Side Letter: EQT’s healthcare drive; BlackRock’s insurer insight; Apax’s $1bn target

EQT won't rule out a life sciences growth fund in its bid to develop a healthcare ecosystem. Plus: Insight from BlackRock's latest insurer survey and Apax wants $1 billion for its debut impact fund. Here's today's brief, for our valued subscribers only.

They said it

“We will probably wait to deploy more capital till we have a little bit more regulatory clarity in that space.”

Temasek’s chief investment strategist Rohit Sipahimalani tells Nikkei Asia that the institution is taking a pause on new investments in Chinese tech. Read Private Equity International‘s deep dive on China’s regulatory crackdown here.

Just happened

EQT’s capital injection
EQT made headlines this month with its purchase of European VC firm Life Sciences PartnersPrivate Equity International recently caught up with Michael Bauer, co-head of EQT’s global healthcare sector team, and LSP managing partner René Kuijten, to discuss the €450 million acquisition. The interview will be published this week. In the meantime, here’s what you need to know:

  • EQT will not rule out a life sciences growth fund over the medium-term to capture opportunities too large for LSP and too small for EQT;
  • The latter hopes to create a healthcare investment ecosystem that can invest from early stage to growth and mature buyout opportunities;
  • The duo see it as a sharing of expertise in scientific risk on the part of LSP, and commercial risk on the part of EQT;
  • Scarcity of capital is one of the biggest challenges of the biotech industry in Europe;
  • LSP’s latest flagship, which closed on €850 million this month, is the largest VC fund dedicated to European life sciences.

Insurer insight
BlackRock published its 10th annual Global Insurance Report yesterday. Here are some key takeaways:

  • Insurers’ private markets allocations are expected to reach 14 percent in the next two years, up from 11 percent and double the 7 percent reported in 2019;
  • Some 25 percent of insurers intend to raise their PE allocations, and 54 percent plan to maintain their current level;
  • North American insurers are most bullish, with 31 percent reporting an increased appetite for PE;
  • Some 42 percent of insurers have turned down an investment opportunity in the last 12 months over ESG concerns;
  • The vast majority (95 percent) believe climate risk will have a significant or very significant impact on portfolio construction and strategic asset allocation over the next two years.

No LV lost for PE?
Bain Capital’s £530 million ($710 million; €625 million) bid for UK insurer LV= is facing strong opposition from politicians, mutual members and mainstream media, the Financial Times reports (paywall). The deal, disclosed in 2020, has come under fire in recent weeks after it emerged that LV= offered £100 each for regular policyholders if they backed the deal. Under the terms of the takeover, LV= would give up its mutual status and no longer be owned by its members.

In a Monday statement, Bain said it was “committed to the long-term growth and success of LV= and will invest significantly in the business”. Its proposals include £160 million for IT modernisation and operational improvements, and £264 million for future pension payments.

PE has been targeting UK businesses with renewed vigour during the pandemic. Data from DC Advisory show 534 PE-backed transactions in the UK worth £85.5 billion between January to October this year – more than double the whole of 2020 by value and count. Bain’s not the only firm to have encountered resistance: Clayton, Dubilier & Rice‘s £7.1 billion purchase of supermarket chain WM Morrison in October also experienced pushback from unions and politicians.

The asset class hasn’t always covered itself in glory when owning UK assets. As PEI explored this year, PE’s latest flurry of high-profile acquisitions in the country is an important opportunity to shed its perception in some quarters for asset-stripping, and showcase its value creation proposition.


Apax’s impact
European PE giant Apax Partners has started marketing its debut impact fund with a target of around $1 billion, our colleagues at New Private Markets report (registration required). The firm’s impact strategy revolves around four sector themes: health and wellness; environment and resources; social and economic mobility; and “impact enablers” (technology and other services businesses that will generate impact across the other three themes). Apax is the latest in a string of big names launching impact strategies this year, including Goldman Sachs, which is seeking $1 billion for its Horizon Environment and Climate Solutions Fund, and BlackRock, which registered its BlackRock Private Equity Impact Capital fund this year.

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