Today, we open with an add-on acquisition in the trust and company service provider (TCSP) industry as Hg-and EQT-backed Quantios has acquired an AI-powered legal entity management tool Klea. The evolving regulatory landscape, market demand and recurring revenue models are among the factors making the sector appealing to private equity.

Private equity is at the forefront of the trend towards clean renewable energy, driven by its potential to fight climate change and reach global net zero goals. This morning, we focus on PE investments in solar energy, with the help of a listicle that includes insights from Reach Capital’s William Barrett.

To finish, we shift to the medical communications sector, where Baird’s Tom Cowap explains why PE is drawn to the industry, which he refers to as a “defensive and robust end market.” He also touches on the headwinds in the broader pharma services sector.

Digitizing TCSP

Quantios, a portfolio company of Hg and EQT, has completed the acquisition of Klea, an AI-powered legal entity management tool.

Brussels-based Klea has built a platform to effectively manage recurring corporate statutory events for a global customer base. It has legal expertise in over 100 countries.

The corporate legal teams and multi-client service providers will now have access to automated workflow products by combining Klea’s AI-enabled legal entity management tool with Quantios software, according to a release.

“The combination of Klea and Quantios affirms our commitment to digitizing the TCSP industry by accelerating our ability to automate core corporate service processes,” said Guy Harrison, CEO of Quantios, in a statement. The Klea team “have built a best-in-class solution that will increase efficiencies for our customers and corporate legal teams worldwide.”

Hg invested in Quantios in 2022. EQT’s investment in Quantios was made via its Private Capital Asia Mid-Market Growth Fund.

Quantios is a global SaaS provider to the wealth, trust and corporate services industry.

Grid connections

Sustainable investments have caught attention in the private equity world in 2024, with a focus on renewable energy – in particular, solar energy, PE Hub’s Sophie Rose writes. That is despite geopolitical tensions and supply chain constraints challenging the sector.

“Solar energy remains the cheapest form of renewable power and is less challenging to deploy compared to other sources,” William Barrett, co-founder and managing partner at independent fundraising and strategic advisory firm Reach Capital, told PE Hub. “Its implementation is generally more accepted by local communities, making it easier to secure permits and grid connections. However, 90 percent of solar panels in the EU are still imported, primarily from China, which subjects the industry to ongoing geopolitical tensions and supply chain constraints.”

Barrett noted that Western countries’ reliance on Chinese module production poses a “significant risk to the growth of the solar sector,” a concern even highlighted in this week’s US vice-presidential election debate.

But the European energy storage market is projected to grow sevenfold by 2030, creating a cumulative investment opportunity of over €70 billion by 2050, he noted.

Below is one of the six recent investments that show PE’s warm feelings for solar energy and other related services.

— GEF Capital-backed Civic Renewables buys Florida Power Management

In September, Civic Renewables, which is backed by GEF Capital, acquired Florida Power Management, a Florida-based solar company.

Civic Renewables is a residential solar installer which operates via subsidiaries Ipsun Solar, Green Rack and Florida Power Management.

Read the full story here to find out the other deals we covered in the sector.

Buy a starting platform

The medical communications sector is a defensive and robust end market, Tom Cowap, managing director at Baird global healthcare investment banking, told PE Hub. “The end user is usually big pharma and biotech, which is historically non-cyclical and always requires support from providers.”

Private equity does not align with the biotech market in the same way VC does, as PE typically focuses on cash generating and relatively low risk businesses. In contrast, the biotech market is characterized by binary outcomes, cash burn and high risk, Cowap said. “The pharma services market, however, is a derivative of that, so it allows you to access that spend without taking the same risk.”

PE has long been interested in pharma services, with medical communications being particularly accessible.

While pharma services include complicated business models like discovery CROs, contract manufacturers and clinical trial companies, medical communications stand out for their “simplicity.” “If you’ve invested in any consulting or white-collar service company, the business model is much easier to understand,” he said, adding that it makes for an attractive way for PE to tap into the big pharma and biotech market.

The sector has also been a fast-growing area that is ripe for consolidation, he said. “PE has viewed it as an opportunity to buy a starting platform and then use it to consolidate a chain of providers.”

The latest transaction in the medical comms sector sees NorthEdge selling healthcare business Helios Global Group to Telemos Capital.

But the broader pharma services sector is facing some headwinds. “We’re going through a period now where biotech has been lowering their spending or spending more cautiously on the back of a period of more difficult fundraising and higher interest rates.”

Big pharma is also facing challenges, he noted, including price reduction measures in the US Inflation Reduction Act hitting revenues. Additionally, the big names are experiencing patent cliffs and challenges around innovation and weakening pipelines.

Previously, while big pharma was cutting costs, biotech was growing, providing a safe option, he said. Now both sectors are cautious on spending.

“Secondly, if you had big pharma as a client base, you were relatively safe,” he said. “They wouldn’t make radical cuts to spending, although you might get the ad hoc shift to insourcing.”

In recent years, several big pharma companies have made more radical changes to spending and procurement, making it essential to partner with the right companies, said Cowap. “People are now looking at which big pharma you are working with,” he added. “Are you working with that pharma that has strong pipelines and outlooks? Or is your client base some of those big pharma firms that are starting to face headwinds of their own, such as big drugs coming up for genericization.”

If so, these companies are less growth focused now and more focused on cost cutting, which has impacted some of the medical communications companies, he said.

Here are some recent deals we’ve reported in the pharma services sector:

— RF Investment Partners has invested in two pharmaceutical and veterinary care companies

— Bain Capital Life Sciences has invested in Serán Bioscience, a development, analytical and manufacturing service provider to pharma and biotechnology companies.

— Aksìa sells Content Group, a pharmaceutical contract development and manufacturing organization

— Partners Group to acquire an antibody discovery contract research organization