S&P Global announced that private equity behemoth Kohlberg Kravis Roberts & Co. L.P. intends to acquire its Engineering Solutions business for $975 million cash. S&P Global had acquired Engineering Solutions just last year as part of it’s merger with IHS Markit.
“Engineering Solutions provides data, technology, and insights that allow over 6,000 global customers and 650,000 users to optimize workflows and end-user experiences,” according to the companies’ joint press release. KKR partner Webster Chua stated, “We see significant opportunities for Engineering Solutions to accelerate growth, expand its footprint and continue to innovate as an independent company.”
Rising interest rates, inflation, and increased geopolitical risk reigned in private equity’s booming activity from late 2020 through mid 2022 – bringing volumes back to pre-pandemic levels. While private equity volume fell 22% during the second half of 2022, the industry remains in a relatively strong position.
Although PE cash reserves reached historical highs in 2022, the ratio of cash reserves to assets under management fell to at least a 20 year low. 2021 set a record for PE fundraising but, as Charles McGrath writes for Prequin, “[t]his supply of available capital, however, still failed to keep up with the deal market as fund managers faced an inflated market and elevated valuations ate into cash reserves.” The expectation is that steady PE activity will continue in 2023, but at more reserved valuations.
PWC’s outlook largely agrees, “With record levels of dry powder (US PE holds $1.1 trillion), we expect more creative approaches to deploy capital (minority investments, all-equity deals, private placement of debt) and a broader recovery in activity either as inflation is tamed or asset valuations are sufficiently depressed.”
According to Matterhorn’s M&A database, which tracks publicly-announced deals over $25 million in value, KKR is advised by law firm Simpson Thacher & Bartlett LLP and financial adviser RBC Capital Markets. S&P Global Inc. is advised by Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates and financial adviser Goldman Sachs & Co. LLC.