ULTRA-RICH individuals and families worth more than US$150 billion are helping drive a resurgence in private equity buyouts, providing capital for some of the year’s biggest acquisitions to overcome a tough dealmaking environment.
Wealthy clans that built their fortunes in industries from children’s toys to household boilers have been co-investors on nearly US$20 billion of listed company takeovers this year, according to data compiled by Bloomberg. They have made a mark on Wall Street as go-to sources of capital for investment firms such as KKR and Silver Lake, helping them get acquisitions over the line at a time when borrowed money remains expensive.
Germany’s Viessmann family, flush with cash after a major divestment, teamed up with KKR for its US$3 billion acquisition of renewable energy firm Encavis announced in March. The century-old dynasty has an estimated net worth of US$13.7 billion after completing the sale of their heating and cooling business to Carrier Global in January, according to the Bloomberg Billionaires Index.
Meanwhile, Michael Dell’s family office partnered with Silver Lake on the biggest private equity buyout this year, a US$13 billion deal for talent agency Endeavor Group Holdings.
Goldman Sachs Asset Management closed its purchase of Norwegian e-learning platform Kahoot! ASA in January with funding from Denmark’s Kirk Kristiansen dynasty, the owners of Lego Group. In April, Morgan Stanley’s infrastructure arm agreed to buy Milan-listed construction firm Salcef Group with the Salciccia family, who have controlled it for decades.
Same terms
Many pension funds and endowments have hit the limit for how much they can allocate to private equity, leaving buyout firms to turn to increasingly sophisticated wealthy families or sovereign funds. Roping in a co-investor allows private equity firms to reduce the money they front themselves for a deal, a welcome prospect at a time when high borrowing costs are crimping the amount of leverage they can use.
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The shift is catching the eye of major investment banks. Darren Allaway, a London-based managing director in Goldman Sachs’s family office unit, said he’s spent more time engaging with private equity investors within the past year than in his entire finance career of more than two decades.
“We are seeing a lot of families saying, ‘We have capital allocated to leading transactions’” or to supporting other investors, Allaway said. “I would expect to see that trend continue.”
Buyout firms have announced US$91 billion of listed-company takeovers this year to May, up 16 per cent from the same period in 2023, according to data compiled by Bloomberg. More than a third of family office clients recently surveyed by UBS Group plan to increase their allocations to direct private equity opportunities, behind only developed-market equities as the most popular asset class.
The participation of private wealth underscores the growing sophistication of how the people behind the world’s biggest fortunes are managing their money, as well as how many investment firms are increasingly tapping them as sources of capital.
Blackstone, KKR and Carlyle Group have already started dedicated platforms to serve the well-heeled, and the richest among them are able to become partners for some of those firms’ most high-profile – and possibly most lucrative – deals.
“They have the potential to take on long-term opportunities,” Christina Wing, founder of advisory firm Wingspan Legacy Partners, said of the ultra-rich. “They are going to come in at the same terms as institutional investors.”
The pace of dealmaking by wealthy families has been steadily increasing in recent years.
When Brookfield Asset Management agreed to buy Network International Holdings last year, Saudi Arabia’s billionaire Olayan family contributed nearly a tenth of the £2.2 billion (S$3.8 billion) purchase price for the London-listed payments processor. In 2022, private equity firm EQT AB teamed up with the pharmaceutical billionaires in Germany’s Struengmann family as it pursued a bid for Novartis’s US$25 billion generic drugs business, Bloomberg News reported at the time.
Rising wealth
Past deals show the potentially outsized returns available from buyout deals involving publicly traded companies.
Michael Dell transformed his technology empire after striking a deal with Silver Lake to take his namesake business private in 2013 through a US$25 billion leveraged buyout, allowing him to reposition the Texas-based company outside the glare of public markets. It relisted five years later in stronger financial shape, with Dell’s stake in the company he founded in his college bedroom now making up most of his US$107.2 billion fortune, according to Bloomberg’s wealth index.
Other members of the world’s wealthiest families are following suit. Reinold Geiger, the billionaire Austrian owner of L’Occitane International, is trying to buy out minority shareholders in the skin-care company with financing from Blackstone and Goldman Sachs.
The billionaire dynasty behind US clothing retailer Nordstrom has been considering a similar move. And Rothschild’s founding family bought out other investors in the storied bank last year with capital from several other wealthy clans, including the owners of luxury fashion house Chanel and Dassault Systemes.
“It’s some of the best capital for our banking colleagues,” Goldman’s Allaway said, referring to funds from the world’s ultra-rich. It will “become more of a permanent capital base for these type of transactions”. BLOOMBERG
