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Inside NewSpring’s sale of Avantus Federal; a new home service deal from TSCP

Good morning, dealmakers. MK Flynn here with today’s Wire.

Today, PE Hub is taking an in-depth look at NewSpring Capital’s recent sale of Avantus Federal to QinetiQ US for $590 million. And Buyouts has some interesting insights on how private equity firms are evolving.

But first, there are a couple of deal announcements worth mentioning.

Pest control. We’ve been reporting all year on the rise in PE transactions involving services for the home. Ever since the pandemic forced us all to stay home a lot, we’ve been taking better care of our domiciles, and private equity firms have noticed.

This morning, PestCo, which is backed by Thompson Street Capital Partners, said it has acquired Reliable Pest Solutions, a provider of commercial and residential pest control, for undisclosed terms. This is the eighth investment for PestCo, an acquisition company formed to consolidate the fragmented pest control industry.

Read Iris Dorbian’s coverage of the deal here.

Keep on adding on. One European deal of note: London PE firm Cinven’s Seventh Cinven Fund, in partnership with Ontario Teachers’ Pension Plan Board, has agreed to acquire and combine two European online presence services, group.ONE (based in Malmö, Sweden) and dogado group (based in Dortmund, Germany).

The Sixth Cinven Fund acquired group.ONE (formerly one.com) in 2019. Under Cinven’s ownership, group.ONE completed 10 add-on acquisitions. The company’s EBITDA more than tripled over the past four years, according to Cinven.

For more details, see Nina Lindholm’s story here.

Inside the exit. And now for that in-depth look at a deal I mentioned. PE Hub reporter Obey Martin Manayiti has this story:

Rapidly acquiring small, founder-led defense and security companies, then putting them under a hyper-growing platform investment, proved to be a successful bet for NewSpring Capital, a Randor, Pennsylvania-headquartered private equity firm that in late November exited Avantus Federal for $590 million to QinetiQ US.

With nine acquisitions from 2018 to 2022, NewSpring grew Avantus’ headcount from less than 20 to approximately 1,200 employees. The average acquisition multiple was approximately 6.5x EBITDA and at exit, it earned 17.2x EBITDA.

“We found great companies that were doing one specific thing for the end customer, and we wove them together into one company that could provide complete solutions to the end customers in our market,” Skip Maner, NewSpring’s general partner, told Obey.

Avantus, based in McLean and Reston, Virginia, offers a suite of services within the defense and security sectors focused on cyber technologies and operations, data and software, digital engineering and integration, intelligence analysis and operations, space domain capabilities and advisory services, among others.

Read Obey’s full story here.

High net worth. To meet the demands of the increasingly challenging fundraising environment, private equity firms are evolving in a variety of ways, including seeking new types of investors, reports Buyouts’ Kirk Falconer.

The demand-supply imbalance is likely to result in “a consolidation,” where “fundraising cycles will be elongated,” HarbourVest managing director Scott Voss told Kirk. Fund sizes may grow, “but they’re not going to grow at the same rate they did.”

“With US pension systems overallocated to the asset class, many of these firms have used big global platforms to scout around for alternative capital sources to make up the difference,” Kirk wrote. “One of the most cited alternative sources is high-net-worth investors. GPs are eyeing the massive untapped capital of wealthy individuals, who have traditionally been under-represented in private equity.”

“As 2023 promises to be another challenging year for fundraising, GPs of all types and sizes may have to brace for further changes in market dynamics,” Kirk wrote.

For the full story, click here.

Don’t miss. Are you signed up for PE Hub Europe? We recently launched the new website, which provides in-depth coverage and exclusive insight on European private equity deals.  

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That’s all for now. I’ll be back with more tomorrow.

Cheers,

MK

Read thefull wire commentaryon PE Hub …

Also of note (may require subscriptions)

Can GPs avoid consolidation in a rocky fundraising market? As 2023 promises to be another challenging year for fundraising, GPs of all types and sizes may have to brace for further changes in market dynamics. (Buyouts)

Managers have a large responsibility to educate individual investors as demand for private equity exposure accelerates, according to panellists at Private Equity International’s Women in Private Markets Summit in London last week. (Private Equity International)

The collapse of cryptocurrency exchange FTX has affected at least two retirement systems via commitments made to Thoma Bravo’s first growth equity fund. (Buyouts)

Europe has supercharged the global LNG market, shifting demand from East to West, with opportunities flaring up along the way. (Infrastructure Investor)

Elif Aktug, managing partner at the Pictet Group, wrote in an FT op-ed: "What alternatives do investors have in a crisis? Public markets are suffering their worst pummelling in a generation or more. In such broad turmoil, private markets offer a compelling investment."

"Saudi Arabia’s crown prince and a U.S. private-equity firm run by Barclays PLC’s former chief executive are among investors preparing to invest $1 billion or more into Credit Suisse’s new investment bank, people familiar with the matter said." (Wall Street Journal)

Blackstone Real Estate "has agreed to buy six industrial properties in the Toronto area." The firm "is paying more than C$400 million ($297 million) in cash for the properties, which total 1.5 million square feet (140,000 square meters) and are all fully leased. The transaction is one of the largest trades of a private industrial portfolio in Canada in recent years." (Bloomberg)

"Energy storage, once a sliver of the renewable-power generation sector, is becoming an asset class of its own, and some early private-equity backers of battery-project developers are beginning to reap the benefits." (WSJ Pro)