Petershill Partners : An Independent Entity Or Division Of Goldman Sachs?
Petershill Partners is a private equity investment company that focuses on providing capital and advisory services to high-quality alternative asset management funds. It is a standalone company, albeit operated by Goldman Sachs Asset Management (GSAM) team that founded the business in London in 2007. They rely on Goldman connections and management skills to persuade funds to sell a part of their firms to them.
Currently, Petershill has stakes in 19 funds which include Accel-KKR, Francisco Partners, Riverstone Holdings LLC, Caxton Associates LP, and LMR Partners LP.
Petershill marketed the shares at £320 to £380 a piece. On September 28, Petershill Partners (PHLL.L) made its trading debut on the London Stock Exchange, pricing its initial public offering at the middle of the range, £350 per share. This represents a market cap of 4 billion pounds or equivalently, $5.5 billion. On its trading debut, shares closed unchanged.
This was disappointing as many investors were expecting a pop, especially after buyout fund Bridgepoint (BPTB.L) popped 30% on its trading debut back in July. Petershill is valued at 22 times forward earnings, compared to Bridgepoint’s 30 times forward earnings.
Between 2018 and 2020, the 19 funds in Petershill grew their assets by 21% a year. Petershill’s revenue, which is their cut of the funds’ profits, was $243 million during the same time period.
The first week of trading was lackluster. Shares continued trading unchanged for the next couple of days until Friday when they rose 0.57% to £352 per share. The chart below shows the price range for its shares in its first week of trading.
Petershill Partners (PHLL.L)
The listing will provide Petershill with permanent capital as well as raise $750 million that will be used for purchasing new stakes in funds.
Goldman manages the portfolio of 19 funds and their profits are a chunk of each fund’s revenue. As of the end of the second quarter, the fund manages a combined $187 billion in assets. Petershill is looking to acquire stakes in private capital managers, with a preference for sectors in tech, healthcare, and ESG that will benefit from the end of the pandemic.
Private assets are in high demand and this current environment of low interest rates drives pension funds and insurers to go risk-on and look beyond traditional equities and bonds.
Of course, this will not last as the purpose of low-interest rates was to stimulate growth during the pandemic. Moreover, the Federal Reserve is expected to raise interest rates in late 2022 or early 2023. When this happens, expect pension funds and insurers to flock back to traditional equities and bonds. This could also correspond to the end of the private equity boom.
As we stated earlier, Petershill relies on Goldman connections. If it loses its connections, then it won’t end well for Petershill.