Business is booming.

Better (IPO) late than never?

One scoop to start: Apollo Global Management improperly agreed to pay $570mn to cover the tax bills of its top executives as part of a shake-up aimed at distancing the private equity firm from its scandal-plagued founder Leon Black, according to a shareholder lawsuit filed on Wednesday.

Montage of Josh Harris, Leon Black and Marc Rowan
From left: Josh Harris, Leon Black and Marc Rowan © FT montage/Bloomberg

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:

In today’s newsletter:

  • Better’s path to an IPO couldn’t have gone worse

  • Private equity hands over distressed companies to rivals

  • Blackstone’s private equity pitch to millionaires

The mortgage lender that has seen Better days

When online mortgage lender Better agreed to go public through a blank-cheque merger in May 2021, the business was at its peak.

The SoftBank-backed group had a huge increase in demand for its services as interest rates hit rock bottom during the pandemic. It hit $58bn in loan originations in 2021, a 1,000 per cent increase from two years prior.

But as Better makes its much-delayed public markets debut on Thursday, things look drastically different — both for the group and its chosen path to become a listed company.

In the two years since Better inked its deal with Aurora Acquisition Corporation, its chief executive Vishal Garg has become an emblem of bad leadership by firing 900 of his employees on Zoom. The company’s loan business has declined by almost 90 per cent and it has laid off more than 90 per cent of its workforce in 18 months.

Despite all this, Better is going public at the same near-$7bn valuation it agreed in 2021.

Vishal Garg, chief executive of Better: ‘
Vishal Garg, chief executive of Better: ‘Over the past two years, I’ve spent a lot of time getting leadership training, learning to become a more empathetic leader’

The reality is that the New York-based company had little option but to get this deal over the line. Despite a $750mn capital injection last year that predominantly came from SoftBank, Better is in desperate need of cash.

The company recently warned in regulatory filings that if the merger failed or it couldn’t find other sources of funding it “may not be able to continue as an operating company”.

Better’s tale is a familiar one for a lot of young companies that benefited from a pandemic-driven boom. They overexpanded to satisfy demand and were left nursing huge losses once that fell away — in Better’s case $1.2bn over 2021 and 2022.

As Lex explains, Better will receive $565mn of fresh capital post-merger, including $528mn from a convertible bond issue to SoftBank. The company isn’t getting much from the special purpose acquisition company trust, which has about $20mn left after more than 90 per cent of shareholders decided to redeem.

While Better has cut costs by reducing headcount and promised to remain diligent about spending — with the company’s non-executive chair Harit Talwar telling DD’s Ortenca Aliaj and the FT’s Joshua Franklin that they’re “not going to be drunk sailors at all” — it’s hard to see how things are going to get . . . better.

Just as the online lender makes its protracted public markets debut, US mortgage rates have hit a two-decade high.

Private equity plays pass-the-portfolio company

DD has written extensively about private equity selling to itself, securitising itself, and even paying itself dividends.

So when the notoriously self-sufficient industry starts handing over its debt-laden companies to their fiercest competitors, you know things are getting tough.

The sector’s biggest names including KKR and Bain Capital are handing over distressed companies to the lending arms of rivals, DD’s Will Louch reports, in the latest sign of how buyout firms are struggling with higher interest rates, stubborn inflation and supply chain woes, among other issues.

Bain’s European business has recently ceded ownership of German manufacturer Wittur to KKR’s credit arm, said people familiar with the deal, while Carlyle is expected to hand over the keys at security company Praesidiad to lenders including Bain’s credit arm.

KKR, meanwhile, has lost control of German payments company Unzer to a group of creditors including Goldman Sachs, Swiss private equity firm Partners Group and European credit manager Alcentra.

And after filing for bankruptcy in May, US physician-staffing company Envision Healthcare — which was taken private by KKR in a blockbuster leveraged buyout that valued it at $10bn — was taken over by a group of senior lenders including Strategic Value Partners, Blackstone and Eaton Vance.

With the era of cheap money firmly in the past, some private equity firms are beginning to regret the amount of leverage they’ve piled on — some of which wasn’t hedged against interest rate rises and is now more expensive to service.

Loose covenants for creditors have also become commonplace in the past few years. That gave private equity buyers more flexibility when it came to taking on more debt and less visibility into a company’s financial health for the buyout groups providing said debt.

The dance between private equity and the credit arms of their rivals is working for some, at least for a while longer.

“Private equity firms want their portfolio companies to keep going, and private credit firms don’t have the infrastructure to take the keys of multiple companies simultaneously,” said Allan Schweitzer, portfolio manager at credit hedge fund Beach Point.

But too many defaults could make life difficult for creditors.

Blackstone seeks millionaires to finance billion-dollar buyouts

The world’s largest private equity group is preparing to sell investments in large leveraged buyouts to small-time investors with a few million dollars to spare.

Blackstone Group will later this year begin taking subscriptions for its Blackstone Private Equity Strategies Fund, or BXPE, after a months-long delay caused by troubles at the $67bn property fund it previously sold to wealthy individuals, DD’s Antoine Gara reports.

Blackstone shelved the fund launch last year after the property fund, called Breit, was forced to limit redemptions. The manoeuvre underscored the risks that hundreds of thousands of wealthy individuals such as multimillionaires — dubbed “retail investors” in private equity circles — had taken by investing in private assets with limited liquidity rights.

Breit was the foundation of Blackstone’s effort to turbocharge growth by diversifying its investor roster beyond pensions and endowments and into private wealth. The push has also come as institutional investors are growing overexposed to private assets.

Blackstone’s leaders Stephen Schwarzman and Jonathan Gray have been tantalised by the opportunity to sell Blackstone products to “retail” investors with almost no exposure to private markets. Private equity is the new frontier in the push, which has come with some major headaches despite hastening the group’s march to $1tn in assets.

The fundraise, expected to begin in the fourth quarter, will come as Blackstone finishes pooling cash for its newest buyout fund at what’s expected to be less than an initial $30bn target, underscoring its impulse to find new investors.

Job moves

  • Reckitt’s chief financial officer Jeff Carr has announced plans to retire in March of next year. He’ll be succeeded by Nike finance executive Shannon Eisenhardt.

  • Quinn Emanuel is set to open a new office in the United Arab Emirates, per The Lawyer. Separately, Pinsent MasonsDavid Lancaster has joined the firm as an intellectual property litigation partner in London.

  • British luxury brand Mulberry has named Boston Consulting Group alum Leslie Serrero as a non-executive director.

Smart reads

Heads will roll Job cuts will probably be inevitable at UBS as political pressure weighs on the Swiss bank to vindicate the national embarrassment that has unfolded at Credit Suisse, the FT’s Jonathan Guthrie writes.

Crunch time As returns dry up at hedge fund Schonfeld, chief executive Ryan Tolkin has been tasked with staging a turnaround at the firm founded by his longtime family friend, Business Insider reports.

And one smart listen: The FT’s Scott Chipolina explains why Binance has struggled to capitalise on the collapse of crypto empire FTX on the latest episode of Behind the Money.

News round-up

US regulators impose tougher disclosure rules on private funds (FT)

Banks agree near $500mn settlement in stock-lending lawsuit (FT)

Alison Rose eligible for £2.4mn from NatWest despite resignation (FT)

Ofgem fines Morgan Stanley £5.4mn for WhatsApp violations (FT)

Saudi Arabia consulting boom bolsters PwC’s UK partner pay (FT)

Buyout firm Roark sets conditions to clinch $9bn-plus Subway deal (Reuters)

Crispin Odey cuts business ties to his family in further retreat (Bloomberg)

Goldman Sachs cracks down on staff who flout five-day-office rule (Financial News)

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

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