Advent International has struck gold with one of the biggest-ever funds to invest in Europe at USD 25bn. However, private equity (PE) fundraising as a whole looks set to fall short of 2021, according to Unquote data.
GPE X, Advent's new vehicle, will buy 35-40 companies over the next few years with tickets as low as USD 100m-200m and up to USD 2bn and beyond across five core sectors – business and financial services; healthcare; industrial; retail, consumer and leisure; and technology. Advent will invest 40%-45% of the fund in Europe, 40%-45% in America and the balance in Asia and other geographies, although it is not legally constrained to a specific allocation, the sponsor told Mergermarket. It likes complex corporate carve-outs, public-to-privates, and repeat business models.
The fund is the largest to invest in Europe in the past twelve months, ahead of funds from Hellman and Friedman (USD 24.4bn) and Silver Lake Partners (USD 20bn).
Winds of change
The sheer size of GPE X and its short roadshow time is an exception to fundraising headwinds faced by some sponsors.
Investors in PE - limited partners (LPs) in the jargon - are swamped with fundraising requests. Sponsors look set to raise considerably less in 2022 than the year before. To date this year, they’ve collectively raised EUR 77.5bn across 41 funds, compared to EUR 196bn across 106 funds in FY21.
However, as public markets lull and the economy braces for a macro turndown, the wind could be changing. Some investors are increasingly looking to private assets for reliable returns, with PE now accounting for a fifth of family office portfolio allocations, according to a UBS survey. This could make Advent's mega-fund less of an exception in the future.
As the economy stumbles, unfortunate corporates and multinationals will generate opportunities for Advent to think about carve-outs and take-private deals. It may have lost to Astorg in ICIG’s carve-out of German CordenPharma but other divestments are ongoing at Novartis, Micro Focus, and Habia Cable, among many others.
The market is also expecting a lot more public-to-private deals in non-consumer-driven sectors like healthcare and energy, said sources. Elderly care groups Orpea and Korian look cheap, discounting a recent scandal, and Remgro’s bid for Mediclinic follows whispers of prep work for a bigger range of bids for healthcare services.
With USD 11bn of dry powder in Europe alone, Advent looks set to be a player to watch at the highest levels of the game of M&A.
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