Good morning, Hubsters. Senior reporter Michael Schoeck here with the US edition of the Wire from New York.
We’re past Labor Day and dealmakers are cranking out the transactions. Today we have two exclusives from senior reporter Obey Martin Manayiti. First up, Blackstone has agreed to acquire a provider of data center cooling services and components.
PE Hub was also first to report that FFL Partners has completed an investment in a provider of services focused on the office of the chief financial officer of private equity-backed companies
To wrap up, I’ll share highlights from my weekly companies-for-sale update.
Now let’s get to those exclusives.
Cooling down
Blackstone has agreed to acquire Flow Control Holdings, a Cincinnati-based provider of highly engineered flow control services and components serving the data center liquid cooling, food, beverage and pharmaceutical markets, PE Hub was first to reveal.
Blackstone is acquiring the majority stake of FCH from Audax Private Equity, which will retain a minority equity stake in the company. The transaction is expected to close in Q4.
The market for data center liquid cooling is growing, as many providers are moving away from air-cooling systems, Bilal Khan, a senior managing director at Blackstone, told PE Hub in an exclusive interview.
“Data centers are becoming more energy efficient through the use of liquid cooling architecture,” Khan said. “From a product standpoint, Flow Control provides the fundamental building blocks for the design of a liquid cooling system. As the newest generation of chips becomes increasingly more power-dense, we believe the data center market will shift towards liquid cooling solutions.”
FCH’s highly engineered, high-performance components are used by original equipment manufacturers and hyperscalers for coolant distribution units, in-row manifolds and secondary fluid networks.
“At Blackstone, our investment philosophy is to identify multiple ways to invest behind a mega-trend – and AI/digitalization is one of our highest conviction thematics,” Khan said. “The more entrenched that we get into the AI ecosystem, we are identifying new and exciting investments and, most importantly, we are able to bring the scale of the entire Blackstone platform to the benefit of our individual investments.”
FCH represents the firm’s second investment in the liquid cooling sector this year. Earlier this year, Blackstone’s energy transition fund group, Blackstone Energy Transition Partners, acquired the majority stake in Advanced Cooling Technologies, a manufacturer of thermal management and energy efficiency products.
In July, Blackstone Energy Transition Partners acquired DarkVision Technologies, which provides ultrasound imaging technology for critical industrial infrastructure inspection, from Koch Engineered Solutions, a unit of Koch.
Based in North Vancouver, British Columbia, DarkVision uses imaging sensors and silicon chips with AI-quantifying models and rendering software to convert ultrasound data into 3D visuals. The technology helps utilities see if an asset such as a gas pipeline is damaged.
For more PE Hub coverage of PE firms investing in data center infrastructure, read this feature.
Outside expertise
FFL Partners has completed an investment in Waylin Partners, a provider of services focused on the office of the chief financial officer (OCFO) of private equity-backed companies, PE Hub was first to reveal. As PE hold periods lengthen, demand for OCFO services is rising.
“Private equity firms are holding onto businesses for longer,” Jonathon Bunt, a partner at FFL, told PE Hub. “As interest rates have run up, the returns that private equity firms need to achieve need to come from different areas, which has caused the focus on value creation to increase significantly.”
Private equity firms need the OCFO to perform at a high level, Bunt added, noting that the OCFO is the window through which many firms view their investments’ performance.
“As a private equity investor, you really need to understand how the business is performing, and you need to have the portfolio company’s OCFO functioning at a really high level in order to effectively do that,” he said.
“Typically, portfolio companies do not have the necessary OCFO talent in house to achieve everything the private equity sponsor wants, so they need outside expertise and execution, and Waylin can help with that.”
Chicago-based Waylin’s approach involves “forward-deployed finance engineers,” who are embedded with the client company and aim to solve both business and technical problems.
There are advantages to outsourcing OCFO services rather than recruiting a permanent CFO. “The mix of skill sets that are needed across financial planning and analysis; technical accounting; and data engineering are just too hard to hire for at a typical middle market company,” he said.
The investment from San Francisco-based FFL will be used to accelerate Waylin’s growth through expanding recruitment, expanding relationships with PE firms and their portfolio companies, and advancing the company’s AI-enabled offerings.
Companies for sale
As Q4 approaches, the pipeline of companies being readied for sale appears robust. Year to date, PE Hub has been briefed by confidential sources on 205 companies coming to market, compared with 94 at the same time a year ago. The sectors that promise the most activity include business services, healthcare, fintech, industrials, aerospace and defense and anything that benefits from the AI buildout.
In September we’ve seen three deal announcements already for companies reported or tracked for sale by PE Hub:
- Health-tech firm Outcomes One was sold by GTCR and BlackRock to HIG Capital
- Family-owned healthcare laundry services firm Unitex was sold to CVC Capital. PE Hub tracked the company in the market recently at a $70 million EBITDA valuation
- In a potential deal, A1 Garage Door, which we reported on for sale earlier this summer, is reportedly in active discussions to be acquired by KKR at a $2 billion valuation
We’ve been talking to investment bankers about what we can expect from companies coming to market, and PE Hub will have more to share on that next week.
On a personal note, this is my final PE Hub Wire dispatch. I’ll be starting a new endeavor in the coming weeks. Thanks for reading the Thursday Wire over the past couple of years, and feel free to keep in touch on social media! Tomorrow, Nina Lindholm will be with you for the Europe Wire, and John R Fischer will be back with you for the US Wire.
Cheers,
Michael