S&P Global Market Intelligence offers our top picks of global private equity news stories and more published throughout the week.
Softening valuations for software-as-a-service businesses are drawing bargain-hunting private equity firms to that corner of the larger technology market.
Spillover from public market volatility, a general slowdown in business activity and a pullback in technology spending by companies that splurged on tech during the COVID-19 pandemic are all factors in the declining valuations for software-as-a-service, or SaaS, firms, according to Bruce Daley, a senior research analyst for 451 Research.
Here is one recent example: Zendesk Inc., a developer of customer service and sales software, agreed in June to be acquired for $9.9 billion, a price 38% lower than the $16.05 billion go-private bid it turned down just four months prior. The investor consortium behind the June offer includes private equity firms Permira Advisers LLC and Hellman & Friedman LLC.
There have been five $1 billion-plus private equity deals for SaaS companies in North America so far this year, according to S&P Global Market Intelligence data. Private equity investors like the steady, predictable cash flow produced by SaaS companies' subscription model, Daley said.
Deals in the space are already getting harder to find, according to Daley, who predicted M&A activity in the SaaS sector would decline in the second half of the year.
Read more about the rising private equity interest in SaaS businesses.
CHART OF THE WEEK: Dealmaking takes a dive in June
⮞ Global private equity and venture capital deal value totaled $62.63 billion in June, down 56.1% from the same month a year ago, Market Intelligence data shows.
⮞ The total number of transactions also dropped significantly, with June's 1,813 announced deals representing a 32.6% year-over-year decline.
⮞ June ended a second quarter in which deal volumes fell precipitously from a relatively strong first quarter, according to the Deals 2022 Midyear Outlook report from professional services firm PwC, which cited "inflation, rising interest rates, geopolitical turmoil [and] increased government scrutiny" of private equity for the decline.
FUNDRAISING AND DEALS
* Funds managed by The Carlyle Group Inc. agreed to sell a majority stake in Unison Software Inc., which provides procurement, supply chain and contract management software to U.S. federal agencies, to Madison Dearborn Partners LLC. Pursuant to the deal, which is expected to close during the third quarter, Carlyle will remain a minority investor in Unison.
* KKR & Co. Inc. closed KKR Asset-Based Finance Partners, its inaugural fund dedicated to asset-based finance investments, with commitments totaling approximately $2.1 billion. Separately, the private equity giant is in talks to sell business management software provider MYOB Group Ltd. to Australia and New Zealand Banking Group Ltd.
* Francisco Partners Management LP secured capital commitments of about $17 billion at the close of its two funds, Francisco Partners VII LP and Francisco Partners Agility III LP.
* Cinven Ltd. held a final close for its first Strategic Financials Fund, with total commitments of €1.5 billion.
ELSEWHERE IN THE INDUSTRY
* Manulife Investment Management joined forces with Capital Power Corp. to buy the 1,633-MW Midland Cogeneration facility in Michigan for $894 million. The plant is majority-owned by OMERS Infrastructure Management Inc. and several other partners.
* ArchiMed SAS agreed to buy a majority stake in Title21 Health Solutions, which offers software for cell and gene therapy laboratories.
* TZP Group will divest 80% of its stake in Knix Wear Inc., an intimate apparel brand, to Essity AB (publ).
* Vitruvian Partners LLP closed the purchase of a majority stake in Outpost24 AB, a software-as-a-service platform for cyberrisk management.
FOCUS ON: ENERGY
* Funds managed by Apollo Global Management Inc. affiliates will invest $175 million in Summit Ridge Energy LLC, which owns and operates community solar assets.
* Partners Group Holding AG purchased a majority interest in energy-as-a-service provider Budderfly Inc.
* OMERS Private Equity agreed to acquire U.K.-based Network Plus Services Ltd., a provider of utility and infrastructure repair and maintenance services.
451 Research is part of S&P Global Market Intelligence.