The Wire

Nov 14, 2022

Partners Group is snatching up digital transformation players in the US and Europe

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

Hope you had a good weekend.

I’ve got a big-picture trend on my mind this Monday morning.

Digital transformation has been a key theme this year for many companies, and PE Hub has seen a slew of deals benefiting from the trend.

Today, let’s take a close look at one private equity firm that has been particularly active in acquiring companies that are involved in helping their customers with digital transformation.

Shifting IT infrastructure. Partners Group has been making deals along that strategy all year, snatching up targets in both the US and in Europe.

On Friday, the PE firm, which has regional headquarters in Baar-Zug, Switzerland, Denver and Singapore, announced the acquisition of EdgeCore Digital Infrastructure, a Broomfield, Colorado-based builder and operator of data centers in the US.

Partners said will invest up to $1.2 billion to fund the acquisition and buildout of data center sites.

"EdgeCore has strong infrastructure characteristics and is set to benefit from structural tailwinds across the data center sector,” Fentress Boyse, member of management, private infrastructure Americas, Partners, said in a statement. “Businesses are increasingly shifting IT infrastructure to scaled outsourced cloud service provider data centers, which have more efficient power and cooling capabilities. The company is at an inflexion point in its growth journey and our transformational value creation plan aims to build a best-in-class sustainable digital infrastructure platform for the largest demand users in this market."

Global dealmaking. Also on Friday, Partners announced it bought a controlling stake in Munich-based Cloudflight, a digital transformation services provider, from Deutsche Beteiligungs. The deal gave an enterprise value of around $400 million.

Earlier in November, PE Hub Europe’s Nina Lindholm spoke with Kim Nguyen, co-head of Partners’ private equity services business, about the trend toward digitization.

Here’s an excerpt from that interview:

What is digital transformation and how does it aid value creation?

Digital transformation is a specific value creation type amongst the digital value creation playbook. It can mean a major transformation, or in some cases you only digitalize some of the processes within your value chain. It is primarily about going into your value chain and breaking down your processes into single steps. Then you think about each step and what digitization can do to that specific process.

Usually, the two main benefits are reducing the cost position and increasing revenues. Through digitalization, you can improve the way you interact with your clients and as a result, improve customer satisfaction. You can also find new services that you can sell to your clients through digitization, or get better access to markets, like through e-commerce.

Which sectors are especially experiencing tailwinds from digital transformation?

All sectors can benefit from digital transformation. The emphasis varies between sector and company. In services, for example, it is all about client satisfaction to ensure sustainable organic growth. Hence, automation of manual, low value-added activities is a key enabler to free up time of client facing front-office roles and to redirect the focus on satisfying client needs. This, combined with user experience and interface design, can lead to significant benefits on revenue and the cost side. This is what we have been doing with our portfolio company Emeria.

In the consumer sector, new revenue streams can be accessed through digitalization such as new sales channels or digital content, which can support the generation of additional revenue. In the health and life sector, digitalization can make certain processes in care delivery more efficient and hence help take cost out of healthcare systems.

For more from the interview, including Nguyen’s take on which sectors are falling behind in digital transformation, read the whole story on PE Hub Europe.

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That’s it for today. I’ll be back with more tomorrow.

Happy dealmaking until then,

Read the full wire commentary on PE Hub ...

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Also of note (may require subscriptions)

Onex held a first close for a sixth flagship buyout offering as founder Gerry Schwartz prepares to exit his role as chief executive. (Buyouts)

Merced County Employees’ Retirement Association posted just a slight downturn in the quarterly value of its private equity portfolio as strong markups from its largest managers helped it counter the downward slip of valuations reported by other LPs. (Buyouts)

The Cibus Funds and a family office connected to former Blackstone Group executive vice chairman Hamilton James were among the investors in a $70 million Series C for Canadian recycled phosphates provider Ostara. (Agri Investor)

"A sanitation company owned by private equity group Blackstone has been ordered to stop using child labour after federal investigators allegedly found workers as young as 13 employed in abattoirs in Nebraska and Minnesota, including some who had suffered serious chemical burns." (Financial Times)

"Deal making gets tougher as era of free money closes: There has been a pick-up in some large US deals, but bankers are having to be more creative overall." (Financial Times)

"JPMorgan Chase & Co. has avoided most of 2022’s so-called hung deals that have cost competitors billions of dollars in paper losses. Whether by luck or by design, the biggest U.S. bank didn’t make loans backing takeovers of companies such as Twitter Inc., Citrix Systems Inc. and Nielsen Holdings PLC, which fell in value as markets turned choppy." (Wall Street Journal)

"Temasek Holdings is exploring selling Advanced MedTech, multiple sources told Reuters on Monday, after the medical devices firm, fully-owned by the Singaporean state investor, received interest from suitors including buyout funds."

"Terrence Keeley had been at BlackRock Inc. for about a decade when he reached a contrarian conclusion: ESG doesn’t work." (Wall Street Journal)

"Even in the face of economic difficulties and market challenges this year, private equity cycles forward. Buyouts have slowed to a trickle, exits have been harder, and, for many in the industry, fundraising has been more challenging. But the PE wheel keeps spinning, and will continue to do so in 2023—in part with the help of the over $1 trillion in unspent capital the industry has available to invest." (Bloomberg Law)

"A Republican takeover of one or both chambers of Congress could help cool the heat the private-equity industry is feeling from politicians and regulators, say people who work with buyout firms on Capitol Hill." (WSJ Pro)

“All sectors can benefit from digital transformation.”

— Kim Nguyen, co-head of private equity services business, Partners Group

Today's letter was prepared by MK Flynn

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