Industries Ripe for an Exit from Private Equity Firms
Portfolio companies currently held 5 – 7 years are likely ripe for an exit from their private equity owners. Industry concentrations within this aged group of portfolio companies might provide leading deal flow indicators. These industries, and certain sub-sectors within them, may have tidal changes of ownership as private equity firms convert equity to liquidity to provide returns to limited partners.
Using our database of private equity portfolio companies, I identified four industry sectors that are thematic in the U.S. portfolio companies currently held between 5 and 7 years:
- Medical / Health
- Oil & Gas
No surprise really, since these are large industry categories. Consequently, for each industry above, I looked for sub-sector concentrations, discussed below.
(Note – I chose 5 – 7 years as the holding period because I reasoned that portfolio companies held longer than 7 years are often owned by PE firms without a typical investment time horizon, sometimes investing from their own funds with a buy-and-hold-forever strategy.)
Manufacturing tops the list because this is such a broad category.
Reviewing the portfolio companies within the manufacturing category, I thought I might see certain recurring sub-sector themes, but I did not. This group of manufacturing portfolio companies are very diverse and include companies that manufacture a variety of products for a wide range of industries. A few examples to illustrate:
Connectors & Cable Assemblies: Quick Cable held by Tonka Bay Equity Partners
Precision Engineered Products: H-D Advanced Manufacturing held by The Riverside Company
The full list is considerably more varied than the examples provided above.
Unlike the manufacturing portfolio companies, the technology private equity investments of 5 –7 years ago did center around a few key sub-sectors. These are shown below with a few sample companies for illustrative purposes:
- Genesys held by Technology Crossover Ventures
- Great Bay Software held by Search Fund Partners
- KLDiscovery held by WestView Capital Partners
- Lumesis held by Safeguard Scientifics
- Acelity held by Apax Partners
- Amphora Medical held by Baird Capital
- Freedom Innovations held by Health Evolution Partners
- RxAnte held by Aberdare Ventures
Marketing Tech Tools
- Altitude Digital held by Mercato Partners
- Brand Networks held by AEA Investors
- Magnetic held by Rho Ventures
- Signal held by Baird Capital
- Strategic Marketing held by Svoboda Capital Partners
- Artel held by TPG
- Coalfire Systems held by Baird Capital
- CSS Corporation held by The Silverfern Group
- Insight Global held by Ares Management
Human Resources Tech Solutions
- Bamboo HR held by Sorenson Capital Partners
- Empyrean Benefit Solutions held by FTV Capital
- Infinisource held by Accel-KKR
- K12 held by Technology Crossover Ventures
- Knowledge Factor held by Leeds Equity Partners
- Logical Choice Technologies held by Vert Capital Corp.
It’s interesting to note that technology investments used to mean chips, circuits and hardware like computers and printers. Very few (perhaps none) of those traditional technology companies are on this list as the private equity firms pushed into higher margin, higher growth, more scalable, less capital-intensive businesses in the tech space.
Medical / Healthcare
Within the medical sector, the predominant themes seem to be Medical Devices (offering specific technical devices to the healthcare industry) and Medical Equipment (offering general, more basic operational equipment to hospitals).
- Amphora Medical held by Baird Capital
- Camela Medical Group held by The Omnia Group
- CSA Medical held by SV Health Investors and First Analysis
- Ivantis held by EDBI
- NovaSom held by Safeguard Scientifics
- NPWT Corporation held by MVC Capital
- Specialized Medical Services held by The Riverside Company
- Xtant Medical held by OrbiMed Advisors
- Dynamic Healthcare Services held by Lakewood Capital
- Freedom Medical held by RAF Industries
- Gamma Medica-Ideas held by Psilos Group
- Integra Partners held by Olympic Valley Capital
- Kova International held by One Rock Capital Partners
- MPE held by Pfingsten Partners
- Winco Mfg. held by Capital for Business
Oil & Gas
Within the oil & gas sector, these aged portfolio companies group into four sub-sectors (Exploration & Production being the largest):
Exploration & Production
- Black Light Holdings held by ArcLight Capital Partners
- BlackBrush Oil & Gas held by Tailwater Capital
- Corlena Oil Company II held by Kayne Anderson Capital Advisors
- Elevation Resources Holdings held by Pine Brook Partners
- ILX Holdings II held by Riverstone
- Kraken Oil & Gas I & II held by Kayne Anderson Capital Advisors
- PetroSantander held by Metalmark Capital
- Silver Creek Oil & Gas held by Crestview Partners
- Venari Resources held by Warburg Pincus
- Gullett & Associates held by Linx Partners
- Liberty Oilfield Services held by Riverstone
- Panhandle Oilfield Service Companies held by Akoya Capital
- ProPetro Services held by Energy Capital Partners
- Refinery Specialties held by Post Oak Energy Capital
- Seitel Holdings held by Centerbridge Partners
- Antelope Oil Tool (Innovex Downhole Solutions) held by Intervale Capital
- Applied Industrial Machining held by Argonaut Private Equity
- GR Energy Services Holdings held by Pine Brook Partners
- Rod and Tubing Services held by Search Fund Partners
- Sonneborn held by One Equity Partners
- Spartan Energy Services held by Harren Equity Partners
Oilfield Acquisition Companies
- Accelerated Oil Technologies held by KKR & Co.
- Excalibur Resources held by EnCap Investments
- Fieldwood Energy held by Riverstone
- Marlin Resources held by EnCap Investments
- Protégé Energy III held by EnCap Investments
- Unitex Oil and Gas held by Ridgemont Equity Partners
It stands to reason that these sectors will have a flux in ownership in the not-too-distant future as private equity firms sell to close out the life-cycle of their funds and return capital to limited partners.
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