S&P Global Market Intelligence offers our top picks of global private equity news stories and more published throughout the week.
The upcoming UK election has amplified the debate around private equity performance fees.
The Labour Party, which held a commanding lead in polls a week ahead of the July 4 election, has pledged to raise taxes on carried interest — the fund manager's share of profits from a successful private equity investment. Currently subject to the 28% tax on capital gains, carried interest could instead be treated as income in a Labour government, exposing the fees to a tax rate that tops out at 45%.
But will Labour actually follow through?
Ludovic Phalippou, a University of Oxford economist who has published research on private equity managers' carried interest earnings, had his doubts. Phalippou explained that Rachel Reeves, in line to serve as chancellor of the exchequer if Labour prevails in the election, has already softened the party's stance on carried interest in comments reported by the British press, saying managers who contribute their own capital to a private equity fund should continue to pay taxes at the lower rate.
As the debate over carried interest plays out, the UK's private equity market is showing signs of a rebound. Dealmaking was pacing for a substantial year-over-year increase in 2024 as of mid-June.
Read more about what is at stake for private equity in the UK's July 4 election.
CHART OF THE WEEK: Steep decline in private equity-backed real estate investments
⮞ Private equity- and venture capital-backed investments in the real estate sector between Jan. 1 and May 28 amounted to $4.88 billion in announced value globally, the lowest total for that period in at least five years, according to S&P Global Market Intelligence data.
⮞ The sharp decline can be chalked up to elevated interest rates that will not come down as fast as some market observers expected at the start of 2024.
⮞ A US office sector walloped by vacancies and falling valuations is another factor.
TOP DEALS AND FUNDRAISING
– TPG Capital LP and Caisse de dépôt et placement du Québec agreed to buy Germany-based property software company Aareon AG from Aareal Bank AG and Advent International LP at an enterprise value of about €3.9 billion. The deal is expected to close in the second half of 2024.
– KPS Capital Partners LP agreed to sell Swiss metal packaging company Eviosys Packaging Switzerland GmbH to Sonoco Products Co. for about €3.62 billion. The deal is likely to close by the end of 2024.
– KKR & Co. Inc. acquired a portfolio of 18 multifamily assets from a Quarterra Multifamily Communities LLC fund for about $2.1 billion. The portfolio comprises more than 5,200 units across California, Washington, Florida, Texas, Georgia, North Carolina, Colorado and New Jersey.
– Klar Partners Ltd. raised €870 million for its Klar Partners II SCSp fund. The fund will invest in midmarket services and industrial technology companies in Europe.
– Elsewhere Partners LLC raised $285 million at the close of its Elsewhere Partners III LP fund. The vehicle makes majority investments in business-to-business software companies.
MIDDLE-MARKET HIGHLIGHTS
– Guardian Capital Partners Investment Management LP acquired home improvement retail company American Overhead Door & Dock, the first purchase under its newly formed North American Door & Dock platform.
– Stellex Capital Management LP exited its investment in conveyor equipment designer Continental Global Material Handling LLC via a sale to Precision Pulley & Idler.
– Copley Equity Partners made a strategic investment in cooling tower services company OBR Cooling Towers Inc.
FOCUS ON: HEALTHCARE EQUIPMENT
– Endogenex Inc., a clinical-stage medical device company, closed its $88 million series C funding round. New investors including Hatteras Venture Partners, Lumira Ventures and Orlando Health Ventures participated in the round.
– French artificial urinary device maker UroMems SAS raised $47 million in its series C financing round led by Crédit Mutuel Innovation, with participation from the European Innovation Council.
– Ocon Therapeutics, an Israel-based women's health company, received $10 million in an investment round led by RH Capital Partners.
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For further private equity deals, read our latest In Play report, which looks at potential private equity-backed M&A, including rumored transactions, each week.
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