Side Letter: CDPQ’s C$15bn spending plans; Thoma Bravo’s threshold; Apollo eyes M&S

Inside Caisse de dépôt et placement du Québec's grand plans for European private equity. Plus: Thoma Bravo's unusual deployment threshold and Apollo Global Management eyes Marks & Spencer. Here's today's brief, for our valued subscribers only.

They said it

“It’s not that law firms are particularly attractive to private equity, but there is a lot of private equity available”

Steve Din, founder of Simpson Millar owner Doorway Capital, tells delegates at a London conference that he expects to see a “significant amount” of US PE firms targeting UK law firms, DailyBusiness reports

Just happened

CDPQ’s von Alvensleben and Levi: Upping their exposure to Europe. Source: CDPQ

In conversation with CDPQ

Caisse de dépôt et placement du Québec has big plans for Europe. The Canadian giant has earmarked C$15 billion ($12 billion; €11 billion) for the region, including private equity, infrastructure and private debt, over the next four years. Private Equity International caught up with its head of European private equity Albrecht von Alvensleben and operating partner Lorenzo Levi to discuss these plans in greater detail. The full interview is well worth a read, but here are some highlights:

  • Europe represents about a quarter of CDPQ’s C$64.3 billion PE portfolio – a proportion that can rise to 30 percent depending on investment activity, realisations and allocation movements in other geographies.
  • The UK and France remain priorities.
  • In PE, the institution is hungry for more healthcare, business services, technology and financial services.
  • CDPQ wants to staff up and add up to 30 employees to its 40-strong London-based team.
  • Global supply chain issues, inflation and rising interest rates are concerns for the pension.

No Thoma to waste

Although a great many firms are taking full advantage of today’s heady fundraising environment, Thoma Bravo has stood out for the size, and speed, of its return to market. As it turns out, the software specialist launched its second small-cap fund in October with its predecessor only about 50 percent deployed, affiliate title Buyouts reported on Friday (registration or subscription required). Explore Fund II is targeting $1.5 billion.

This deployment threshold is unusually low for a firm to bring out the successor fund; such limits are typically intended to help ensure that the GP will not start looking for new capital until it is able to actually deploy it. Around 44 percent of North American buyout firms required 75 percent of a current fund to be deployed, or reserved for follow-on investments, management fees and other expenses, before successor vehicle restrictions can be lifted, according to Buyouts’ PE/VC Partnership Agreements Study 2018/2019.

PE mega-funds seem to be returning to market faster and with significantly larger targets during the pandemic, as frenetic deal activity, a flight to familiarity and rampant investor appetites create perfect fundraising conditions. This dynamic has sparked concern in some quarters about the prices firms are paying for assets and, as we explored in our latest Friday Letter, put the onus on managers to ensure 2022 is a year of discipline.

PSERS’ job hunt

The embattled Pennsylvania Public School Employees’ Retirement System is on the hunt for a new chief executive. The $72 billion institution last week accepted the retirement of incumbent Jim Grossman, who will transition to senior adviser in early December and advise his successor until May 2022, per a statement. It is also seeking a replacement for executive director Glen Grell, who will retire in February.

PSERS may not be the most appealing destination for potential new hires. The institution is under investigation by the FBI and the Securities and Exchange Commission over an error regarding the reporting of investment performance numbers from last year, according to the Philadelphia Inquirer.


Apollo goes shopping?

Another day, another US PE giant linked to a UK retail chain. This time it’s the turn of Apollo Global Management, which has been running the rule over high-street stalwart Marks & Spencer in recent months, The Sunday Times reports (paywall). Apollo is said to have considered London-listed M&S a bargain due to the pandemic and the market undervaluing its £750 million ($1 billion; €894 million) tie-up with delivery business Ocado in 2019. It’s unclear whether Apollo still considers the business appealing after a more than 30 percent jump in its share price over the past month.

Data from DC Advisory shows there were 534 PE-backed transactions in the UK worth £85.5 billion between January and October – more than double the amount, by value and count, for the whole of 2020. The influx has proved controversial, with some transactions, such as Bain Capital‘s ongoing efforts to acquire insurance business LV=, encountering stiff opposition from politicians and the media. Keep an eye out for PEI’s December cover story, which will examine PE’s burgeoning love affair with the UK in greater detail.

Dig deeper

LP meetings. It’s Monday, so here are some LP meetings to watch out for this week.

23 November

26 November

30 November

Today’s letter was prepared by Alex Lynn with Carmela Mendoza