The world’s largest asset managers spent less money on GP stakes in 2023 than they have in a decade, but they’re ready to deploy capital in 2024.
Bogged down with market uncertainty, buyers and sellers of GP stakes retreated from the market in 2023. Minority ownership positions encompassed only 17.2% of the total value of deals involving GPs as targets—a steep decline from historical norms.
In 2019, for example, noncontrol stakes comprised 84% of total deal value, according to PitchBook’s Q4 2023 US Public PE and GP Deal Roundup.
“The fog of uncertainty was dense over fundraising amounts and timelines and asset realizations—all bottled up in the high interest rate environment,” said Robert Hamilton Kelly, global co-head of Goldman Sachs’ GP stakes operation, Petershill Partners. “Our view was to take our foot off the gas.”
Amid fundraising uncertainty, sellers of minority stakes were also reluctant to enter into deals in 2023. Firms weren’t sure if they would be able to raise subsequent funds that were larger than their previous vehicles and didn’t want to risk selling a stake in their firm at a discount.
Now, Hamilton Kelly said, that fog has largely dissipated and managers like Petershill are gearing up to deploy capital from their GP stakes funds. Petershill has deployed over half of its $5 billion Petershill IV fund since its 2022 close.
But the fundraising environment remains unpredictable. Blackstone, for example, has decreased its initial fundraising target for its flagship Blackstone Capital Partners IX fund from $26 billion to $20 billion.
While the total number of announced GP stake deals fell from 33 in 2022 to 23 in 2023, some firms remained active in the space and others doubled down on the strength of their pipeline for this transaction type.
Bonaccord Capital Partners and Hunter Point Capital were the most active firms in this space in 2023, completing three deals each, according to the report. Both firms focus on the middle market.
In Q4, Blue Owl didn’t deploy capital for its GP stakes strategy but said that it has a “robust” pipeline of targets for its two GP stake funds, according to the report.
The firm has a history of bullishness on GP stakes. In 2021, Owl Rock combined with Dyal Capital, a GP stakes manager, to create Blue Owl Capital.
Since then, the firm has further cemented its foothold in the market with over half of its GP stakes deals in private equity.
In January 2023, Blue Owl closed its fifth GP stakes fund on $12.9 billion in capital commitments. Shortly thereafter, the firm began raising for its sixth fund and made an initial close of $2.1 billion.
2024 kicks off with strategic acquisitions
Overall deal volume involving GPs as targets rebounded at the end of the year. Twenty-six such deals were announced in Q4, the highest quarterly total of 2023.
Still, the bulk of these deals were majority control transactions, with large GPs making strategic acquisitions to grow in scale. The quarter’s largest deals included Keppel Capital’s 50% stake in real estate manager Aermont Capital for $517 million and Manulife’s acquisition of alternative credit manager CQS.
Last year also saw TPG’s $2.7 billion acquisition of Angelo Gordon and Bridgepoint Advisers’ purchase of Energy Capital Partners.
The market preference toward strategic acquisitions over GP stakes has spilled over into 2024 with BlackRock’s $12.5 billion acquisition of Global Infrastructure Partners, the largest amount a GP has ever paid for an alternative manager.
In 2024, with a limited number of buyers capable of making GIP-sized deals, industry players expect to see more add-on acquisitions and minority stake sales and a tapering off of massive strategic deals.
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