Happy Wednesday, Hubsters, Rafael Canton here with the latest going on in private equity deals.
We are kicking off this edition of the Wire with a scoop. We broke the news earlier this morning that Hamilton Lane has made an investment in Avista-backed Cosette Pharmaceuticals.
Next, we have a deep dive into Estancia’s investment in StrategyCorps.
Then, we have a report about PE deals up a bit but exit count remaining flat during Q2 from Mufson Hunter Howe.
Mitch Truwit, co-CEO of Apax Partners, stopped by PEI Group’s New York office earlier in the week to chat with us about the firm’s investment strategy. The former CEO of Orbitz Worldwide and COO of Priceline.com shared insights about investing in online marketplaces and other internet businesses.
We also have a deal this morning from Genstar which is making an investment in AffiniPay.
Finally, we take a moment to remember Alex Stanton, CEO and founder of Stanton Public Relations, who passed away last week.
Beauty mark
As PE Hub's John R Fischer was the first to report earlier this morning, Hamilton Lane has invested in Cosette Pharmaceuticals, a portfolio company of Avista Capital Partners. Cosette provides branded drugstore products.
With the Hamilton Lane deal, Avista has achieved a 2.4x ROI for LPs on Cosette to date, a source close to the matter, told John. Avista will retain a significant equity stake and jointly manage Cosette’s growth and portfolio expansion alongside Hamilton Lane. The source declined to say if the transaction was a majority or minority investment.
“It’s really a significant upside as the company still has a lot of room to acquire more brands and expand in different markets,” said the source.
Cosette develops and sells topical creams, ointments, suppositories and drugs for dermatology, cardiology and women’s health. The company is based in Bridgewater, New Jersey and has over 350 employees across its corporate and manufacturing facilities in New Jersey and North Carolina.
Read the rest of the story to learn more about how Cosette was formed and some of the add-on and licensing deals the company has made since.
Analytically charged
The analytics processes and rewards menu were at the heart of Estancia Capita Partners’ recent investment in Nashville-based StrategyCorps.
PE Hub reporter Obey Martin Manayiti caught up with Estancia managing director Dana Kurttila and Estancia chief operating officer and managing director Darrin Jeffries to learn more about the deal.
StrategyCorps provides analytics analysis for credit unions and banks to look at their checking account roster and the data around it, such as tenure, deposits, profitability and engagement by the underlying client, and help bucket that into different segments.
The company also curates various rewards such as roadside assistance, cellphone protection, bill payment negotiation, health savings, ID theft, credit monitoring and financial wellness, among many others, which are attached to checking accounts on behalf of banks and credit unions.
In analytics, data is anonymized at the client level and is used for benchmarking, helping banks and credit unions roll out the company’s rewards offering using best practices to drive positive engagement. “Our product is a revenue enhancement mechanism for small banks and credit unions, and it’s a value-added offering for checking account clients,” Kurttila told Obey. “It fits very nicely from a regulatory perspective and where we think the market is going as well.”
Niche players
On Monday, Mitch Truwit, co-CEO of Apax Partners, visited PEI’s New York office to chat with PE Hub’s staff about what his firm is up to and what types of companies the firm is looking for.
Apax’s sector focus is on technology, healthcare, services, and internet/consumer. “Within our sectors we focus on a handful of sub-sectors including online marketplaces, IT services, and insurance brokers,” said Truwit, an online marketplace pioneer who served as the CEO of Orbitz Worldwide and COO of Priceline.com before turning to private equity investing.
Software has also been a focus for the firm. Apax has invested over $9 billion of equity in 30 deals in the last 23 years.
One example Truwit mentioned was My Case.
“We like niche players,” Truwit told us. “A big priority for us is looking at advanced technology over dated technology in software deals.”
The firm acquired the legal software company from Appfolio for $193 million in 2020. Apax sold its majority stake in My Case to AffiniPay, the parent company of LawPay, in 2022. The exit generated a return over 4x, according to a source close to the matter.
Connected deal
Speaking of AffiniPay, this morning, Genstar Capital announced it has agreed to make a significant investment in the Austin, Texas-based provider of practice management software, integrated payments and embedded fintech for professionals across the legal, accounting, and professional services end markets.
TA Associates, which has been an investor in AffiniPay since 2020, will continue to retain a meaningful stake in the company. At the closing of the deal, Apax, a current minority investor in AffiniPay, will exit its investment.
“Alongside TA, Genstar looks forward to helping the Company extend its leadership in software and fintech while enabling new avenues of growth, through investments in new products and verticals,” Eli Weiss, a managing partner of Genstar, said in a statement.
Dealmaking
Private equity dealmaking in the US has slightly increased from last year, but exits continue to remain flat as buyers and sellers struggle to meet in the middle.
Philadelphia-based investment bank Mufson Howe Hunter’s middle market Q2 report says private equity dealmaking in the US during the first half of 2024 advanced by approximately 12 percent year-over-year in both count and dollar terms. The report also says US PE exit value increased by approximately 15 percent year-over-year in H1 2024, though exit count remained flat at 626.
“We had a weak deal economy in the third and fourth quarters of 2023, and it’s rolled into the first half of the year,” managing partner Michael Mufson told PE Hub. “Many industry sectors were experiencing soft numbers coupled with an uncertain interest rate environment, both buyers were skittish, and sellers were not excited with the valuations. We started to see the market psychology starting to change slightly in Q2 with the credit markets responding to likely rate decreases in the near future and in the current period at least stabilizing.”
In terms of sectors to watch for in the projected increase of dealmaking, Mufson said, the investment bank is seeing interest from larger privately held, family-owned companies in the infrastructure sector.
These include categories such as building products and construction services. Backlogs for many of these businesses are at historical highs and the government infrastructure spending is beginning to wind its way into the supply chains. Then there’s also interest in the consumer sector, which Mufson said is doing better. He added that the sector is working through bloated inventories in the post-covid economy.
Tremendous leader
Finally, PE Hub is sad to report that Alex Stanton, CEO and founder of Stanton Public Relations, passed away last week, following an illness. As many of you know, the PR firm works extensively with private equity firms – and with the reporters and editors who cover them.
Alex Stanton spent more than 30 years working in public relations, government affairs, marketing services and business development. Prior to launching Stanton, he started several communications firms, among them Dorf & Stanton Communications, which was sold to Shandwick (now a unit of the Interpublic Group) and Stanton Crenshaw Communications.
Managing directors Charlyn Lusk and Tom Faust will remain in their leadership roles, supported by a team of six senior executives. Both Lusk and Faust have been with the firm for two decades and managed the firm alongside Stanton over the past 10 years.
On Stanton’s passing, Lusk and Faust said in a statement: “In addition to being one of the hardest working and smartest people we have known, Alex Stanton was a tremendous leader, mentor, colleague and friend. The outreach we have received from so many is a testament to the impact he had on employees, clients, media and the public relations industry over the past 50 years. No one will ever be able to fill Alex’s shoes, but we will do everything possible to honor his legacy and his name.”
That’s it from me today. If you have any questions, thoughts, or want to chat about anything PE-related, please email me at rafael.c@pei.group.
Michael Schoeck will have the Wire for you tomorrow.
Cheers,
Rafael
