly divested from Duolingo since 2022 and no longer lists it as a portfolio company on its website. 

While General Atlantic’s run was relatively short with Duolingo, it created a good amount of value – the company currently has a market capitalization of $16.21 billion and an enterprise valuation of $15.38 billion. 

Breaking (down) the streak. How did General Atlantic grow Duolingo so quickly? Much like General Atlantic’s plans for LTG, the value came through product innovation.

First, in early 2021 Duolingo professionalized its product by ending its volunteer contributor program. Then, in 2022 it redesigned its user interface and invested more in graphics by acquiring Detroit animation studio Gunner. 

Whether or not this playbook will be repeated with LTG remains to be seen. There is one aspect that may be more difficult to replicate: virality. The firm’s owl has become an internet icon for its absurdist humor, helping to popularize the app with Gen Z. 

Having a corporate learning company publicly shoot its shot at global popstars might not have the same impact. 

LTG and General Atlantic did not respond to requests for comment. 


Portco News

PE portcos saw some full and partial exits last week:

 * Frontenac sold Integris, an IT solutions provider, to OMERS Private Equity for an undisclosed amount.
 * Veriforce, a supply chain risk management platform, was traded from Thoma Bravo to Apax Partners. Financial terms were undisclosed.
 * Insight Partners offloaded some minority stakes in its data resilience portco, Veeam, to a variety of investors including TPG, Neuberger Berman, and Temasek. Insight Partners initially bought the company for $5 billion in 2020. The latest funding round has raised another $2 billion in capital for the firm and values it at $15 billion.

Meanwhile, portco M&A was in full swing:

 * Apollo and Oaktree’s ABC Technologies acquired TI Fluid Systems for $1.92 billion. Both firms are manufacturers in the automotive industry.
 * Astorg took Hamilton Thorne, a reproductive technology company, private in a deal valued at $282 million. It then immediately closed a deal to carve out and merge Cook Medical’s reproductive health business with the asset. The newly combined business will rebrand to ART MedTech in 2025.
 * GTCR’s wealth management portco AssetMark completed its acquisition of Morningstar Wealth’s TAMP (turnkey asset management program) assets. The firm is reportedly paying “upwards of $100 million” for the additional $12 billion in assets under administration. 
 * Advent International’s SYSPRO, a software company focused on the manufacturing and distribution sectors, agreed to pay £36 million ($46 million) to carve out NexSys, another software provider, from K3 Business Technology Group.
 * Eleda, a Swedish infrastructure services provider backed by Bain Capital, bought three companies from Vestum, a Swedish construction engineering company: landscaping firm Marbit and railway service providers Hanell Entreprenad and Flexirail.
 * Mubadala-backed Canada Cartage, a transportation and logistics provider, acquired Coastal Pacific Xpress (CPX), a refrigerated transportation solution provider, for an undisclosed sum.
 * Insurcomm, a disaster restoration construction firm owned by Summit Partners, bought Theraclean Restoration in order to expand its services beyond New England into the mid Atlantic region. 

And finally, there were a few people moves:

 * CD&R named Andy Callahan as an operating advisor. Callahan most recently served as the chief executive of Hostess Brands.
 * The Knot Worldwide, an online wedding registry company owned by Permira, appointed Raina Moskowitz as its next CEO and president. Moskowitz is coming from Etsy, where she was the COO and and CMO, to replace founder Tim Chi. 
 * Alteryx, an AI enterprise analytics platform owned by Clearlake and Insight Partners, appointed Andy MacMillan as its next CEO. MacMillan is currently the CEO of UserTesting. He will replace Mark Anderson, who left the firm in February to join Cloudflare as its president of revenue.
 * Apollo poached Hector Fernandez from Aristocrat Gaming to lead Diversified Gaming Solutions, the combined entity of IGT and Everi, which Apollo merged in July. 
 * Hillhouse Investment hired Tomohiro Kikuta as the head of its Japan operations. Kikuta joins from Bain Capital, where he was a partner on the APAC PE team.


Hot Take

Crazed fans. I will never understand the public aversion to foreign private equity ownership in sports. People will let foreign entities own everything from gas pipelines to digital infrastructure assets – things that are genuinely crucial to national security. But I don’t see those deals getting toppled like sports deals have.

There were two headlines that highlighted the absurdity of the situation to me: Ackerly Sports Group’s failed $75 million attempt to buy 20% of South African rugby team Springbok’s commercial rights, as well as Apollo’s grueling two year bid to buy Liga MX for $1.25 billion. I won’t even mention the NFL negotiations going on right now.

It should come as a surprise to no one that I am not a sports fan. Maybe that’s why I don’t understand the backlash. In private equity, not all capital is created equal… except when it comes to minority investments in sports leagues. I highly doubt that a 20% equity stake won’t result in an operational overhaul. 

But hey, there’s a lot about sports I don’t understand. I have no idea what the rules are to score a touchdown – and evidently, neither did ASG. 


More from Privitas

 * Technology: Value Creation 2024 (Read)
 * Could Unhappy Employees Be Good For Tech Exits? (Read)
 * Portco IQ: Technology 2024 (Read)
 * Top Tech Exits in 2024 Were to Strategic Acquirers (Read)
 * Exits Are Back, But Different (Read)

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

Will General Atlantic Duplicate Duolingo’s Success with $1B LTG Deal?

The 2024 Portco IQ: Technology report benchmarks large PE-backed technology companies across four dimensions.

What's Included

 * Proprietary Scoring and Rankings: Graded ranking of 15 companies based on their performance, with in-depth profiles of leaders, underperformers, and insights into what helps or hurts successful exit outcomes.
 * Benchmarking Across Four Key Dimensions: A comprehensive analysis of recently-exited PE-backed technology portfolio companies, assessing their performance in financial growth, operational efficiency, market positioning, and talent and governance.
 * Detailed Value Creation Insights: Examination of the strategies that drove enterprise value growth, including M&A, product innovation, market expansion, and restructuring, with real-world examples from top-performing companies like QGenda and Exosens.




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Portco IQ: Technology 2024

What's Included

 * Record Surge in Sponsor-to-Sponsor Exits: Discover why sponsor-to-sponsor (S2S) exits have skyrocketed by 154% in 2024, now representing 68% of total exits for PE-backed companies – more than double last year’s rate.
 * Shorter Holding Periods, Faster Turnarounds: Learn why companies exiting through S2S deals have a shorter holding period than those going public or acquired by strategics, and how it impacts exit strategies.
 * Underperforming Assets in the Spotlight: Uncover why lower-growth companies are more likely to follow S2S exits, with enterprise value (EV) expansion lower than their IPO or strategic exit counterparts.




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"report": "Sponsor-to-Sponsor Exits 2024.pdf",
"excerpt": "Sponsor-to-Sponsor Exits 2024 Excerpt.pdf"
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Sponsor-to-Sponsor Exits 2024

What’s Included

 * Extended Strategic Planning Horizons: Explore how PE firms are adjusting to longer holding periods by extending strategic planning to 5-7 years, enabling deeper value creation and robust risk management strategies that align with market cycles.
 * Focus on Organic Growth and Cash Flow: Understand the increased emphasis on organic growth and strong cash flow generation in the current economic environment, and the operational efficiency measures that PE firms are adopting to support these goals.
 * Demand for Digital Transformation Leadership: Discover the growing need for executives who can drive digital initiatives, with an emphasis on talent acquisition, cultural transformation, and investment in cutting-edge technology across portfolio companies.
 * Integration of ESG in Investment Strategies: Learn how PE operators are incorporating Environmental, Social, and Governance (ESG) factors into their strategies to meet investor expectations, mitigate risks, and drive sustainable value creation.

What's Included

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