By Jian Wee Soh, Bharath Sivakumar, Aaren Tan, Arfred Garcia and Yagnesh Patel (Imperial College London), Carlo Leopardi, Tommaso Arona, Edoardo Tosti di Valminuta, Alina Shaikh and Alexander Svanidze (Boston University)
Photo: Ricardo Gomez Angel (Unsplash)
Overview of the deal
Acquirer: General Atlantic
Target: Actis
Implied Equity Value: Not disclosed
Total Transaction Size: Not disclosed
Closed date: 16th January 2024
Target advisor: Goldman Sachs, Campbell Lutyens (financial), Kirkland & Ellis (legal)
Acquirer advisor: Morgan Stanley & Co, JP Morgan Securities, (financial), Paul, Weiss, Rifkind, Wharton & Garrison and Ashurst (legal)
On January 16th 2024, General Atlantic announced the acquisition of Actis, a global investor primarily focused on investments in sustainable infrastructure. Post transaction, a new global investment platform is to be created by both firms - representing around $96 billion in combined assets under management. The close of the deal is expected to be in Q2 2024, with the financial terms not disclosed as of yet.
The strategic rationale behind the deal outlined in General Atlantic’s statement is five-fold, with the primary reason being that of diversifying the investment platforms of both firms, in a way which is scalable and brings a broader set of investment solutions for both firms, in terms of both sustainability and global footprint, to their respective clients. This move also reinforces General Atlantic’s recent commitments to dedicate large sums of their portfolio to sustainability and net zero causes, having established their inaugural climate investment firm, BeyondNetZero, in 2021.
"Addressing the global paradigm shift toward sustainability requires an economic transformation and a capital investment on a massive scale. With the addition of Actis, we are taking a significant step forward to add a sustainable investment capability which positions General Atlantic to capture this opportunity set for our investors" - Bill Ford, Chairman and Chief Executive Officer (General Atlantic)
Company Details (Acquirer - General Atlantic)
General Atlantic is a prominent global growth equity firm which pioneered the concept of growth equity, focusing on investing in and building leading growth companies over its more than 40-year history. Historically, General Atlantic has focused on investments in computer software, oil and gas exploration, real estate, and retailing. The firm has recently expanded its presence overseas, opening offices in Europe and Asia, and currently boasts a global footprint with 14 offices worldwide.
Founded in 1980, headquartered in New York, United States
CEO: William E. Ford
Number of employees: 588
AUM: $83bn (as of 21/2/24)
Recent Transactions: $355m investment in Butternut Box (Oct 2023), $870m investment in Jio Platforms (May 2020), $415m investment in Royalty Pharma (Feb 2020)
Company Details (Target - Actis)
Actis is a premier global investment firm based in the United Kingdom with a focused expertise in the realms of private equity, energy, infrastructure, and real estate. Actis focuses on emerging markets, delivering measurable positive impact in the regions they operate in: Africa, China, India, Latin America, Southeast Asia, the Middle East, and Eastern Europe. Renowned for its strong commitment to sustainable investment practices, Actis integrates ESG criteria and focuses on impact investing, particularly in the renewable energy sector.
Founded in 2004, headquartered in London, United Kingdom
Senior Partner and Chairman: Torbjorn Caesar
Number of employees: 350
Projections and Assumptions
Short-term consequences
General Atlantic’s acquisition of Actis will create a diversified, global platform with around $96 billion in combined assets under management (AUM) across sustainable infrastructure, real estate, growth equity and credit. Actis itself has $12.5 billion AUM specialising in energy and digital transition, and supply chain transformation. The acquisition complements General Atlantic’s climate platform, BeyondNetZero, and seeks to capitalise on growth in the sustainability sector. Actis will become the sustainable infrastructure arm within General Atlantic..
Actis will continue to be led by its Chairman and Senior Partner, Torbjorn Caesar, retaining independence over investment decisions under the Actis brand. The acquisition is expected to be financially accretive as it strengthens General Atlantic’s sustainable investment capability with Actis, via its local teams across the globe. Following the acquisition, Actis will continue to grow its real estate assets across Asia such as data centres and logistics, realising their synergies in infrastructure and real estate while increasing General Atlantic’s footprint across different asset classes in the region.
Long-term Upsides
The acquisition offers multiple strategic advantages in the long-term to General Atlantic. Actis’s role as the specialised sustainable infrastructure investment arm will allow General Atlantic to compete in a growing market that, in the last period, has attracted many other asset managers like Blackrock, Blackstone and KKR. The intervention in this new market will also diversify General Atlantic’s positions, developing a wider choice of investment products to be offered through a global platform with deeper expertise. In addition, the decision to keep Actis’ management team intact as its leaders will guarantee consistency within the firm, as already proven by the BeyondNetZero and Atlantic Park funds, created in 2021 and 2023 respectively.
General Atlantic, which in the latest years has already focused its strategy on sustainability, is going to boost its effort in ESG investing with Actis, becoming one of the major players inside a new sector that has proven to generate higher returns in recent years. This market has in fact shown several advantages including inflation protection, revenue diversification and a constant cash flow. Infrastructures for energy transitions, for instance, will generate over $150 trillion in investments alone by 2050, according to Blackrock. In addition, many of these investments will take place in emerging markets, which could offer outsized growth potentials at discounted valuations.
Risks and Uncertainties
Alignment of Investment Philosophies/ Unrealized Synergies - General Atlantic focuses on growth equity, investing in companies with strong business models poised for scaling. In contrast, Actis often invests in infrastructure development in riskier environments. The acquisition merges these distinct philosophies, potentially leading to conflicts due to differences in risk tolerance, sector focus, and geographical positioning. Michael Harrington, CIO of Actis, negates this claim, stating “we are excited to team up with a firm that shares our investment ethos and approach. This partnership has the potential to enhance our offering through our combined expertise, networks, and geographical scope.”
Navigating The Shift Towards Sustainability - Uncertainty is present in sustainable infrastructure due to rapidly increasing regulation. This can negatively impact the companies that Actis is invested in due to an increase in compliance costs. This acquisition is also occurring amidst a boom of infrastructure demand. The long term implications of this acquisition are driven to uncertainty as, over time, profitability can fall with demand.
Clash in Recruitment and Development Culture- The corporate cultures of General Atlantic and Actis might clash due to their different approaches in employee expectations, career progression, and the balance between collaboration and individual achievement. Because Actis will continue operating independently, this can create disagreement between the two companies as employees interact with each other while operating separately.