Business is booming.

Has the golden age of private equity come to an end?


Two big things to start. First: NatWest chief executive Alison Rose has stepped down after she admitted to having inaccurately briefed a BBC journalist about the closure of Nigel Farage’s bank account. Her resignation follows a high-profile row between the former Brexit party leader and the taxpayer-backed lender.

Alison Rose
Alison Rose: ‘I want to extend my sincere apologies to Mr Farage for the personal hurt this has caused him’ © Hollie Adams/Bloomberg

And: Joe Lewis, the billionaire real estate investor and owner of Tottenham Hotspur football club, has been charged over multiple alleged instances of insider trading, US prosecutors said on Tuesday.

And one big invitation: Due Diligence Live is back. Join us in London on October 17 as we gather some of the biggest names in finance and dealmaking for a full day of interviews. Find the full agenda and a special offer for DD subscribers here.

Welcome to Due Diligence, your briefing on dealmaking, private equity and corporate finance. This article is an on-site version of the newsletter. Sign up here to get the newsletter sent to your inbox every Tuesday to Friday. Get in touch with us anytime: Due.Diligence@ft.com

In today’s newsletter:

  • GIC finds a bright spot in the liquidity crunch

  • Roomba maker iRobot calls in the Carlyle clean-up crew

  • Epstein ties hang over Wall Street

GIC plays the dealmaking drought to its advantage

One of the world’s biggest private equity investors has warned that the industry’s golden age of buyouts may have come to an end.

Singapore’s GIC, the investment behemoth with more than $700bn in estimated assets and one of private equity’s largest backers, said the industry faces tougher market conditions.

“Many of the things that were tailwinds for the private equity industry have come to an end . . . and I don’t think they are coming back any time soon,” chief investment officer Jeffrey Jaensubhakij told the FT’s Mercedes Ruehl this week.

Buyout funds, which have benefited enormously from a lucrative mix of low interest rates and high valuations, now face higher funding costs, increased market volatility and a scarcity of new investor cash.

But GIC is planning to make money from the end of the private equity boom by buying assets from firms looking for ways to exit large investments, and from investors trimming their exposure to private assets.

As investors press private equity firms to hand over cash before they allocate more funds, some buyout shops are selling off parts of their portfolios “at reasonable prices”, Jaensubhakij said.

In March, the Singapore state fund purchased a stake in Japanese software group WHI Holdings from Bain Capital for $2.6bn, Nikkei Asia reported — one of its biggest acquisitions to date.

LPs finding themselves overcommitted to the asset class on the tail-end of the decade-long boom are also selling stakes in large buyout funds in the secondaries market, selling at up to 20 per cent discounts, he added. “We’ve had a couple of transactions recently of a reasonably large size.”

In trying to turn the liquidity squeeze to its advantage, the Singapore state fund is emerging alongside fellow sovereign wealth funds such as Saudi Arabia’s sprawling Public Investment Fund and the United Arab Emirates’ Mubadala as the new power players in private markets.

Carlyle’s lifeline to a cash-burning vacuum cleaner

Some big names on Wall Street are cleaning up as US antitrust regulators scrutinise Roomba vacuum cleaner maker iRobot’s sale to Amazon.

The maker of popular gadgets that zig and zag in search of dirt — and sometimes scare pets — is turning to Carlyle Group for $200mn in cash to shore up its finances amid antitrust scrutiny into the transaction.

At a rate of 14.6 per cent, Carlyle’s loan is a juicy yield play that comes as private capital firms push into corporate lending by making large loans to companies such as Carvana, Hertz and Albertsons.

It also comes with protections a merger arbitrage fund could only dream of — underscoring iRobot’s dire cash burn as the antitrust review continues.

On Tuesday, iRobot cut its sale price to Amazon by 15 per cent from $61 to $51.75 per share, a $225mn drop that now puts the deal value at $1.45bn. The cut reflected its increased indebtedness, iRobot said.

It needed the money after burning through $95mn in cash last quarter amid a sales slump and as some of its credit facilities were expiring.

Carlyle does not have to worry too much about iRobot’s financial woes, however.

If the Amazon deal is blocked by antitrust regulators, iRobot will be forced to use the majority of its $94mn termination fee from Amazon to help Carlyle recoup part of its loan.

It’s a novel construct that comes as antitrust authorities as in Federal Trade Commission chair Lina Khan and Department of Justice antitrust tsar Jonathan Kanter square off against tech giants such as Amazon.

While it’s unclear how antitrust authorities will eventually rule, the man who proceeded Kanter at the DoJ appears to have made good business out of the uncertainty.

A legal adviser to Carlyle on its antitrust strategy is Latham & Watkins partner Makan Delrahim, the top antitrust official at the DoJ during the Trump presidency who Kanter replaced.

The ghost of Epstein’s past lingers over Wall Street

Last week DD mused that it’s a great time to work at JPMorgan Chase. That’s aside from the Epstein elephant in the room.

The Wall Street bank agreed to a $290mn settlement with accusers of the deceased paedophile Jeffrey Epstein last month. But a separate lawsuit from the US Virgin Islands over its dealings with the disgraced financier suggests that its troubles are far from over.

On Monday, New York court filings from the USVI laid out the most detailed account of JPMorgan’s dealings with Epstein, including allegations that JPMorgan reimbursed former executive Jes Staley for trips he took to meet the late sex offender.

Jes Staley arrives at a law firm’s offices
Jes Staley, pictured, has been sued separately by JPMorgan, his former employer, for allegedly misleading the bank about Jeffrey Epstein © Bing Guan/Bloomberg

Staley was Epstein’s private banker while at JPMorgan and made several trips to Epstein’s home on the island of Little Saint James over the years. An anonymous Epstein victim has accused the banker of witnessing and participating in Epstein’s sex crimes. Staley strongly denies the claims.

The territory also alleges the bank maintained accounts for Epstein’s victims and allowed him to withdraw $5mn in cash and send $3mn to women and girls over a decade.

JPMorgan, which has expressed regret for banking Epstein but did not admit any liability, didn’t comment on the latest filings.

As the spotlight on Staley grows harsher, another powerful financier’s past ties to Epstein have come back to bite. Apollo Global Management founder Leon Black reached a settlement with the USVI on Friday, agreeing to pay $62.5mn to the island territory.

Separately, $158mn in payments made by Black to Epstein for financial advice is the subject of a US Senate finance committee probe, Bloomberg reported this week. Lawmakers are investigating whether a portion of the large sums could be classified as gifts, on which the billionaire investor would then owe taxes.

“Mr Black has fully paid all taxes owed to the government,” a spokesperson told Bloomberg. An investigation by law firm Dechert found “no evidence that Black was involved in any way with Epstein’s criminal activities at any time”.

Job moves

  • Alphabet’s chief financial officer Ruth Porat is taking up a new role as president and chief investment officer. She’ll continue as CFO until a replacement is found.

  • Lazard has named Tim Donahue, who left JPMorgan Chase last year to become the advisory firm’s vice-chair of US investment banking and head of private credit, to lead its new capital solutions business, The Wall Street Journal reports.

  • EY’s US general counsel Ann Cook has resigned after two years in the role, as the firm nears the conclusion of an investigation into its failure to properly handle a staff cheating scandal.

  • Victor Lazarte, the co-founder and chief of gaming start-up Wildlife Studios, has joined venture capital firm Benchmark as a general partner.

Smart reads

A-list attorney From Elon Musk to Jay-Z to Megan Thee Stallion, Quinn Emanuel’s Alex Spiro has made a lucrative practice as a go-to lawyer for the rich and famous, The New Yorker writes.

AI’s modern renaissance man OpenAI chief Sam Altman is pushing artificial intelligence forward and developing technology to counteract future problems it could create. His outsize role in the movement is because of governments’ aversion to innovation, he tells the FT.

The new bank heist Germany’s fragmented banking system, decentralised police force and prominence of ATMs has made it a hotbed for bomb attacks on cashpoints, the FT’s Olaf Storbeck reports.

News round-up

US regional lenders PacWest and Banc of California agree merger (FT)

Qatar sovereign fund seeks stake in Mukesh Ambani’s retail arm (FT)

Altice co-founder placed under house arrest in Portugal in corruption probe (FT)

Music rights giant BMI in renewed talks to sell itself (Reuters)

Thales/Imperva: cyber security deal boosts defence group’s best division (Lex)

Monsanto: Anderson must uproot Bayer’s perennial problem (Lex)

The dangerous game of floating by China’s new rules (Alphaville)

Due Diligence is written by Arash Massoudi, Ivan Levingston, William Louch and Robert Smith in London, James Fontanella-Khan, Francesca Friday, Ortenca Aliaj, Sujeet Indap, Eric Platt, Mark Vandevelde and Antoine Gara in New York, Kaye Wiggins in Hong Kong, George Hammond and Tabby Kinder in San Francisco, and Javier Espinoza in Brussels. Please send feedback to due.diligence@ft.com

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