“If you can’t raise money now, you never will.”

That’s what one seasoned private equity investor had to say after learning that Guy Hands, the founder of Terra Firma Capital Partners (pictured), is seeking to raise as much as $3.4bn in what would be his first buyout fund in a decade. 

 

But will the private equity boss behind the calamitous, poorly timed and well-chronicled £4.2bn takeover of music label EMI in 2007 succeed in wooing investors? (Do read this 2008 FT profile of Hands as well.) 

The Terra Firma fundraising comes a decade on from the onset of the financial crisis and things couldn’t be more different.

DD has reported extensively on just how fertile the environment is for private equity firms to raise cash as investors struggle to deploy capital in sectors that can yield them handsome profits. 

Clearly Hands and Terra Firma, which he founded in 1994 after stints at Goldman Sachs and Nomura, know this. The fund is officially raising money in the US, according to an SEC filing, but it will also look to tap into European capital.

“Raising money in Europe will be key for them,” the private equity investor said. The fund will also look to raise money from the usual suspects, including large pension funds Calpers and CPPIB.

Despite favourable market conditions, Hands will have to face down sceptics who have said that he is tainted by the EMI saga and the subsequent court case where he tried (and failed) to allege that his bankers at Citigroup misled him about the deal for the music label. 

Part of his pitch will be that Terra Firma is no longer a one-man show, with a management team that now includes Andrew Geczy and Justin King, the former chief executive of UK supermarket chain Sainsbury’s who became vice-chairman and head of the firm’s portfolio businesses in September 2015. Will those additions and a buoyant market be enough to put Hands back on solid ground?

Payday

 At long last, the UK’s Worldpay is set to unveil an agreed £9bn deal to be acquired by its US payment processing rival Vantiv. Key terms on the cash-and-stock takeover are expected to remain roughly the same as agreed a month ago, though the companies will now disclose a synergy figure that will be closely watched as well as plans to establish a secondary listing in London to appease UK investors.

Welcome to your curated briefing on deals and dealmaking from the FT. Due Diligence is your gateway to the best M&A stories, insights, analysis and exclusives. Each day we expand on three topics and pick a series of smart reads from the FT and elsewhere. Next you’ll find the latest industry job moves and get a round-up of key headlines. DD is delivered to your inbox Tuesday-Friday at 5am UK time. See all previous editions and sign-up here. Please spread the word. Get in touch with us at: Due.Diligence@ft.com  Arash, James, Don, Sujeet, Javier & Neil.

Unhealthy M&A 

There was a time (2014 to 2015) when healthcare-focused investors demanded that chief executives did bold mega deals. And if the bosses listened to their shareholders they were immediately rewarded. During the healthcare M&A boom acquirers had the rare joy of seeing their share price jump after a deal (historically the opposite is true).

For example, when Teva Pharmaceuticals acquired Allergan‘s generics drug unit for an eye-popping $40.5bn two years ago, its share price rose more than 10 per cent as shareholders blessed the deal. The same happened for Valeant, the Canadian specialty pharma group that was rolling up companies at an unstoppable rate with heaps of leverage.

However, after the initial excitement for the expected deal-driven growth funded with ultra cheap cash, many pharma companies — Teva and Valeant being prime case studies — struggled to turn their acquisitions into success stories. 

Lex notes how both companies are struggling to offload the incredible debt loads they piled on their balance sheets to finance the deals, and how both have seen their share prices tank in the aftermath of the transactions. 

Is there a lesson to be learnt here? Here is what Lex has to say:

Teva and Valeant serve as enduring reminders that companies with no idea how even short-term healthcare trends may evolve should not load their balance sheets with borrowings.

That might sound tough but it’s hard to argue with. 

The Wanda way of selling out

Of all the Chinese conglomerates that have ended up under the thumb of Beijing regulators in recent months, Dalian Wanda has been the most proactive in showing its allegiance to its masters.

Wanda’s name appeared in June on a short list of companies that the banking regulator was probing for excess leverage following an overseas deals binge. HNAFosun and Anbang Insurance were also on the list.

Each of the companies has taken its own approach to handling the powers that be. Wanda in particular has been fast to act to address its leverage problem.

Last month, it suddenly announced that it would sell off a huge portfolio of property assets in China to rival developer Sunac for more than $9bn. There have also been signs of some selldown overseas. For example, AMC Entertainment, one of Wanda’s overseas acquisitions, has just sold film producer Open Road to a Chinese investment fund.

On Tuesday, there was news that Wanda was “fielding offers” for $2bn worth of property assets in Australia. The company was quick to deny the story but the sell-off would fit the pattern. It’s worth noting that Wanda is controlled by billionaire Wang Jianlin (pictured), someone with admitted connections to the family of China’s leader Xi Jinping.

It doesn’t take too big a leap of the imagination to think that the company might be getting some direction directly from Beijing on how to handle their recent problems.

And speaking of Beijing, do read this column by the FT’s James Kynge on how the crackdown on private company dealmaking will sow further confusion for western companies trying to better understand the competitive landscape in China.

Job moves

  • DD ExclusiveAndrew Kenny has joined Apax Partners, the private equity group, as head of communications. He joins from Epiris, where he worked in a PR, marketing and investor relations role. He replaces Alex Wessendorff, the former communications manager who abruptly left the firm in May.

  • Livingbridge, a mid-market private equity firm, has appointed Susie Stanford as associate director. Stanford was previously investment manager at The Lewis Trust Group, the investment vehicle of the Lewis Family, founders and owner operators of River Island, the UK fast-fashion retailer. 

  • Mohit Goyal, a former senior associate at Carlyle, has joined CVC Capital Partners as investment director in India, Private Equity International reported. For five years Goyal was asenior associate working with the Asia buyout fund at Carlyle.

  • General Atlantic, a US growth and private equity firm, said it had hired John Prasetio, a former Indonesian ambassador to Korea, as a special adviser. He will focus on GA’s business in Southeast Asia.

  • HSBC has hired Jonathan Tretler to head its consumer and retail industry coverage in North America, Bloomberg reported. Tretler joins from RBC where he was a managing director and has also worked at Deutsche Bank and UBS

Smart reads

  • To boost profits, go east: Carlyle, the US buyout group, is going shopping for assets in India as large conglomerates sell units. Prime buying opportunities for private equity. (Bloomberg

  • Five things we learnt from earnings season: Earnings growth is being drive by tech, energy and financials; US consumers are cautious; companies are loath to talk about the benefits of the weaker dollar; the prospect of corporate tax reform is already affecting corporate decisions; and Donald Trump is not as popular as he used to be. Read the full breakdown here. (FT)

  • Following in his footsteps: A look at the ‘two Davids’ who married the daughters of a billionaire corporate raider and have now themselves teamed up with Corvex’s Keith Meister to challenge the planned $20bn chemicals tie-up between Switzerland’s Clariant and Huntsman of the US. (Reuters

News round-up

Blackstone seals deal for stake in Banco Popular property portfolio (FastFT)

Standard Life hit by customer caution ahead of Aberdeen merger (FT)

Web retailer Fanatics raises $1bn from SoftBank’s Vision Fund (WSJ)

S&P junks Staples after private-equity buyout (FastFT)

Mobileye co-founder Ziv Aviram steps down with $15bn Intel deal complete (FastFT)

BAT bond sale for Reynolds deal attracts $35bn in orders (FT)

Thoma Bravo enters credit market with new $750m fund (AltAssets)

TowerBrook Is in Talks to Raise $5.9 Billion for Its Next Fund (Bloomberg)

Liberty Global on target to spin off LatAm arm by year end (FT)



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