Private equity firms hunting for acquisitions with their $1.5 trillion of unspent capital are struggling to seal deals as they hit roadblocks from heady price demands to difficult financing markets.
Buyout funds have seen around $30 billion of potential deals hit trouble in recent weeks. Medtronic Plc is looking increasingly likely to spin off of its patient-monitoring and respiratory-intervention operations, after talks with Carlyle Group Inc. slowed and strategic bidders’ interest cooled, people with knowledge of the matter said. It was seeking a valuation approaching $10 billion, they said.
Dentsply Sirona Inc.’s potential $1 billion sale of medical product unit Wellspect HealthCare is stalling after private equity bids didn’t meet expectations, the people said. Meanwhile, Cardinal Health Inc. said last week it’s holding onto its $2 billion nuclear medicine unit, which had drawn bids from CapVest Ltd. and HIG Capital.
These days, price expectations need to be bridged and potential buyers are spending more time on due diligence, said Carsten Woehrn, JPMorgan Chase & Co.’s head of financial sponsors mergers and acquisitions for Europe, the Middle East and Africa.
BC Partners, which was initially seeking to raise about £3 billion ($3.8 billion) from a full sale of UK veterinary chain VetPartners, is now also exploring other options including a minority stake sale, people with knowledge of the matter said.
Meanwhile, Advent International recently pulled a full sale of €4 billion French biometrics firm Idemia, the people said. Apollo Global Management Inc.’s negotiations over potential take-privates of British engineering firm John Wood Group Plc and London-listed e-commerce group THG Plc also fell apart in recent weeks.
Deliberations on some of the other deals are still ongoing, and discussions could eventually pick up and lead to an agreement, the people said. Representatives for Advent, BC Partners, Carlyle, Dentsply and Medtronic declined to comment.
Some deals are getting done, with EQT AB agreeing this month to buy UK veterinary drugmaker Dechra Pharmaceuticals Plc for £4.46 billion after negotiating a lower price. Last week, Brookfield Asset Management said it will acquire Middle Eastern credit processor Network International Holdings Plc for £2.2 billion.
Still, the gap in valuation expectations is making it “very challenging” for buyers to reach deal agreements, according to Ben Thompson, head of EMEA leveraged finance capital markets for JPMorgan.
“It’s still a fairly uncertain macro environment, and it’s hard to know in many cases how businesses will perform over the next 12-24 months,” Thompson said. “We’re still seeing transactions get done, but there is a higher attrition rate than normal.”
Source from: Bloomberg