OMERS PE: ‘The market is challenging, but there’s also opportunity’

The investor seeks to be the partner of choice for GPs and businesses in today's tough market, says the Ontario pension’s head of PE for Europe.

OMERS Private Equity is set to deploy capital in minority transactions alongside control deals in 2023, following one of its busiest years in Europe.

“The market is challenging,” Jonathan Mussellwhite, senior managing director and OMERS head of European private equity, told Private Equity International. “While our focus is on control position investments, we’re thinking very much where the opportunities for us are to step in and be a supportive minority partner.”

What this means is the investor can provide a range of capital solutions in a fiercely competitive PE landscape. “We can do control position investments, we can do minority investments, we can do preferred investments,” he added. “We have the ability, both culturally and with the strength of our capital, to be a really strong partner for businesses or for other private equity firms who are looking for capital over the coming period.”

Mussellwhite noted this may include situations where a business is constrained in its own growth and the private equity fund isn’t able to back further acquisitions for the portfolio company.

The firm has thus far done only one minority deal in Europe: it picked up a 25 percent stake in International Schools Partnership from Partners Group in May 2021 at an enterprise value of €1.9 billion, according to a statement. OMERS PE has done more of such transactions in North America – a combination of becoming a new minority investor in the platform, exiting an asset and re-investing, Mussellwhite said.

Because OMERS PE is not capital constrained, it has the agility to deploy long term, Mussellwhite noted: “The market is tough today, but there’s also opportunity. We can be a supportive partner for businesses and GPs to capitalise on that opportunity.”

OMERS PE manages approximately C$20 billion ($15 billion; €14.5 billion) of private equity assets for the Ontario Municipal Employees Retirement System, as of end-December. The pension system’s net assets stood at C$119.5 billion as of end-June 2022. It generated a net return of 7.7 percent on its PE investments for the six months ending on 30 June, according to its 2022 mid-year update.

OMERS PE has closed seven new investments globally since the beginning of the year. Two of these, both in Europe, were new platform deals: OMERS PE acquired UK utility and infrastructure repair and maintenance service company Network Plus from management shareholders and Livingbridge in July, and agreed to acquire Bionic, a provider of energy, insurance and finance services to SMEs in the UK, from management and ECI Partners shortly after.

The next 18 months are expected to be tougher for raising capital and dealmaking as valuation uncertainties, debt concerns, record inflation and slowing economic growth persist in the medium term. Yet, there are more opportunities for acquisitive growth in 2023, according to Mussellwhite.

“It’s an exciting place to be in a challenging market. There’s no doubt that some private equity firms – some of our competitors – will choose to watch and wait because they have capital constraints,” he added.

“We have an interesting dynamic. There’s a trillion dollars of dry powder globally looking for a home… In order for people to continue to raise money, people will need to exit. And if you can’t exit in full, then that’s an opportunity for us to provide partnership capital.

“Smart, agile capital is what I think we can really bring to play to generate returns over the next 18 months,” said Mussellwhite.