“Everything in Britain is for sale,” says US private equity manager
Sterling’s falling value means that “everything in the UK is for sale,” according to a top executive at US private markets giant Ares Management.
Blair Jacobson, Ares’ co-head of European lending, said he “absolutely” expected US investors to do more business in the UK to take advantage of the weak currency. “There’s a pretty big difference if you have funds denominated in US dollars,” he said at the FT’s live due diligence event in London on Wednesday.
A pioneer in private lending, Ares has funded a number of public company takeovers after banks pulled out of the market. Traditional lenders pulled out after struggling to sell debt on deals they pledged to fund earlier this year.
The pound has traded at its lowest level against the US dollar since the 1980s in recent weeks after Chancellor Kwasi Kwarteng announced a package of unfunded tax cuts in his September ‘mini’ budget.
US private equity groups have been on dealmaking tours in the UK for several years. Clayton, Dubilier & Rice bought supermarket chain Wm Morrison last year and UK-listed security group G4S was privatized by its North American rival Allied Universal, which is backed by US takeover group Warburg Pincus and Canadian pension fund Caisse de depot et placement du Quebec. Blackstone last year bought Bourne Leisure, which operates the Haven holiday parks.
But such activity has slumped this year as the economic outlook has clouded over and rising interest rates have made it harder and more expensive to borrow money for businesses.
Speaking at the FT event, Blair Effron, co-founder of investment bank Centerview Partners, said private equity deals would be the first to bounce back. “The first wave of mergers and acquisitions that’s emerging is private equity, not corporate, driven,” he said, adding he didn’t expect the pound to fall to par with the dollar and that the UK would would recover from what he described as a “self-inflicted” economic hit.
Dealmaking is likely to increasingly lead to public companies being privatized, Jacobson said. “The delisting trend will continue. . . we were the big beneficiaries of this trend.”
Brad Hyler, Managing Partner at Brookfield, said during the panel that this also applies to listed real estate funds in Europe. Rising inflation has made new homes more expensive to build, Hyler said, making budget building portfolios more attractive. However, it is difficult to find financing for large deals.
Jacobson also criticized what he termed “absentee ownership” by US-based private equity groups that bought up British companies and oversaw them from across the Atlantic without having an office in the country.
And he said negotiations on the takeover board’s requirements to buy UK-listed companies could be difficult. “You’re really limited in terms of the information you can get, the number of parties you can bring into the herd,” he said.
As the pension funds that have poured billions into private equity became increasingly unwilling or unable to continue at the same pace, private equity groups turned to Middle East investors for fresh money, Jacobson said.
He has recently been to Saudi Arabia, Kuwait, Abu Dhabi and Dubai, he said. “They are well funded” and “fairly long-term oriented”.
https://www.ft.com/content/c4a54ef9-3ef7-4ab1-b87b-211f779a4299 “Everything in Britain is for sale,” says US private equity manager