The Latest in Lower and Middle Market Private Equity
Welcome to the latest edition of The Lower Middle Market, which will be the last one of 2023. Here’s what we have in store today:
Medspas drawing interest
Bitotech earnouts low success rate
Could private equity could create systemic risk for the U.S. economy?
What’s Hot
Medspas - According to this Pitchbook report, “Numerous sponsors are looking for entry into medspa, with its consumer demand tailwinds, cash-pay business model, and small clinic footprints. A category that lends itself to de novo plays, medspa feels very of the moment.”
Continuation Funds - Although Bain & Company recently reported that private equity investors are increasingly saying no to continuation funds, opting instead for cash, a few firms have bucked the trend. BV Investment Partners announced the closing of a single-asset continuation fund transaction for Right Networks. ABS Capital closed its first continuation fund. Meanwhile, Kinderhook Industries announced a $1.3 billion continuation fund in partnership with AlpInvest.
Systematic Risk - Federal regulators continue to take aim at private equity and hedge funds with an ongoing debate over whether private equity creates systematic risk for the U.S. economy. Link
What’s Not
The Traditional LBO - With the climbing cost of capital, private equity firms are increasingly reliant on the organic growth of their portfolio companies. Link
Biotech Earnouts - A recent study found only 22 percent of biotech deals met their earnout milestone to payout. This article suggests that earnouts from those tied to research advances such as successful clinical trials, have a much better chance of hitting than those tied to commercial goals. Link
This (Mainly Incorrect) Take From The Atlantic on the Private Equity Industry - Outcomes are all about incentives. Unfortunately, this author failed to mention the many negative outcomes public companies create due to equally - if not worse - incentives. Link
Fundraising
Kelso & Company Closes Middle Market Fund XI at $3.25 Billion Link
NexPhase Capital Raises Fund V to Focus on LMM Healthcare, Software, and Consumer Industry Verticals Link
Graycliffe Partners Holds Single Closing for $600 Million Buyout Fund Link
Gridiron Capital Closes Fifth Fund Above Target at $2.1 Billion Link
Incline Closes Fund VI with More than $1.9 Billion Link
Pfingsten Closes $435 Million Fund VI Link
Granite Creek Capital Partners Closes LMM Flexible Capital Fund at $300 Million Link
Great Range Capital Closes $250 Million Fund to Focus on Midwestern LMM Companies Link
Rubicon Technology Partners Raises $1.7 Billion for LMM Software Companies Link
Brynwood Partners Closes its Ninth Fund at $750 Million Link
Saothair Closes Inaugural Fund at $125 Million for Manufacturing Companies Link
Trivest Closes its Largest Fund Ever Link
Other stuff
Align Capital Partners Launches New Strategy Targeting Independent Sponsors Link
Supporting Middle Market Manufacturing – A Conversation with Torque Capital Group Link
A Strategic Partnership Aims to Invest in Lower Middle Market Companies Link
Thanks for reading and have a great end to the weekend!