PE Weekly: Fundraising Makes a Mild Return Amid Sinking M&A Activity

Two middle-market investment firms announced the close of their new funds this week, marking a mild return of fundraising in a market hampered by uncertainty and depressed M&A activity. While new research from Dealogic pinpoints just how far M&A value declined in the year’s second quarter, deals are still getting done in the middle-market. This week, transactions focused on healthcare, manufacturing and industrials, and energy, while even challenging sectors like consumer products and technology saw some transaction activity.

Platform Investments

Greenbriar Acquires Parking and Hospitality Company. Greenbriar Equity Group, a middle-market private equity firm, has acquired parking and hospitality solutions provider Towne Park. In a statement, Towne Park CEO Andrew Kerin said the company will benefit from Greenbriar’s experience expanding tech-enabled service platforms such as Towne Park and focus on both organic and acquisition opportunities to expand geographically.

Blackford Capital, HCAP Partners Acquire Industrial Automation Business. HCAP Partners, a lower-middle market impact private equity firm, has acquired PACIV, an industrial automation service provider. The transaction is a co-investment with lower-middle market PE firm Blackford Capital, which acquired PACIV earlier this month, a press release said. PACIV services the biotechnology, pharmaceutical and medical device sectors.

Add-Ons

Blue Point’s Weaver Leather Acquires Dog Products Business. Weaver Leather, a platform of leather brands and manufacturers, and portfolio company of Blue Point Capital Partners, announced its acquisition of Rex Specs, an outdoor dog products brand. Rex Specs targets active and working canines including goggles, ear protection and more. Weaver will support Rex Specs’ expansion, yielding its supply chain and e-commerce expertise to grow the company’s customer base and product line.

Stellex’s P3 Acquires Anchor Plumbing. P3, a plumbing services platform owned by Stellex Capital Management, has announced its second acquisition this year. The company will acquire Anchor Plumbing, allowing it to expand in Texas, a press release said. The investment marks P3’s eleventh add-on investment since its formation in early 2022.

Ridgemont Equity’s Agape Care Acquires Two Hospice Care Providers. Agape Care Group, a provider of hospice and palliative care across the Southeast U.S., has acquired two additional hospice care providers, Hope Hospice and Assured Hospice. The investments expand Agape’s presence in the region, particularly in Alabama and Georgia. Agape is a portfolio company of Ridgemont Equity Partners, a middle-market private equity firm.

Thompson Street’s Gurobi Acquires October Sky. Gurobi Optimization, a provider of decision intelligence technology and portfolio company of private equity firm Thompson Street Capital Partners, has acquired October Sky. Based in Japan, October Sky provides mathematical optimization services. Gurobi said the investment will “empower customers across industries to tackle complex business challenges efficiently and effectively.”

Exits

L Catterton Exits Italian Cycling Company to Family Office. L Catterton, a consumer-focused investment firm, has announced the sale of Italy-based cycling company Pinarello to a private family office. In a statement, Pinarello chairman Fausto Pinarello said the company “achieved record revenues” during its partnership with L Catterton. He will retain an interest in the business and retain his position as chairman.

Carlyle, Stellex Exit Ship Repair Business. Titan Acquisition Holdings, which provides ship repair and marine complex fabrication services, has been sold by Carlyle and Stellex Capital Management, according to a press release. The Titan platform includes Vigor Industrial LLC, MHI Holdings LLC and Continential Maritime San Diego. Carlyle and Stellex, a private equity firm, sold the company to PE firm Lone Star.

Utility Duke Energy Sells Assets to ArcLight Capital Partners. Duke Energy, a utility firm, announced it reached an agreement to divest its commercial distributed generation business to ArcLight Capital Partners, Reuters recently reported. The private equity firm will acquire assets of REC Solar, which Duke acquired in 2015, among other assets. The deal was announced for $364 million.

Fundraising

Cathay Capital Raises $270 Million for Growth PE Fund. International investment firm Cathay Capital Private Equity has announced the close of its latest growth private equity fund, raising $270 million in capital commitment. Small Cap IV, as the fund is called, will focus on healthcare, consumer and technology investments across Europe, North America and Asia. Cathay noted the fund is an expansion of its middle-market investment strategy.

Varity Healthcare Raises $700 Million. Varsity Healthcare Partners, a lower-middle market private equity firm targeting the healthcare services market, announced the close of its latest fund with $700 million in capital commitments. Varsity Healthcare Partners IV exceeded its initial $650 million target. The fund will continue the firm’s existing investment strategy, pursuing a “buy-and-build” value creation plan and targeting businesses that provide outsourced services and technology to healthcare providers and payers.

Insights

Monroe Capital Expands into Venture Debt with Acquisition. Monroe Capital, a boutique asset management firm, has acquired venture debt firm Horizon Technology Finance Management. The investment expands Monroe’s existing direct lending offering, including lower-middle market lending. In a statement, Monroe President Zia Uddin said the investment broadens the firm’s ability to invest in businesses across a wider range of their growth cycles.

M&A Activity Sinks in Q2: Dealogic. New data from Dealogic finds global M&A activity sank 36% year-over-year in 2023’s second quarter, but analysts point to optimism among investment bankers that deal activity will pick back up. The total value of global M&A transactions in Q2 fell to $732.82 billion, down from $1.14 trillion in Q2 2022. Analysts cite global economic uncertainty as a main factor in the decline. The report also cited Sullivan & Cromwell Co-Chair Scott Miller, who warned that trouble in the U.S.’s regional banking sector could more heavily impact middle-market M&A activity as the year progresses.

Middle Market Growth is produced by the Association for Corporate Growth. To learn more about the organization and how to become a member, visit www.acg.org.