Buyout firms have embraced dividend recapitalizations this year as the continued slowdown in traditional exit channels pushes sponsors to find alternative sources of liquidity. With average holding periods stretching to five years in 2023-2024—up from 4.2 years in the prior two-year period—general partners are turning to debt markets to find an answer to the realizations problem.

Portfolio companies are tapping leveraged loans or high-yield bonds to fund payouts to investors: institutional loan volume tied to dividend recaps rose by five-fold from 2023 to 2024, with 103 recapitalizations delivering $80.4 billion in proceeds, the highest level since 2021.

"As more and larger funds approach the end of their life, financial sponsors face increasing pressure to return money to their limited partners," noted Andrew Nussbaum, Steven Cohen, and Igor Kirman, partners at Wachtell, Lipton, Rosen & Katz. "Traditional exits such as IPOs slowed over the past few years, and sponsors increasingly utilized alternative exits such as sponsor-to-sponsor sales, minority investments and continuation funds, as well as other liquidity events like leveraged dividends."

Recent deals include Clayton Dubilier & Rice-backed Wolseley Group's £350 million senior secured bond offering earlier this month, with proceeds used to refinance existing debt and fund a distribution to shareholders.

It's a similar story in Europe. Last week, power equipment company Aggreko offered $2.265 billion of debt, with $503 million distributed to owners TDR Capital and I Squared Capital.

In January, Clarios International completed one of the largest-ever dividend recaps after paying out $4.5 billion raised through a combination of a dollar-denominated term loan, a euro term loan, and high-yield bond issuance. The deal reportedly allowed investors, including Brookfield Asset Management and Caisse de Depot et Placement du Quebec, to take out the equivalent of 1.5 times their equity investment.

A competitive lending environment has helped the trend, with lenders generally taking a favorable view of such financings and competing to put money to work. But, the high rate environment makes for more challenging math than when dividend recaps were last in vogue in 2021.

Limited partners have expressed mixed opinions.

Realizations are always welcome, especially when they've been so hard to come by. Even so, some LPs have pushed back against distributions that they feel are 'manufactured' by the sponsor and not necessarily reflective of real value creation (dumping dividend recaps into the same camp as options like NAV loans or secondaries). There's also been some concern over elevated leverage post-recap and what that means for an investment's risk profile through the remainder of the hold.

• Toyota Industries Corp., a manufacturer of forklifts, textile looms and automotive parts, plans to accept a $41 billion buyout offer from Akio Toyoda, the chairman of Toyota Motor Corp.

• Blackstone Infrastructure agreed to acquire TXNM Energy (NYSE: TXNM), New Mexico's largest utility, for $61.25 per share in cash, reflecting a total enterprise value of $11.5 billion.

• Cinven has hired Goldman Sachs and UBS to lead the sale of Ufinet Group, a Madrid-based telecom operator with fiber networks across Spain and Latin America, in a deal that could value the company at around €6 billion, per Bloomberg.

• Pfizer (NYSE: PFE) licensed rights to a bispecific drug candidate for treating colorectal, ovarian, and non-small cell lung cancers from 3SBio for $1.25 billion upfront plus potential milestone payments of up to $4.8 billion.

• Sanmina (Nasdaq: SANM) agreed to acquire ZT Systems' data center infrastructure manufacturing business from AMD (Nasdaq: AMD) for $3 billion.

• Five Point Infrastructure hired Piper Sandler to find a buyer for Northwind Midstream, a Permian Basin gas infrastructure operator that could fetch $2 billion, per Reuters.

• Apax Partners agreed to acquire Finastra's Treasury and Capital Markets division, a provider of risk management software for financial institutions, from Vista Equity Partners for around $2 billion.

• Blackstone has launched a sale process for Clarion Events, a global trade show organizer, which could be valued at around £2 billion, with interest from sponsors including CVC, KKR, PAI Partners, Ardian, and Hillhouse Investment, per Reuters.

• Authentic Brands Group agreed to acquire Dockers, a khaki apparel brand, from Levi Strauss & Co. (NYSE: LEVI) for $311 million.

• BioMarin Pharmaceutical (Nasdaq: BMRN) agreed to acquire Inozyme Pharma (Nasdaq: INZY), a developer of enzyme replacement therapies for rare genetic disorders, for $270 million in cash.

• Regeneron Pharmaceuticals (Nasdaq: REGN) agreed to acquire the assets of bankrupt genetic testing company 23andMe for $256 million, with commitments to maintain privacy policies for its database of over 15 million customers.

• Chobani, a yogurt maker backed by Healthcare of Ontario Pension Plan, acquired Daily Harvest, a plant-based meal kit company that had raised approximately $190 million from investors including Lightspeed, VMG Partners, and Serena Ventures.

• Warner Bros. Discovery (Nasdaq: WBD) is in advanced talks to acquire BT's (LSE: BT) 50 percent stake in TNT Sports UK, their joint sports broadcasting venture, per the Financial Times.

• Shermco Industries, an Irving, Texas-based portfolio company of Gryphon Investors, acquired R3L Engineering, a Parrish, Alabama-based electrical engineering firm.

• Ardurra Group, a Littlejohn & Co. portfolio company, acquired Cannon & Cannon, a Knoxville-based civil engineering firm specializing in utility infrastructure and transportation.

• Nearmap, a Thoma Bravo portfolio company, agreed to acquire ITEL Laboratories, a Jacksonville-based provider of data and analytics for property and casualty insurers, from GTCR.

• Chesnara (LSE: CSN) is weighing a bid for HSBC's (LSE: HSBA) UK life insurance unit in a deal that could value the business at several hundred million dollars, per Bloomberg.

• Boomi, owned by Francisco Partners and TPG, agreed to acquire Thru, a provider of enterprise-grade managed file transfer solutions.

• Tigertail Capital Partners invested in Blue Ridge Global.

• SEVA Growth invested in Teleskope, a Bethesda, Maryland-based provider of an employee experience platform.

• New Mountain Capital formed Smarter Technologies, a healthcare revenue management automation platform, through the merger of three portfolio companies: Access Healthcare, SmarterDx, and Thoughtful AI.

• Ares Management Corporation (NYSE: ARES) acquired a majority stake in Landscape Workshop, a Birmingham-based provider of grounds maintenance services for commercial properties across the Southeastern United States.

Tech, Vertical SaaS, & Misc. Enterprise

• PsiQuantum, a Palo Alto-based startup developing photonic quantum computing technology, raised $750 million in Series C funding led by BlackRock at a $6.75 billion valuation, with participation from Nvidia.

• Awardco, an employee rewards and recognition platform, raised $165 million in Series B funding co-led by Sixth Street Growth and Spectrum Equity, with participation from General Catalyst, at a valuation exceeding $1 billion.

• Ascendx Cloud, a London-based CRM software provider, raised $110 million in funding co-led by Osprey Investors and Columbia Lake Partners, comprising $60 million in equity and $50 million in debt financing.

• Miter, a San Francisco-based cloud platform for construction management, raised $23 million in Series B funding led by Bessemer Venture Partners and Coatue Management.

• Graphiant, a San Jose-based cloud networking solutions provider, raised $19 million in Series B extension funding co-led by Tali Ventures and Wa'ed Ventures, with participation from Sequoia Capital, Two Bear Capital, and IAG Capital Partners.

• TrustCloud, a security assurance platform for enterprise governance, risk, and compliance, raised $15 million in Series A funding led by ServiceNow Ventures, with participation from Cisco Investments, Presidio Ventures, OpenView Venture Partners, Tola Capital, and existing investors.

• BreachRx, a cybersecurity incident response platform, raised $15 million in Series A funding led by Ballistic Ventures, with participation from SYN Ventures, Overline, and Silver Buckshot Ventures.

• Mura, an AI platform for automating commercial field service payments, raised $6 million in seed funding co-led by Level One Fund and Lerer Hippeau.

• Theo Ai, a litigation prediction platform, raised $4.2 million in seed funding co-led by NextView Ventures and Collide Capital, with participation from nvp capital, Ripple Ventures, Beat Ventures, and Four Acres Capital.

Fintech

• Catena Labs, a developer of AI technology for financial institutions, raised $18 million in Series A funding led by Andreessen Horowitz's crypto arm, with participation from Breyer Capital, Circle Ventures, Coinbase Ventures, CoinFund, Pillar VC, and Stanford Engineering VF.

• Affiniti, an expense management platform for small businesses, raised $17 million in Series A funding led by SignalFire, with participation from Contrarian Thinking Capital, Sequel, Indicator Ventures, LightShed Ventures, and RiverPark Ventures.

• Thndr, a Cairo-based investment platform for the MENA region, raised $15.7 million in Series A funding led by Prosus Ventures, with participation from BECO Capital, JIMCO Capital, Endeavor Catalyst, The Raba Partnership, and Y Combinator.

Consumer & Media

• FanBasis, a platform for creators to build and monetize digital businesses, raised $20 million in Series A funding led by Left Lane Capital, with participation from Upside Ventures and Connexa Capital.

• Sylndr, an Egyptian marketplace for buying, selling, and financing used cars, raised $15.7 million in Series A funding led by Development Partners International Venture Capital via the Nclude Fund, with participation from Algebra Ventures, Nuwa Capital, Raed Ventures, Uncovered Fund, Beltone Venture Capital, and Camel Ventures.

• VUZ, a Dubai-based immersive media platform for 360-degree videos, raised $12 million in pre-Series C funding led by International Finance Corporation, with participation from Al Jazira Capital, CrossWork VC's Success Fund, and several Saudi family offices.

Healthcare

• CellCentric, a biotech developing an oral inhibitor for multiple myeloma treatment, raised $120 million in Series C funding co-led by RA Capital Management and Forbion, with participation from Avego Bioscience Capital and BrightEdge.

• Dazos, a Boca Raton-based CRM platform for behavioral health providers, raised $25 million in Series A funding led by Radian Capital.

• Kincell Bio, a cell therapy contract development and manufacturing organization, raised $22 million in Series A funding co-led by NewSpring Capital and Kineticos Life Sciences.

• Biostate AI, a company using AI to predict disease and drug responses from RNA sequencing data, raised $12 million in Series A funding led by Accel, with participation from Gaingels, Mana Ventures, InfoEdge Ventures, Matter Venture Partners, Vision Plus Capital, and Catapult Ventures.

• Hy2Care, a Dutch company developing hydrogel implants for cartilage repair, raised €4.5 million in Series A funding led by Brightlands Venture Partners, with participation from the European Innovation Council Fund and LIOF.

Industrials, Greentech, & Other

• The Nuclear Company, a nuclear power plant developer for fleet-scale reactor deployment, raised $51.3 million in Series A funding led by Eclipse Ventures, with participation from CIV, True Ventures, Wonder Ventures, Goldcrest Capital, and MCJ Collective.

• Wi-Charge, a Tel Aviv-based wireless power transmission company, raised $20 million in Series C funding led by Standard Investments, with participation from the European Innovation Council Fund.

• SparkCharge, a mobile EV charging network provider, raised $15.5 million in Series A-1 funding led by Monte's Fam, with participation from Cleveland Avenue, Collab Capital, Elemental Impact, MarcyPen, and Non Sibi Ventures.

• LIS Technologies, a laser uranium enrichment technology developer, raised $11.9 million in seed funding from 28 Ventures, with participation from an unnamed US-based nuclear technology company and other nuclear technology investors.

• Catalyxx, a Spanish biotech startup converting bioethanol into renewable chemicals and aviation fuels, raised €3 million in Series A funding led by Axon Partners Group, with participation from Aether Chemical Investments and the European Commission's EIC Accelerator.

• Eagle Merchant Partners, an Atlanta-based buyout firm, raised $415 million for its second fund.

• Factorial Funds, a Menlo Park-based venture firm, raised $200 million for its second institutional fund.

• Headline Asia raised $145 million for its fifth fund, targeting early-stage tech startups across Japan, Taiwan, and Southeast Asia.

• Lunar Ventures, a German VC firm, raised €50 million for its second pre-seed fund focused on DeepTech startups.

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