Private equity steps in where others fear to tread during pandemic

As the coronavirus pandemic spooked rival bidders for cosmetics maker Coty’s professional beauty division, private equity group KKR pounced

Handful of mainly US groups on spending spree despite worldwide lockdowns to halt coronavirus

Johannes Huth, the top executive at private equity group KKR in Europe, had been eyeing cosmetics maker Coty for nearly two decades — longer than even some of its loyalest customers have been using its products, which include Wella hair colour, Marc Jacobs fragrance and Ghd hair straighteners.

As the coronavirus pandemic spooked rival bidders for Coty’s professional beauty division that was put up for sale last year, Mr Huth pounced. He struck two deals in quick succession, agreeing to buy a majority stake in the unit at a cut-price valuation and invest $1bn in Coty, in the process taking a seat on its board.

KKR, which has about $207bn in assets under management, is one of a handful of mostly US-based private equity groups that have taken a bullish view during the crisis. Between them they have aggressively struck deals when others have stayed on the sidelines.

The top 10 ranking private equity groups by deal count have announced deals worth a total of more than $40bn since the beginning of March, according to FT analysis using figures from data provider Refinitiv — even as economists predict the worst contraction since the Great Depression of the 1930s.

The figure, which covers 11 firms since some are jointly-ranked, is more than a third of the $103bn that all private equity groups worldwide spent on acquisitions in the final three months of 2019. It is also likely to underestimate the scale of dealmaking because some deals — such as investments in Mukesh Ambani’s telecoms operator Reliance Jio of $1.5bn by KKR and more than $1bn by Silver Lake over the past month — do not meet the criteria for inclusion, which require minority stakes to be more than 3 per cent.

“Our active investment pace since the beginning of Covid has been quite intentional,” said Joe Bae, co-president and co-chief operating officer of KKR, whose $16.9bn in deals is almost 43 per cent of the total. The firm is “capitalising on the unprecedented level of volatility and dislocation in the markets to buy high-quality businesses at attractive prices,” he added.

One adviser to KKR, which on Tuesday led a $650m deal for a stake in the property arm of Vietnam’s biggest conglomerate, said it has “taken out the playbook and is using every chapter on how to deploy capital” during the crisis. “It’s auction processes, it’s proprietary deals, it’s public, private, control, single-percentage minority, carve outs, it’s all sectors . . . there’s no rock unturned.”

Continue reading…

Source: Kaye Wiggins | Financial Times