Everything about Blackstone, under its new president Jonathan Gray, spelled big in 2018. The firm won three categories in the Americas in Private Equity International’s 2018 Awards, taking the honours as large-cap firm of the year in North America as well as for the exit and deal of the year in the region. It raised almost $100 billion, including $27 billion for private equity, led a consortium to acquire Thomson Reuters’ Financial & Risk US Holdings for $20 billion and made the most profitable exit of $18 billion when it sold Hilton in 2018.
The beginning of collaboration between LPs that aligns their interests and expands their control was visible in Alaska Permanent Fund Corporation, Public Institution for Social Security of Kuwait and RMPI Railpen’s $700 million joint venture, Capital Constellation.
- Vista Equity Partners
- Advent International
Even by mega-firm standards, 2018 was a big year for Blackstone. The firm – which elevated real estate head Jonathan Gray to president in February – raised more than $100 billion across its platforms, including $27 billion for private equity. At its investor day in October, the firm laid out its future growth plans, and it’s making excellent headway already, acquiring global life sciences investment firm Clarus to launch Blackstone Life Sciences, and poaching growth guru Jon Korngold from General Atlantic to launch a dedicated growth equity platform. That’s not to mention pulling off 2018’s most high-profile deal and the most high-profile exit this side of the Atlantic (see below).
- New Mountain Capital
- TA Associates
- The Riverside Company
Growth-focused New Mountain Capital had a busy 2018. The firm made several transactions, including acquiring Remedy Partners, a provider of financial software for health insurers and healthcare providers, and MAG Aerospace, a turnkey provider of intelligence, surveillance and reconnaissance solutions, and offloading Medical Specialties Distributors at an enterprise value of $800 million. It also sold a 9 percent stake in itself to Blackstone’s Strategic Capital Holdings Fund, with plans to “further invest in our business and increase alignment with investors”, according to a statement from managing director Adam Weinstein, and is gearing up to launch a minority strategy this year.
- Alaska Permanent Fund
- Teacher Retirement System of Texas
- Princeton University Investment Company
It was a busy year for Alaska Permanent Fund, which posted a 30.2 percent net IRR for its private equity portfolio in 2018. The fund, managed by APFC, set up a $700 million joint venture, Constellation Capital, with Public Institution for Social Security of Kuwait, Wafra and UK pension fund RPMI Railpen to provide cornerstone fund commitments and scaling advice for emerging managers in 2018. It also sold a $1.4 billion portfolio of stakes to Ardian.
- Blackstone, CPPIB and GIC for Financial & Risk US Holdings (Thomson Reuters)
- KKR for BMC Software
- Veritas Capital, Elliott Management for Athenahealth
As one of the biggest firms in the industry, it should come as no surprise that Blackstone was behind one of the biggest deals in 2018.
The firm led a consortium together with CPPIB and GIC to acquire a majority stake of the financial & risk unit of Thomson Reuters in a $20 billion acquisition which global head of private equity Joe Baratta called “a landmark transaction” for the firm. The company – rebranded Refinitiv – serves 40,000 institutions in more than 190 countries.
- Blackstone for Hilton Hotels
- L Catterton for Ainsworth Pet Nutrition
- Advent International for Cotiviti
Blackstone’s investment in Hilton Hotels will go down in private equity history. It was the quintessential pre-crisis transaction: a $26 billion take-private with a 20 percent equity cheque, split between the firm’s private equity and real estate funds. After a tough period for the hotels sector during the downturn, Blackstone wrote down the investment, invested additional capital, increased the number of rooms, and restructured the debt, shaving $4 billion off the total. In 2013 Blackstone took the hotel chain public again. When it completed its final exit in 2018, realised profit stood at $14 billion, comfortably making it one of the most profitable private equity deals ever.
- Insight Venture Partners
- Hellman & Friedman
- The Carlyle Group
It was a milestone year for growth capital investing and particularly for Insight Venture Partners, a New York-based private equity and venture capital firm focused on software companies. In 2018, the late-stage investor raised its largest fund since inception in 1995 and one of the largest-ever venture capital funds in the industry. Insight announced the final closing of its $6.3 billion Fund X, which counted the firm’s GPs amongst its largest investors. “While the size of Fund X is noteworthy, we’re most excited about the potential it provides both our investments and our investors,” says Deven Parekh, managing director at Insight Venture Partners. The new fund came only three years after the firm, which now has more than $20 billion in assets under management, closed on about $5 billion for Fund IX.
- Lexington Partners
- Whitehorse Liquidity Partners
The secondaries market continues to grow and Lexington Partners is vital to this expansion. The New York-headquartered firm made headway with its ninth secondaries fund, which is seeking the biggest amount ever sought for the strategy, and closed or committed to 44 secondaries transactions totalling $6.4 billion. 2018 was a year of change for the firm as well with the completion of a leadership succession that saw Wil Warren become president of the firm. The firm’s reach is truly global – its deal log last year included a GP-led process on TPG’s Asia funds and a directs deal with France’s Eurazeo. Chances are the secondaries market will continue to hear much more of Lexington in 2019.
- Ardian and Campbell Lutyens for the spin-out of Manulife/John Hancock’s infrastructure team
- Goldman Sachs, Hamilton Lane and Lazard for the NEA spinout and directs deal
- CPPIB, HarbourVest, StepStone, Park Hill for Providence’s GP-led process on Fund VII
The secondaries market has been spreading beyond just private equity in recent years with asset classes such as infrastructure “only going to get larger”, according to Campbell Lutyens partner Gerald Cooper. Indeed, infra accounted for around 17 percent of GP-led secondaries deal volume last year.
In June Ardian worked with Canadian insurer Manulife Financial to carry out the largest stapled secondaries deals in North America for 2018.
Of the six alternative asset classes in which Manulife invests, as of spring 2017 infrastructure was the only one that had not been opened to outside investors. The deal, advised on by Campbell Lutyens, resulted in the creation of a $2 billion fund and marked the entry of Manulife’s infrastructure investment team into the world of third-party asset management.
- Park Hill
Evercore has been expanding its private capital advisory business including the acquisition last year of competitor Greenhill’s real estate fundraising team. PCA, led by global head Nigel Dawn, executed some eye-catching deals last year, including the restructuring of energy-focused private equity firm Lime Rock Partners’ 2006-vintage fund and mid-market firm Vestar Capital Partners’ 2005-vintage vehicle. The team also advised on some huge LP portfolio sales from Maryland State Retirement and Pension System and Florida State Board of Administration. With 64 professionals around the world, Evercore’s PCA team looks set for another exciting year.
- Oaktree Capital Management
- TPG Sixth Street Partners
- SVP Global
Public market volatility in the fourth quarter of last year did not deter Los Angeles-headquartered Oaktree Capital Management from investing capital. The credit and special situations investor deployed $4 billion from closed end funds during the quarter and ended the 12 months with $19 billion of dry powder. On the fundraising front, the firm raised $13 billion across the full year and made headway with its second flagship special sits fund, seeking $1.75 billion.
“We had a relatively good year relative to our competition in our very important distressed debt strategy,” co-chairman Howard Marks said on a fourth quarter earnings call, adding that the strategy returned 10 percent for the year.
- Whitehorse Liquidity Partners
Brookfield’s private equity business had an active 2018, acquiring a number of businesses including Westinghouse and European plastic packaging manufacturer Schoeller Allibert. Brookfield also won a PEI Operational Excellence Award for what judges termed a “stunning improvement” in GrafTech International, a maker of graphite electrodes used in steelmaking. GrafTech listed on the New York Stock Exchange in April after racking up EBITDA of more than $1.2 billion in 2018. One of its flagship funds – Brookfield Capital Partners V – which is its largest-ever global private equity fund, had a first close, which as of press time totalled $6.5 billion in the fourth quarter last year. This is already more than the $4 billion that its 2015-vintage predecessor fund raised against a $3.5 billion target.
- Advent International
- DXA Investments
In 2018 Advent had a record year in terms of capital deployed across Latin America, says Patrice Etlin, a managing partner at Advent International in their São Paulo office. “In our last three largest deals, we acquired 80 percent of Walmart Brazil; completed our first investment in Chile – hotel and casino operator Enjoy; and increased our ownership in Estácio Participações, our third education investment in Brazil,” he says. As a part of the firm’s re-engagement in Argentina, Advent also worked in 2018 to close the acquisition of a 51 percent stake in Prisma, an Argentinian payments company.
- HarbourVest Partners
- Hamilton Lane
- Adams Street Partners
In 2018 HarbourVest raised nearly $4 billion for multi-strategy funds of funds, grew its credit team and was selected by the Canadian government to participate in the country’s Venture Capital Catalyst Initiative. The firm also has $1.6 billion committed to 33 funds in North America. “This award reinforces our client-centric approach to private markets solutions, providing one of the best ways for LPs of all sizes, especially those new to the private markets, to access a cost-effective and diversified portfolio,” says John Toomey, managing director of HarbourVest.
- Credit Suisse
- Eaton Partners
Evercore held final closes for three North American buyout funds in 2018 that were all oversubscribed at their hard-caps for a total closed amount of $5.25 billion. The average fundraise timeline was less than seven months across the three, and capital was raised from a global, diverse group of institutional investors. A major highlight was K4 Private Investors, which closed on its $2 billion hard cap. This represented a 144 percent increase in fund size from its predecessor fund K3 Private Investors, among the largest fund size increases in North America mid-market in recent years. Other highlights included LS Power Equity Partners IV and Symphony Technology Group V, which closed on its $1 billion hard-cap in less than five months.
- Kirkland & Ellis
- Paul, Weiss, Rifkind, Wharton & Garrison
- Debevoise & Plimpton
With attorneys in 14 offices in major financial centres, Kirkland & Ellis’s investment funds group has helped dozens of firms raise and close funds in 2018, working with first-time funds and making its marks in the secondaries fundraising market as well. Clients included Landmark Partners, which closed its 16th private equity secondaries fund on $5.4 billion, above its $4 billion target. With the fund’s affiliate co-investment vehicles, the aggregate commitments totalled $7 billion. The firm also represented LightBay Capital in its oversubscribed inaugural fund, which closed in January 2018 on $615 million; and Sycamore Partners, the consumer-focused GP that closed on $4.75 billion in June, surpassing its $2.5 billion 2014-vintage predecessor.
- Kirkland & Ellis
- Simpson Thacher & Bartlett
- Debevoise & Plimpton
The numbers speak for themselves. Kirkland & Ellis worked on 167 global private equity deals in the first half of 2018 alone, totalling $70.4 billion, according to Bloomberg’s H1 2018 Global M&A Market Review. Throughout the year and of the transactions that were publicly announced, the law firm was involved in 10 deals for Blackstone, 16 deals for Bain Capital and 22 for Vista Equity Partners among others. Kirkland serves more than 450 private equity firms. While it has many of the large-cap multi-asset managers as clients – it represents eight of the top 10 firms in the PEI 300 list of the world’s largest private equity firms by capital raised in the last five years – it also regularly works with mid-market fund sponsors.
- Kirkland & Ellis
- Gibson, Dunn & Crutcher
Kirkland & Ellis advised on about $18 billion in North American secondaries transactions in 2018 across 51 different deals, including an impressive number of GP-led transactions as that part of the secondaries market is growing at a quick pace. It was involved in seven GP-led restructurings totalling $4 billion in value, addition 10 GP liquidity investments by secondaries investors for an aggregate of $5 billion and two stapled tender offers for $1.2 billion. In other parts of the secondaries market, it assisted in 24 portfolio sales for $4.5 billion and 20 preferred equity secondaries investments representing three different investors. “Kirkland’s strong presence in the secondaries market is a result of the team-oriented approach Kirkland takes to transactional work,” says Michael Belsley, global head of Kirkland’s secondaries market practice.
- GSO Capital Partners
- Golub Capital Partners
- TPG Sixth Street Partners
Credit represents one of the largest strategies at Blackstone and GSO Capital Partners is the biggest contributor to it. In 2018, GSO launched a new internal direct lending business after parting ways with FS Investment Funds effective in April 2018. It closed on $1.8 billion for its direct lending platform in the fourth quarter, for a total of $4.4 billion for the year. In other credit strategies, the New York-based credit giant closed its latest distressed debt fund, GSO Capital Solutions Fund III, on its hard-cap of $7 billion in April. Blackstone’s GSO and Tactical Opportunities also led a $2 billion investment in insurance broker Acrisure alongside Partners Group and Harvest Partners. “We’ve enjoyed a long-standing relationship with a talented management team that has built a high growth business,” says Lou Salvatore, senior managing director at GSO.