Headshot Norm Alpert

Private Equity Managers Expect Another Boom Year in 2022

S&P Global Market Intelligence, 13 January 2022 - Private equity deal-making and fundraising is expected to continue apace in 2022, although midmarket managers in both the U.S. and Europe are mindful of high valuations and inflationary pressures as they deploy record amounts of cash.

In total, 24,722 deals were announced in 2021 worth a disclosed aggregate $1.2 trillion, up from 17,618 deals worth just under half that amount the year before, according to S&P Global Market Intelligence data.

A record $1.32 trillion in dry powder sat in the asset class's coffers as of September 2021, according to Preqin's Alternatives in 2022 report. Fundraising is expected to remain strong, and limited partners are likely to maintain their focus on re-ups as established managers quickly return to market with larger vehicles, managers said.

Given the combination of available dry powder, the number of funds in market and the huge amount of interest in the asset class and its performance, it will be "a really strong year" for investments and exits, Pete Wilson, head of U.K. midmarket at pan-European manager IK Partners, said.

"Most private equity firms invest through the cycle — so while deploying, they are also exiting. And there's very little, in my view, that I can see that is going to change fundamentally this year to what we've seen over the last 12 months."

Deal-making comes with a price tag

While bullish on the deal-making outlook, managers are wary that the market is not free from risk. For both general partners and their investors, high valuations will be top of mind in 2022.

"What’s pushing valuations up? It's more demand. So, there's more volume pushing valuations up," Jason Barg, partner at U.S.-headquartered finance-focused buyout house Lovell Minnick Partners LLC, said. "I don’t foresee that there's going to be a lot of bargain shopping in 2022."

Clear business growth and value creation plans, sector expertise and sourcing bilateral deals are key in this environment, managers said.

If private equity firms have not got a value creation "playbook" at this point in time, it is going to feel quite hard to provide compelling answers to investors who are mindful of high valuations, Richard Swann, partner and member of U.K.-headquartered Inflexion Pvt. Equity Partners LLP's executive and investment committees, said.

Still, some managers expect growing valuations to moderate as central banks throttle back their pandemic stimulus measures. Norm Alpert, founding partner and co-president of U.S. midmarket investor Vestar Capital Partners LLC, said government stimulus "has been a mighty powerful source of driving valuations up, because there's just more liquidity globally searching for returns."

Now the U.S. Federal Reserve has signaled its intention to taper the bond purchases that infused cash into the economy during the pandemic and to tighten monetary policy by raising interest rates. "If global liquidity starts to stabilize and maybe even pull back, those are de-stimulative policies," Alpert added.

The costs of doing business

Macro factors including rising inflation, supply chain issues and talent are also being assessed. Managers are testing their assumptions, mitigating risks before buying into companies and evaluating existing business plans.

Following years of low interest rates, inflationary pressure is something "everybody is keeping their eye on," Lovell Minnick's Barg said.

Wage inflation, a knock-on effect of supply chain issues post-pandemic, has been the biggest surprise, Inflexion's Swann said. "We probably didn't collectively think there'd be a problem with haulage in the U.K. market or what the effects of working from home had on talent pools outside of London."

Many of Inflexion's portfolio companies are "not really constrained by the market," Swann said; rather, "they're constrained by the capacity of people and people driving technology. If you can't get the people, you can't grow."

Competition for talent is a cross-sector issue, IK's Wilson said. Losing a key team member can set business plans back considerably. "The cost is clear and easy and you can wrap your arms around that. But the time to re-recruit or find a new team — this is months or potentially a year that you lose, which is significant."

Tech-focused U.K. growth investor FPE Capital LLP has found rising demand for software services coupled with poaching in the industry has created a "tightness in the tech labor market," Managing Partner David Barbour said. Retaining and recruiting talent is something both it and all its companies "work very hard at," he added. "It's going to just become a bigger issue."

Morale is also a concern, Vestar's Alpert said, with workers just plain worn out.

"The impact on people's behavioral health and ability to maintain the pace is something that has been rearing its head and is only going to continue," Alpert said. Demographic trends around the number of people entering the workforce plus retirements are probably going to exacerbate it, and some companies will respond by shifting to more automation, he predicted.

Cautious optimism

Most managers Market Intelligence spoke with believe the momentum behind the asset class will continue to drive high levels of M&A activity.

Beyond significant volatility in interest rates, IK's Wilson said there were no obvious signs in the near term of a slowdown in activity because the supply/demand drivers will "continue to dictate that activity." Although inflation and labor pressures are "nontrivial challenges … they're not enough on their own to have such a big impact."

"There is a lot of momentum, and you've got a big population of private equity-owned deals. You've got a willingness of sellers to sell to private equity, you've got the capital there, you've got increased allocation," Mads Ryum Larsen, a managing partner and head of investor relations at IK Partners, said. There will be "hiccups" in valuations, and the stock market may see falling multiples, "but I think it's going to be shorter-term volatility rather than sort of a big trend change right now. I don't see that coming at least in near to midterm," Larsen said.

Vestar's Alpert is more cautious in his outlook. Years of "extraordinarily low" interest rates for an "extraordinarily long time" have spurred on a generally stable and consistently growing economic environment, which "tends to instill a lot of confidence in people's ability to forecast the future," he said.

"It's been this very sort of benign, self-supporting virtuous circle between exits, fundraising, more purchases, more exits, more fundraising, more purchases," he added. Alpert said he would not be surprised if 2022 is "more of the same" of what was seen last year, or if it is a more challenging year.

"Did going through the pandemic set up another long-term upcycle? Or are we going to be in for a challenging period sort of just dealing with the aftermath because it wasn’t a finite event?" Alpert said. "That's probably the thing I worry about first."

PetHonesty Appoints Consumer Products Executive Richard Greenberg as CEO

AUSTIN, TexasJan. 13, 2022 /PRNewswire/ -- PetHonesty, a trusted leader in premium pet health products and a portfolio company of Vestar Capital Partners, today announced it has named consumer products executive Richard P. Greenberg as CEO effective February 14. PetHonesty founder and CEO Ben Arneberg will continue to serve as a Director on the Company's Board, and he and his family will retain their significant ongoing investment in the Company.

"Rich is an inspirational leader with a track record of achieving breakthrough results and driving organizational capability," said Jeffrey Ansell, PetHonesty Chairman and Vestar Senior Advisor. "I've seen the impact of Rich's leadership first-hand, and I'm confident his principle-based and inclusive leadership approach will enable the Company to achieve its next phase of exciting growth. I'd also like to thank Ben Arneberg for his tireless efforts launching and building PetHonesty into a high-growth, high-potential business.  We look forward to his continued contributions as a Board member."

A more than 20-year CPG executive, Mr. Greenberg most recently served as Chief Commercial Officer of Sovos Brands, which launched its IPO in the fall of 2021. Sovos Brands includes leading brands Rao's Homemade, Noosa Yoghurt, Birch Benders, and Michael Angelo's. Prior to Sovos, he held key leadership positions in the household products sector, initially at the Sun Products Corporation, which was acquired by Henkel Consumer Goods in 2016, where Mr. Greenberg ultimately served as General Manager and Chief Customer Officer. Mr. Greenberg was recruited to Sun from Kellogg's Kashi Foods division. He currently serves on the Board of Vestar's Roland Foods, and he earned a bachelor's degree in business from Penn State University.

"I'm honored to join PetHonesty and serve as its next CEO as we build upon the Company's strong foundation at a time when the pet products industry is experiencing record growth and strong tailwinds," said Mr. Greenberg. "With the Company's leadership team, I look forward to partnering with Vestar and leveraging their industry relationships and resources as we drive the PetHonesty brand, launch meaningful innovation, and delight pets and pet parents with products that make a difference to pet health and well-being."

"Bringing Vestar on was a significant step in fueling PetHonesty's growth trajectory, and the addition of Rich will further accelerate the Company's strategic expansion plans," said Mr. Arneberg. "I'm proud of the innovative company we've built to address the needs of pets and pet parents, and am energized by the tremendous talent and resources we have been able to attract to help the Company unlock its enormous potential."


About PetHonesty 
PetHonesty is a trusted leader in premium pet health products. Founded in 2018 and headquartered in Austin, TX, the company provides a natural and noticeable boost to pet health through natural, science-backed products that demonstrate effectiveness pet parents can truly see. PetHonesty's products are formulated to help address a plethora of common pet ailments, including immobility, digestive issues, and allergies. The company's world-class customer service provides personalized guidance and education to help light the way to more joyful, healthy years for pets and pet parents. PetHonesty products are available via its website as well as through Amazon and Chewy. For more information, please visit www.pethonesty.com.

A tonal version of the Vestar logo on a dark blue ground.

Vestar Capital Partners Promotes Three to Managing Director

NEW YORKJan. 6, 2022 /PRNewswire/ — Vestar Capital Partners, a leading U.S. middle-market private equity firm, today announced the promotions of Jake OlsonDiya Talwar, and Mike Vaupen to Managing Director.

"Jake, Diya, and Mike have played integral roles in Vestar's success, both on the investment side and within the firm," said Dan O'Connell, Founder and CEO of Vestar. "Vestar had an active 2021, investing in five new platform companies, among other accomplishments. We expect this momentum to continue into the new year, with our new Managing Directors helping to lead this activity. On behalf of the firm, we congratulate Jake, Diya, and Mike on their well-deserved promotions."

Mr. Olson is a member of Vestar's Business & Technology Services team and serves as a Director on the Board of Stratus, a Vestar portfolio company. Prior to joining Vestar, he was a Vice President at Tailwind Capital, and began his career at Lehman Brothers and Barclays Capital. Mr. Olson holds a BA from Columbia College, Columbia University, and an MBA from Columbia Business School.

Ms. Talwar is a member of Vestar's Consumer team and serves as a Director on the Boards of Dr. Praeger's and PetHonesty,  Vestar portfolio companies. Prior to joining Vestar, she served as SVP, Business Development & Strategy at High Ridge Brands, a private equity-backed personal care company. Previously, Ms. Talwar served as VP, Corporate Development at Jarden Corporation, a publicly traded Fortune 500 diversified consumer products company where she spent 10 years involved in the completion of over 30 acquisitions. She began her career in investment banking at Dresdner Kleinwort Wasserstein and Banc of America Securities, and holds a BS in Economics from The Wharton School, University of Pennsylvania.

Mr. Vaupen is a member of Vestar's Healthcare team and serves as a Director on the Board of Quest Analytics, a Vestar portfolio company. Prior to joining Vestar, he was an investment professional at Welsh, Carson, Anderson & Stowe, focused on healthcare technology and services investing. He previously worked at Pamplona Capital Management, where he helped to establish the firm's healthcare vertical, and prior to that, in the healthcare group at Oak Hill Capital Partners. He began his career in the investment banking division at Morgan Stanley. Mr. Vaupen holds a BS in Economics from The Wharton School, University of Pennsylvania, and an MBA from Harvard Business School.

About Vestar Capital Partners
Vestar Capital Partners is a leading U.S. middle-market private equity firm specializing in management buyouts and growth capital investments. Vestar invests and collaborates with incumbent management teams and private owners to build long-term enterprise value, with a focus on Consumer, Business & Technology Services and Healthcare. Since inception in 1988, Vestar funds have invested $11 billion in 88 companies – as well as more than 200 add-on acquisitions – with a total value of approximately $52 billion. For more information on Vestar, please visit www.vestarcapital.com.