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Cheap money's past is private debt's future

Plus: VC's fire sales, supply chain tech, TPG's post-IPO deals and more
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The Weekend Pitch
July 3, 2022
Presented by Masterworks
(Joey Schaffer/PitchBook News)
The multibillion-dollar sale of Britain's biggest pharmacy chain was set to be among the UK's largest PE-backed take-privates of 2022—but it didn't happen. The deal for Boots had Apollo Global Management and Indian conglomerate Reliance Industries named as potential buyers.

In a statement, the parent company, Walgreens Boots Alliance, blamed the buyers' inability to raise financing amid volatile market conditions created by the war in Ukraine and monetary tightening from central banks.

It's a high-profile example of dealmakers struggling to secure financing from the public debt market, and it's unlikely to be an isolated case. Indeed, the failed deal could indicate that the cheap money era, which fueled the most recent private markets renaissance, is over.

Private debt funds—particularly in Europe—will be keen to pick up the slack left by the traditional leveraged loan market, but doing so could involve taking greater risks.

Welcome back to The Weekend Pitch. I'm Andrew Woodman, and you can reach me at andrew.woodman@pitchbook.com or on Twitter at @adwoodman.

In spite of the macroeconomic headwinds, PE funds are still eyeing take-private opportunities. These types of deals offer a great opportunity for fund managers sitting on a veritable mountain of dry powder. Valuations are attractive in public markets, as falling share prices create a bargain bucket of targets for well-capitalized investors.
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Quote/Unquote
(Alexey Yaremenko/Getty Images)
"A sale could be attractive to founders because they don't have to lay off everyone, and investors can get some or all their money back. It's a soft landing."

—Chris Farmer, a partner and CEO at early-stage firm Signal Fire

After years of telling their portfolio companies to grow at all costs, PitchBook's Marina Temkin reports that some investors are telling companies to resort to even more drastic measures: try to sell to a strategic buyer at a discount rather than risk going out of business next year.
 

Deal flow
Last year, 53 PE deals in the US supply chain sector accounted for $20 billion in total deal value, according to PitchBook data. Deal value has nearly quadrupled since 2019 and more than doubled over 2020.

The last two years have seen a sharp rise in private equity activity in the supply chain tech sector as the pandemic, the war in Ukraine and the growth of ecommerce combined to reveal weaknesses such as a lack of data and analytics, as well as outmoded technology.
 

Datapoints
(wsfurlan/Getty Images)
VC-backed startups in Central and Eastern Europe have secured €2.4 billion (about $2.5 billion) across 312 deals so far this year, according to PitchBook data. In terms of capital raised, the region is already two-thirds of the way to last year's record total.

Here's a closer look at dealmaking, fundraising and exit activity for CEE startups in the midst of geopolitical instability and harsher market conditions.
 

Did you know ...
(shomos uddin/Getty Images)
… That TPG has completed or announced 51 deals, including buyouts and investment rounds, during the first half of the year?

Find out more about the firm's largest deals since its public offering in January, its Rise Climate fund and how TPG finds itself in the middle of the pack among publicly traded PE firms tracked in our PE Earnings Dashboard.
 

Recommended reads
Apple's executives had a front-row seat for the development of the iPhone. Even they didn't realize how much its features would change the world. [The Wall Street Journal]

Researchers set out to determine how much endowments invest with diverse managers. Most refused to participate. [Institutional Investor]

In a stunning crime spree, a pair of "open house hunters" allegedly stole luxury items worth millions of dollars from celebrities, wealthy homeowners—and even their friends. [Bloomberg]

Meet the Midwestern retailer quietly making a fortune selling used stuff—and beating the S&P 500. [Forbes]

Venture capital's reckoning: Why there won't be a rerun of the dotcom crash. [The Economist]

In the waning days of the Cold War, Rainer Sonntag helped fuel a neo-Nazi movement still active in Germany. He was also a communist spy—and worked for Vladimir Putin. [The Atavist]

This edition of The Weekend Pitch was written by Andrew Woodman and Priyamvada Mathur. It was edited by Chris Noble and Kate Rainey.

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