Side Letter: Deal types in 2022; OTPP’s Mercer hire; (Not-so) private equity

With an increasingly complex dealmaking environment calling for some creativity on the part of market participants, Private Equity International explores the types of transaction we're likely to see more of in 2022. Plus: Ontario Teachers' Pension Plan has snapped up a former Mercer head in Asia. Here's today's brief, for our valued subscribers only.

They said it

“It’s not just a question of promoting values. There’s a view – and it’s administration-wide, not just the SEC –that ESG risks are material, and you have to have a handle on them for whatever business you’re in”

SEC examiners are asking probing questions about how private fund advisers are managing their sustainable investment commitments and disclosures, Seward & Kissel partner Debbie Franzese tells affiliate title Regulatory Compliance Watch (registration or subscription required).

Just happened

What’s the big deal?
Last year was a memorable one for private equity dealmakers. Regulatory shifts, supply chain issues and macroeconomic grey clouds, which at various times seemed to threaten a hard stop to the dealmaking frenzy, have so far failed to dampen the enthusiasm. Still, an increasingly complex dealmaking environment calls for some creativity on the part of market participants, as Private Equity International reports this morning. Here are some deal types to look out for in the year ahead:

  • Carve-outs – which have become especially popular in the UK and across mainland Europe during the pandemic – may continue to rise as businesses prioritise core assets.
  • Transactions for minority, non-controlling stakes are becoming popular both as investments and as precursors to secondary transactions, providing market validation for asset prices.
  • Expect more large institutions to use secondaries processes to free up balance sheet capital by lifting assets into new vehicles and taking on additional third-party capital for new deals.

OTPP scoop
Ontario Teachers’ Pension Plan continues to expand its presence in Asia. The C$222.5 billion ($178 billion; €155 billion) institution has appointed Mei-ni Yang, former head of APAC PE at investor advisory outfit Mercer, to lead its PE funds team in the region, PEI reported on Friday. Yang spent more than five years with Mercer in Hong Kong and was previously with UBS. Her appointment comes amid a wider buildout for OTPP in the region, including the launch of a Singapore office in 2020. Asia-Pacific accounted for 11 percent of OTPP’s overall investment portfolio as of that year – a proportion that may well increase under Yang’s guidance.

(Not so) private equity
If you can’t beat ’em, join ’em, as the adage goes. The London Stock Exchange appears to have taken that message to heart: the company is proposing a new semi-public market that would allow privately held businesses to list and trade their shares on a periodic basis, The Wall Street Journal reports. These shares would trade between one and five days in a given trading window, providing founders, early investors or employees access to liquidity without the same degree of regulatory oversight as a fully listed company.

The LSE’s proposals – which would require regulatory approval and legislative changes – are seemingly designed with a couple of goals in mind, not least of which would be stemming the long-term decline in the number of publicly listed companies caused by businesses looking to stay private for longer. Such a market might also help bolster the UK’s appeal as a destination for fast-growing start-ups in a post-Brexit environment.

The new market would represent a significant step forward in the democratisation of private markets, providing retail investors with access to a lucrative stage of company growth usually reserved for institutional investors or, at the very least, wealthy individuals. You can keep tabs on PEI‘s ongoing coverage of this trend here.


Names you might Recognize
Recognize, a new PE firm co-founded by former Clayton, Dubilier & Rice veteran David Wasserman and a team of industry operators, has raised $1.3 billion for its inaugural tech fund, per a statement. The New York firm’s founding team includes Frank D’Souza and Raj Mehta, respectively the former co-founder and president of tech services company Cognizant; and Charles Phillips, former chairman and CEO of enterprise SaaS company Infor. Recognize seeks to partner with next-gen tech services companies and has completed three platform deals thus far.

Dig deeper

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

18 January

20 January

21 January

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