TPG said Tuesday it is buying healthcare technology company Conway Health Solutions Holdings for $10.50 per share, or $1.1 billion.
This year’s market downturn has plunged shares of publicly traded private equity firms, but conglomerates, which include TPG and Carlyle Group, are expected to ultimately benefit from the disruption.
The second quarter has been particularly difficult. Brian McKenna, an analyst at JMP Securities, a civilian firm, said in a note on Tuesday that shares of alternative asset managers fell an average of 25% from April 1 to Friday.
So far this year, the stocks — Apollo Global Management (ticker: APO), Ares Management (ARES), Blackstone (BX), Carlyle Group (CG), KKR & Company (KKR), Blue Owl Capital (OWL), and McKenna have held Said TPG – on average 33% less.
McKenna pointed out that the underperformance of alternative asset managers in 2022 is in line with broader market trends and those of other financial services stocks. baron’s, He pointed to the S&P 500, which was down 19% for the year as of Friday. “Against this background, on the up days, the group will outperform, and like last week, on the down days, they underperformed. It’s a really wide ups and downs [of] market,” he said.
McKenna said merger activity has declined this year, with private equity deal making in the second quarter up more than 50% from the first quarter.
For example, TPG has received over 20 investments this year. In May, the PE firm, along with Clayton, Dubillier & Rice, also a private equity firm, bought animal healthcare company Covetrus (CVET) for $4 billion.
TPG was also part of a consortium led by Insight Partners, which in April invested in the $6.2 billion purchase of security and cloud-based software provider, Datto (MSP). Last week, TPG invested in Little Leaf Farms, a supplier of packaged lettuce.
On Tuesday, TPG said it was buying healthcare technology company Conway Health Solutions Holdings (CNVY) for $10.50 per share, or $1.1 billion. Convey, which went public last year, helps government-sponsored health plans manage benefits for their members. The transaction is expected to close in the second half.
Conway’s stock rose 139% on Tuesday on news of the deal, while TPG shares were up nearly 2% in afternoon trading.
TPG’s stock has remained muted since the firm went public in January, delivering its biggest IPO so far this year, when its offering raised $1 billion. Its stock has remained well below its $29.50 offer price since April.
Carlyle Group stock is down nearly 46% from its 52-week high of $60.14 in November, while Blackstone is down 31% from its year’s peak of $63.62 in February. Apollo fell to a low of $46.70 last week, but has reversed and is trading at $50 on Tuesday.
McKenna said credit-oriented firms such as Ares and Blue Owl were outperforming some of their peers earlier this year, but their shares have also declined. (Ares is down 37% from its year high of $88.84 in November, while Blue Owl is down 42% from its 52-week high of $17.86 in November.)
McKenna said his shares could decline, but the group of public alternative asset managers expects to thrive from the current broad market dislocation, given that the group has more than $500 billion in available capital to deploy. .
“We expect to see a really strong deployment cycle over the next few quarters because these companies want to put money to work. When you get sharp downsides and volatility, these private equity firms step in and that’s where is where significant value is created for the long run [limited partners] and shareholders,” he said.
Write to Louisa Beltran at [email protected]