PE landscape resilient and adaptable in H1 2023, reveals CVCA

BY Fraser Tennant

The Canadian private equity (PE) landscape continues to navigate market dynamics with resilience and adaptability, according to a new report by the Canadian Venture Capital and Private Equity Association (CVCA).

In its ‘H1 2023 Canadian Private Equity Market Overview’, the CVCA reveals that C$1.6bn was raised across 161 deals in Q2 – a 4 percent increase in deal volume compared to Q1 2023.

Moreover, despite a 19 percent decline in disbursed capital, the PE industry has maintained a strategic focus on smaller investments and sectors aligned with sustainable growth. The average deal size declined by 22 percent to C$10m, reflecting the industry’s preference for smaller investments.

“The Canadian PE sector’s approach to investment and focus on sustainable growth strategies reflect a resilient response to market dynamics,” said Kim Furlong, chief executive of the CVCA. ​“Investors have shown cautious optimism, remaining committed to the mid-market and choosing sectors with longer-term potential, such as information and communications technology (ICT) and cleantech.”

Sector-wise, ICT claimed the top spot with C$936m invested across 64 deals, contributing to 26 percent of total investment value. The cleantech sector continues to shine, surpassing previous years’ performance with C$885m invested across 16 deals, underscoring the growing focus on climate issues and solutions.

As far as buyout and add-on investment activity is concerned, the industry experienced a decline, with C$435m raised from 47 deals in Q2, reflecting a 50 percent reduction in deal value. However, despite the challenges posed by rising interest rates, investors remain committed to smaller deals that align with their strategies.

In terms of the exit landscape, there were 46 exits totalling C$139m in H1 2023. M&A transactions accounted for 80 percent of exits, while exits via a secondary buyout represented the remaining 20 percent.

“Canada’s PE landscape remains strong in the mid-market,” concludes Ms Furlong. “Opportunities to assist on succession planning and the growth of small and medium sized companies continue to dominate.”

Report: H1 2023 Canadian Private Equity Market Overview

GTCR acquires security provider ADTC in $1.6bn deal

BY Fraser Tennant

In an acquisition expected to fortify its position in the market, commercial security, fire and life safety solutions provider ADTC has been sold to private equity firm GTCR in a deal valued at approximately $1.6bn.

Headquartered in Texas, ADTC has built a robust national footprint with more than 5300 colleagues across over 100 locations servicing more than 300,000 customer sites.

GTCR’s investment will strengthen ADTC’s position as one of the largest and fastest growing providers in the space. Together, GTCR and ADTC will implement a strategy to drive continued growth and innovation, with additional capital available to help fund strategic M&A opportunities.

As an independent company, ADTC will continue to focus on delivering reliable service, strong technical expertise and unique solutions to protect its customers’ people and assets.

“We are excited to again partner with the incredible team at ADTC,” said David Donnini, managing director and head of business & consumer services at GTCR. “This is a unique opportunity to invest in a successful business that we know well and helped develop, alongside partners that we have worked with for two decades.”

The acquisition of ADTC marks GTCR’s fourth investment in the security and fire industry, which includes the acquisition of Cambridge Protection Industries, the carveout of Honeywell Security Monitoring and the taking private of security company P1.

“As a firm, we have a long history of investment in the security and fire sector and have always viewed the commercial market as an attractive area for growth,” said Tom Ehrhart, principal at GTCR. “We look forward to building upon ADTC’s position as a premier provider of critical services and continuing to invest in its expansion and innovation.”

The transaction is expected to close in the fourth quarter of 2023 subject to customary regulatory approvals.

Mr Donnini concluded: “We believe making ADTC a standalone company strengthens its competitive positioning, sets up ADTC for future growth and builds upon GTCR’s history of successfully transforming businesses in the sector.”

News: Security firm ADT's commercial unit to be taken private by GTCR for $1.6 bln

Public Storage to acquire rival Simply Self Storage for $2.2bn

BY Richard Summerfield

Storage operator Public Storage has agreed to acquire Simply Self Storage from Blackstone Real Estate Income Trust (BREIT) in a deal worth $2.2bn.

The deal, which is expected to close in the third quarter of 2023, subject to customary closing conditions, will generate over $600m in profit, Blackstone said. The firm acquired Simply in October 2020 from Brookfield Asset Management for approximately $1.2bn.

“We are pleased to welcome Simply’s team, customers, and third-party management partners to Public Storage’s industry-leading brand and platform,” said Joe Russell, chief executive of Public Storage. “This acquisition reflects the continued execution of our multi-factor external growth platform, which includes acquisitions, development, redevelopment, expansion, and third-party management. We are pleased to complete this important transaction with Blackstone, which further demonstrates our position as an acquirer of choice in the industry. Blackstone has done a tremendous job of growing and improving the quality and operations of the Simply portfolio over the past few years.”

“Where you invest matters, and this transaction demonstrates the strong investor demand for the high-quality assets and platforms we have assembled within BREIT,” said Nadeem Meghji, head of Blackstone Real Estate Americas. “This sale is a terrific outcome for BREIT stockholders and enables us to further concentrate BREIT’s portfolio in its highest growth sectors. Public Storage is a leader in its space and will be a terrific steward of this portfolio.”

Simply Storage’s portfolio comprises 127 wholly-owned properties and 9 million net rentable square feet that are geographically diversified across 18 states and located in markets with population growth that has been approximately double the national average since 2018. During BREIT’s ownership period, Blackstone made investments into the Simply platform that enabled the company to enhance the quality of the portfolio and management team, and ultimately significantly increased its net operating income.

Public Storage has been in a state of growth over the last few years. Since 2019, the company has expanded its portfolio by approximately 55 million net rentable square feet, or 34 percent, through $10.6bn worth of acquisitions, development and redevelopment, including Simply and additional properties previously announced as under contract.

News: Public Storage to acquire rival Simply Self Storage for $2.2bn

TPG to acquire Forcepoint unit in a $2.45bn deal

BY Richard Summerfield

Global asset management firm TPG has agreed to acquire Forcepoint’s global governments and critical infrastructure (G2CI) cyber security business in a deal worth $2.45bn.

The deal is subject to regulatory review and customary closing conditions and is expected to close in the fourth quarter of 2023.

Under the terms of the deal, Forcepoint’s commercial and G2CI businesses will be separated and will establish the G2CI business as an independent entity. The unit focuses on critical infrastructure for US government and federal agencies.

TPG will invest in Forcepoint G2CI through TPG Capital, the firm’s US and European late-stage private equity platform.

“It’s our mission to support the national security and intelligence communities by providing trusted, data-driven security solutions that enable them to collaborate and conduct mission-critical work securely and effectively,” said Sean Berg, president, global governments and critical infrastructure at Forcepoint. “TPG has a long history of carving-out, building, and scaling world-class cybersecurity companies. We’re confident that this partnership, along with continued support from Francisco Partners, will provide us the resources and expertise to strengthen our position as a partner of choice for government agencies.”

“Today’s operating environment – one in which data volumes are compounding, attack surfaces are broadening, and threats are growing in sophistication – demands dynamic security solutions,” said Tim Millikin, a partner at TPG. “This is especially true for the public sector, and Forcepoint has designed its platform to address the unique complexities of government objectives and culture. We’re excited to partner with Sean and the G2CI team to expand the platform and further its position as a leader in high assurance, zero trust security.”

“We are proud to have built an industry-leading portfolio of security products that protect government and enterprise customers’ infrastructure, people, and data,” said Manny Rivelo, chief executive at Forcepoint. “This transaction represents an exciting opportunity for the Forcepoint G2CI business to continue its trajectory of growth, delivering high assurance security to government and critical infrastructure customers worldwide. Similarly, it enables the Forcepoint Commercial business to further focus investment and innovation in accelerating growth of the company’s Data-first SASE platform, Forcepoint ONE, while delivering increased value to our customers.”

“Sean and the Forcepoint G2I team have been excellent partners and built a thriving business that will benefit from operating as its own standalone business,” said Brian Decker, a partner at Francisco Partners. “We are excited to remain investors in the business and partner with the management team and TPG to help it continue to grow and succeed”.

Francisco Partners, a leading global investment firm that specialises in partnering with technology businesses, acquired Forcepoint in January 2021 from Raytheon Technologies. Francisco will retain a minority stake in the unit going forward.

News: TPG to buy Forcepoint unit from Francisco Partners for $2.45 billion, Wall Street Journal reports

CIRCOR taken private in $1.6bn deal

BY Richard Summerfield

Private equity giant KKR & Co has agreed to take industrial machinery maker CIRCOR International Inc private in a deal worth $1.6bn.

Under the terms of the agreement, KKR will pay $49 per share, a premium of nearly 55 percent to CIRCO’s last closing stock price on Friday 2 June.

CIRCOR’s board has unanimously approved the transaction and recommended that shareholders vote in its favour. The deal is expected to close in the fourth quarter of 2023, subject to the receipt of approval from the company’s shareholders and certain required regulatory approvals, as well as the satisfaction of other customary closing conditions. Upon completion, CIRCOR will be a privately held company wholly owned by KKR’s investment funds and will no longer have its common stock listed on any public market.

“Our agreement with KKR marks the successful culmination of a strategic review process conducted by the Board, supported by external advisors and the management team,” said Helmuth Ludwig, chair of the board of CIRCOR. “As part of our comprehensive strategic review, initiated in March 2022, we engaged in extensive dialogue with a number of parties that expressed interest in acquiring all or parts of the Company. We believe that this transaction and the immediate cash value it will provide to CIRCOR’s stockholders best achieves the Board’s goal of unlocking the significant incremental value within CIRCOR for its stockholders. This transaction is a testament to the dedication of CIRCOR’s talented team and we are grateful for their tireless efforts and commitment to making CIRCOR an industry leader.”

“This transaction will create significant value to our stockholders, reflecting the dedication of our team in executing on our strategic priorities, the strength of our family of brands and the deep relationships we have built with our customers,” said Tony Najjar, president and chief executive of CIRCOR. “We believe that having the support and resources of an experienced investor like KKR will help us expand our presence in the flow control space and support our mission to deliver the highest-quality products and services to our customers, many of which play a critical role in protecting national security.”

“CIRCOR stands out as an innovative and trusted solution provider, manufacturing mission-critical flow control products for industrials, aerospace and defense customers,” said Josh Weisenbeck, a partner at KKR. “We believe the Company is in a strong position to grow and benefit from the attractive tailwinds in those markets. We look forward to working closely with Tony and his talented team to drive further growth and value through new product development, aftermarket expansion, strategic acquisitions and allowing all CIRCOR employees to have the opportunity to participate in the benefits of ownership of the Company.”

CIRCOR has around 3100 employees and manufactures pump and valve systems for sectors including oil & gas, industrial, aerospace and defence.

News: KKR to take machinery maker Circor private in $1.6-bln deal