PE Weekly: Private Equity Leads the ESG Pack

ESG (environmental, social and governance) has emerged as a top priority for investments across asset classes, but new research suggests private equity is ahead of the curve. So it’s perhaps unsurprising that this week’s middle-market M&A activity includes several ESG-focused transactions, with an emphasis on the “E” as investors bolster renewable and cleaner energy solutions with recent deals. Elsewhere, investors this week also zeroed-in on healthcare and healthtech, infrastructure, logistics and more. Explores the latest deals and insights below.

Platform Investments

Lincoln Road Acquires Landscaping Business Zodega. Lincoln Road Global Management, a lower-middle market private equity firm, announced its acquisition of Zodega, a provider of landscaping and lawn care services to commercial end customers. In a statement, Lincoln Road founder and managing partner Jeff Magny said the business already has a strong growth trajectory that will be reinforced by its partnership with the private equity firm. He added that the investment reflects Lincoln Road’s broader investment strategy “to identify an attractive investment opportunity involving a business that provides local and regional communities with essential services that support overall quality of life and well-being.”

Court Square Backs Five Star Parks & Attractions. Court Square Capital Partners, a private equity firm focused on the middle market, has invested in Five Star Parks & Attractions, which develops and operates family entertainment centers. Based in Kentucky, Five Star said the strategic capital investment from Court Square will support its efforts to develop “safe and accessible family entertainment centers throughout the U.S.” The business added in its announcement that it will focus on collaborating with brands to expand into new markets. Existing backers, including Fruition Partners, Taubman Capital and management, will remain minority investors in the business.

HASI Joins Investors in Renewable Energy Business. HASI, a climate-focused investment firm, is joining existing investors in renewable energy business Bioenergy Devco, the North American division of BTS Bioenergy. HASI provided $30 million to the company in support of its operations in designing and operating facilities that recycle organic material to produce natural gas. Bioenergt Devco said it will use the funds to develop anaerobic digestion facilities across the U.S. Existing investors in the company include Newlight Partners, Sagewind Cpaital and Irradiant Partners.

LongueVue Capital Invests in RBW Logistics. LongueVue Capital, a private equity firm based in New Orleans, has announced its recapitalization and growth equity investment in RBW Logistics, a provider of warehousing, fulfillment and other value-added services to blue-chip customers in the staples, industrials and durable goods markets. RBW will use the backing to expand across the Southeast, a press release said.

Enhanced Healthcare Partners Acquires Healthcare RCM Company. Enhanced Healthcare Partners, a private equity firm targeting middle-market healthcare investments, has acquired Janus, a provider of revenue cycle management (RCM) technology for the healthcare space. Janus plans to use the investment to support market expansion, product development and go-to-market initiatives. “This investment allows us to accelerate the development of our innovative revenue cycle platform, enabling revenue cycle teams to operate more efficiently and effectively,” said Janus founder and CEO Brendan Downing.

Argosy Acquires Industrial Equipment Provider Vac2Go. Argosy Private Equity, a lower middle-market private equity firm, has announced its seventh platform investment from its sixth lower middle-market fund. The firm acquired Vac2Go, which provides equipment to industrial, utility and municipal customers, offering daily and monthly rentals of trucks and vacuum trucks. A press release noted the support from Argosy will enable Vac2Go to expand geographically and grow its fleet size.

Accel-KKR Backs Retail Software Provider StoreForce. Accel-KKR, a technology-focused private equity firm targeting the middle market, has provided a “significant capital investment” to retail store management software provider StoreForce, according to a press release. Accel-KKR managing director Phil Cunningham said StoreForce presents an opportunity for expansion using the firm’s resources, an M&A strategy and product-led growth. Specific terms of the investment were not disclosed.

TJM Capital Establishes InCompass Platform. TJM Capital has announced the formation of a new platform company, InCompass, providing manufacturing solutions to industrial business clients. InCompass incorporates a variety of industry brands including Timesavers, Dubois Equipment Company, Randbright, Clausing Industrial and U.K.-based Colchester Machine Tool Solutions. The platform company will be led by Micah Coleman, current CEO of the individual companies.

Add-Ons

OceanSound’s RMA Acquires Petroleum Product Testing Business. RMA Companies, a portfolio company of technology-focused private equity firm OceanSound Partners and a provider of product testing and inspection services, has announced its acquisition of A.J. Edmond, which similarly provides product inspection services. A.J. Edmond specializes in lab testing and analysis of raw materials, and focuses on providing its services to the petroleum byproduct production and resale market. In a statement, RMA CEO Ed Lyon said its investment in A.J. Edmond supplements its existing lab testing services and opens up cross-selling opportunities for the company.

Hastings’ GridSource Announces First Add-On. GridSource, an infrastructure company providing boring and drilling services, has announced its first add-on acquisition since first receiving investment from lower-middle market private equity firm Hastings Equity Partners in December. GridSource acquired WiseConnect, an asset-light service provider to the telecommunications industry. The business provides support for telcos’ infrastructure build, installation, fulfillment and maintenance. In its announcement, GridSource said its investment will support an expansion of its service offerings as well as its geographic footprint as it works to capitalize on growing demand for infrastructure upgrades.

BP Energy’s Catalyst Power Takes Minority Stake in Solar Consulting Business. Catalyst Power Holdings, a provider of cleaner energy solutions for the commercial and industrial markets and a portfolio company of private equity firm BP Energy Partners, announced its strategic partnership with JCD Solar Consulting. As part of the agreement, Catalyst has acquired a minority stake in JCD Solar, which provides solar project development consulting solutions. Their partnership will also see Catalyst become the exclusive offtake provider for community solar for future JCD solar projects.

Huron Capital’s Exigent Announces HVAC Acquisitions. Exigent, the ExecFactor platform company owned by lower middle-market private equity firm Huron Capital, has announced its acquisitions of JPG Plumbing and Mechanical Services and ThermaServe, enabling Exigent to scale its existing HVAC services and operations. JPG is a plumbing and mechanical service company based in Maryland, while ThermaServe is a mechanical service company based in Florida. The investments expand Exigent’s footprint across Washington, D.C., Maryland, Virginia and elsewhere in the Southeast.

Exits

New Heritage Exits Rhythmlink. New Heritage Capital, a private equity firm based in Boston with a focus on the middle market, has announced its exit of portfolio company Rhythmlink International. Rhythmlink designs and manufactures single-use brain health and neurodiagnostic electrodes to support brain health testing. Since first partnering with New Heritage, the company has introduce new products and expanded into new markets, as well as expanded via strategic acquisitions. New Heritage noted that the business has struck a new partnership with Philadelphia-based private equity firm Graham Partners for its next phase of growth.

Fundraising

Deerpath Capital Closes $1.5 Billion Fund. Deerpath Capital Management, which provides senior debt financing to lower-middle market companies, announced the close of its sixth fund with $1.5 billion in equity capital commitments. Fund VI continues Deerpath’s existing investment strategy and secured commitments from existing and new investors across the U.S., Canada, Germany, Japan, Lebanon and Panama. The firm will provide financing to private equity-backed companies with valuations between $50 million and $150 million.

Bow River Raises $605M for Software Fund. Bow River Capital, an alternative asset manager, has announced the close of its second software growth equity fund, Software Growth Equity Fund II, with commitments totaling $605 million. The fundraising surpassed its initial target of $500 million, and marks the firm’s largest fund to-date. Bow River will provide investments between $25 million and $50 million to bootstrapped, founder-led SaaS companies seeking their first institutional capital, the press release said. Fund II currently has seven companies in its portfolio.

Sverica Capital Closes Sixth PE Fund. Sverica Capital Management, a middle-market private equity firm, announced the close of its sixth private equity fund, Sverica Capital Partners VI. The firm said in its announcement that the funds will continue its investment strategy of targeting businesses that are or could be category leaders within their industries, with a particular focus on technology, business services, healthcare and advanced industrials. The fund closed at its hard cap of $750 million in limited partner commitments.

Insights

Great Hill Expands to U.K. and Europe. Great Hill Partners, a middle-market private equity firm focused on high-growth businesses in the software, digital commerce, FinTech, healthcare and digital infrastructure spaces, has announced its international expansion with the opening of its London office. The move will support the firm’s continued expansion across the U.K. and Europe, according to a press release. In a statement, Great Hill managing director Chris Gaffney said the expansion is a “natural next step” for the firm. “We have more than a decade of experience investing in the UK and Europe, with a large and growing portfolio of international investments,” he noted.

PE Leads in ESG Management, Malk Partners Finds. The inaugural The State of ESG: 2022 report by private market advisory firm Malk Partners finds private equity investors lead the pack in terms of ESG management compared to private credit and growth equity/venture funds. A press release announcing the latest research found 100% of PE investors already incorporate ESG in their investment process, compared with 86% for growth/venture funds, and 64% for credit funds. PE also leads in monitoring their portfolio across ESG issues, engaging portfolio companies in ESG discussions and setting ESG targets. Researchers also found that LPs are largely the driving force behind the embrace of ESG across asset classes, while risk management, alignment with peers and value creation were also top drivers.