PitchBook News - PE's merger mania

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The Weekend Pitch

September 24, 2023

Presented by the U.S. National Science Foundation

(Mara Potter/PitchBook News)

The combined factors of a tougher economic environment and a maturing industry are driving consolidation among private equity managers.

In this month alone, CVC Capital Partners bought infrastructure-focused manager DIF Capital Partners, and London-listed Bridgepoint picked up Energy Capital Partners, another infrastructure specialist, for an equivalent of $1.05 billion, including debt. The two deals happened within a day of each other.

Even larger firms have become targets of acquisitive peers. In May, TPG paid $2.7 billion for real estate and private credit heavyweight Angelo Gordon. At the end of last year, Sweden's EQT bought Baring Private Equity Asia—one of the Asia-Pacific's most well-established firms—in what is likely the biggest merger of its kind.

Fund manager mergers have long been a feature of the industry, but some in the industry expect them to accelerate. Such deals have many benefits for both parties. For the acquirer, they afford access to new markets and expertise; for the acquired, they can mean access to a bigger platform and an extensive investor roster. Meanwhile, LPs benefit from having their investment managed by a new entity that is feasibly better equipped to pursue new investment on their behalf.

Yet consolidation is a double-edged sword. While investors may be spared the tyranny of choice that comes with a saturated market, fewer players will be bad for competition and may eventually expose LPs to a higher fee burden and less diversification.

This is the Weekend Pitch, and I'm Andrew Woodman. You can reach me at andrew.woodman@pitchbook.com or @adwoodman.

Trivia

Since cryptocurrency exchange FTX collapsed more than a year ago, it has pulled down other crypto exchange startups. How much has VC investment into exchanges plummeted this year?

A) 40%
B) 68%
C) 97%
D) 52%

Find your answer at the bottom of The Weekend Pitch!

The crystal ball metrics for venture's future

(VallarieE/Getty Images)

Our models are pegging the probability of a recession at 73%, and revenue growth in formerly VC-backed public tech companies is at a decade-low, in the red at -8.1%. The IPO window is reopening, but this week's debuts have been a mixed bag.

Peer into venture's crystal ball models with our VC-focused Q2 2023 Quantitative Perspectives report, with over 30 charts to explain where we are and what's to come.

How LPs can navigate the tyranny of choice

When institutional investors decide to allocate to alternative investing strategies, hundreds—if not thousands—of GPs could be vying for their commitments for open funds. Complicating those decisions: Even the firms that delivered top-tier returns in previous funds can't be counted on to repeat that performance.

Enter our analyst note, which lays out dozens of key questions for LPs to dive into as they consider making capital commitments. Crucially, it also includes the green and red flags to watch for in the answers.

China VC remains in lockdown

No great burst in economic activity followed the lifting of COVID-19 restrictions in China at the end of 2022, and the startup market was no exception, our Greater China Venture Report shows. VC investment in the Greater China region is on pace for a 31% decline, which would put it below 2016 levels.

With Chinese consumer confidence in the doldrums and talk of deflation in the air, don't expect investors to change their attitude any time soon. The region also badly needs exits to power the flow of capital into new funds and startups.

The report is available in English, traditional Chinese and simplified Chinese.

Quote/Unquote

"We've covered a lot of ground, and the full effects of our tightening have yet to be felt."

—Federal Reserve Chair Jerome Powell in a press conference following the decision not to raise interest rates.

Stay tuned

Keep an eye out for these insights and research reports coming out this week:

Q2 2023 E-commerce Report
Analyst Note: Emerging Sustainable Investing Opportunities: Transit Tech
Q2 2023 Enterprise SaaS Report
H1 2023 Global Private Debt Report

Trivia

Answer: C)

This year, investment in cryptocurrency exchanges has declined by 97%. You can read more about why in our latest on the vertical.

This edition of The Weekend Pitch was written by Andrew Woodman, Emily Burleson, James Thorne and Rosie Bradbury. It was edited by James Thorne and Laural Hobbes.

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PitchBook News - PE's merger mania

Trivia

The crystal ball metrics for venture's future

How LPs can navigate the tyranny of choice

China VC remains in lockdown

Quote/Unquote

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