August 15, 2022

Private Equity: Pubco Valuations Down, Take Privates Up

When there’s a big slump in public company valuations, a surge in going private deals is almost sure to follow – particularly when private equity is sitting on a whole bunch of dry powder.  A recent Institutional Investor article says the 2022 stock market slump is no exception:

 As companies continue to trade at discount prices, more private equity firms are eyeing opportunities in the public markets. The value of take-private deals announced or closed by buyout funds was $96 billion in the first half of 2022, according to a report from Preqin. Last year, the total value of such deals led by private equity firms reached a record of $118 billion, and according to the report, that figure will soon be surpassed by this year’s number.

Notable public-to-private deals in the first half of 2022 include Blackstone’s $7.6 billion acquisition of the real estate investment trust PS Business Parks; Apollo’s $7.1 billion acquisition of the automotive manufacturer Tenneco; and Clayton Dubilier & Rice’s $4 billion acquisition of animal health services company Covetrus. TPG also announced in June that it would acquire the healthcare technology company Convey Health Solutions for $1.1 billion.

If you’ve got a client considering going private, be sure to check out this Harvard Governance Forum blog on things for boards to consider before making that decision that was posted over the weekend. The boom in take privates is a bright spot in a down year for dealmaking. According to a recent WSJ article, the dollar value of deals during the first half of 2022 was the lowest in five years (excluding pandemic-impacted 2020) and represented a nearly 40% drop from the same period in 2021.

John Jenkins