• Short Squeez
  • Posts
  • 🍋 Private Equity’s Dry Powder Threat to IBs

🍋 Private Equity’s Dry Powder Threat to IBs

Investment banks are starting to feel the heat from their long-standing allies and clients. Not only are private equity firms competing with investment banks on some of the largest credit deals - but they’re outpacing the banks, too. 

Together With

"If you want to help somebody, just lend them a little bit of money. If you want to ruin somebody's life, lend them a lot of money." — Michael Lewis

Good Morning! Crypto bank Silvergate said it’s shutting down yesterday but will still repay deposits. The private sector added 242k jobs in January, more than what economists expected. EY paused the spin-off of its consulting arm, payrolls jumped in February, and Jerome Powell testified to Congress - but rate hikes still seem up in the air.

President Joe Biden is proposing a series of new tax increases on billionaires, which includes a 25% minimum tax on the richest 0.01% of Americans.

If you are looking for business podcasts, check out My First Million by Shaan Puri and Sam Parr. They dive deep into different business opportunities and explain how to pounce on them. Start listening today.

1. Story of the Day: Private Equity’s Dry Powder Threat to IBs

Investment banks are starting to feel the heat from their long-standing allies and clients - private equity firms.

Not only are private equity firms competing with investment banks on some of the largest credit deals - but they’re outpacing the banks, too.

Private equity firms traditionally buy up companies through leveraged buyouts - but now they’re providing financing for their peers to do the same. These firms are sitting on a record amount of dry powder to begin 2023, and they’re not afraid to get aggressive on private credit deals.

For example, Carlyle is acquiring a 50% stake in Cotiviti, a healthcare analytics company, and is seeking a $5.5 billion loan. Private equity firms including Apollo, Ares, and Blackstone, are edging out the traditional giants of lending like Goldman Sachs and JPMorgan Chase and are on the verge of writing the largest direct loan on record.

Private equity firms started building up their credit capabilities in the aftermath of the global financial crisis when stricter rules made it harder for investment banks to fund risky takeovers. Private equity firms have funded deals that would be considered too risky by mainstream banks for a minute.

But now they're competing for some of the biggest deals in credit history. Investment banks are struggling to sell off the massive debt they accumulated from funding high-profile deals like the Twitter takeover. And private equity firms are eager to fill the void.

2. Markets Rundown

Stocks closed higher after Powell’s testimony on Wednesday.

Movers & Shakers

  • (+) Diversey ($DSEY) +37% because the cleaning company will be acquired by Solenis.

  • (+) WeWork ($WE) +4% because the company is reportedly in talks with investors to restructure debt.

  • (–) United Natural Foods ($UNFI) -28% after the organic food company cut its full-year earnings guidance.

Private Dealmaking

  • Solenis, a chemicals company, will buy Diversey, the maker of Dove and Lysol, for $4.6 billion 

  • Ares Management invested $375 million in WHP Global, a retail brand management firm

  • Arko, a convenience store operator, acquired Transit Energy Group for $370 million

  • Consensus, an automation platform for enterprise software, raised $110 million 

  • Bicara Therapeutics, a cancer treatment startup, raised $108 million

  • Threecolts, a cloud software provider, raised $90 million

A Message from My First Million: The Best Business Podcast

My First Million is one of the top-ranked business podcasts in the world hosted by Sam Parr (Founder of The Hustle) & Shaan Puri (Founder of Milk Road).

Every week they dive deep into different business opportunities and explain how to pounce on them.

Basically, they spoon-feed you interesting businesses based on trends & opportunities they see in the market, interview business builders who are creating big, meaningful companies, and do business breakdowns on different companies.

And hey, maybe it'll help you get your first million users, revenue, profit, employees (that'd be wild), or whatever it is you want a million of.

3. Top Reads

  • Hedge funds up leverage, but fear directional bets with blurred macro picture (Reuters)

  • There’s a silver lining for mortgage companies in a bleak market (WSJ)

  • Crypto fraud victim’s case against Coinbase faces tough odds (YF)

  • You can’t fire them, they quit (Fox)

  • Study finds news coverage a better predictor of markets than ESG (Fox)

  • Appeals court could upend the leveraged loans market (Axios)

  • Which American city has the best and worst tippers? (CNBC)

  • Amazon’s belt-tightening affects town across the U.S. (WP)

  • Adani pays $500 million bridge loan to restore investor faith (BB)

  • No exit ramp for Powell until he creates a recession (CNBC)

4. Book of the Day: Games of Greed

Read a Book in a Day - Don't think it's possible? With Shortform it is. Their super-detailed book guides give you the world's best ideas without all the fluff. And they don't cut corners, either. Shortform's guides to popular nonfiction books and articles include comprehensive coverage, analysis, and even interactive exercises. With a library of 1000+ books in categories like finance, careers, and personal development, you'll have the tools to excel in 2023. Start learning faster with a free trial and $42 off the annual subscription - that's almost 3 months free!

Fear and greed are among the strongest motivators. They influence all our decisions.

Every day, we see the lives of the fabulous and famous in the press, on TV, and on social media, and we envy them for their luxurious lifestyle. We want it all too!

Games of Greed reveals how some of these people let greed get the better of them.

This book connects the dots between the Panama Papers, Bernie Madoff, famous rough traders, and con artists like Nick Leeson, Jérôme Kerviel, Billy McFarland, and Jordan Belfort, the real Wolf of Wall Street.

It reveals the excesses of Main Street and Wall Street and Silicon Valley, and even loafing Las Vegas—art heists, stock markets, bitcoins, and festival fraud.

In this insightful book, Torsten Dennin demonstrates the pitfalls of greed through many examples of people who, like Icarus, flew too high and fell with catastrophic consequences.

In the current day and age of increasing financial tensions and fewer planetary resources, his analysis of greed is both relevant and timely.

“Three great forces rule the world: stupidity, fear and greed.”

5. Short Squeez Picks

6. Daily Visual: Change in the Share of US Workers who are Women

Source: Axios

7. Daily Acumen

“Business is about who has the best story.

Solutions, right answers, great ideas — they’re a snoozefest.

The person who wins in business has the best story.

The story is what makes a manager hire you.

The story is what makes a startup successful.

The story is why customers buy products.

Get great at telling stories.”

Source: Tim Denning

8. Job Board

9. Memes of the Day




Want more Short Squeez?

Become an Insider. You'll get access to:

  1. Industry deep-dives & compelling investment ideas

  2. Wall Street Insider interviews breaking down their investment portfolio, strategy & investment picks

  3. Knowledge Drop - an exclusive alpha-generating newsletter covering the best weekly research & content (podcasts, articles, blogs)

  4. Vault – a collection of investing & recruiting guides, modeling courses, salary / comp data, institutional research (40+ resources added / month)

See you on the Inside.


What'd you think of today's email?

Login or Subscribe to participate in polls.

Join the conversation

or to participate.