News & Analysis

Morgan Stanley leads on consumer-focused Swander Pace deal

Rabo Investments also invested in the deal centred on vitamin, mineral and supplement soft gel manufacturer Captek Softgel International.

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Morgan Stanley is backing a continuation fund deal centred on the consumer sector at a tricky time for the market.

San Francisco-headquartered Swander Pace Capital has rolled vitamin, mineral and supplement soft gel manufacturer Captek Softgel International out of its Fund V and Fund VI and into a continuation fund led by the asset manager, according to a statement.

Lazard advised on the deal, the size of which was not disclosed. The deal puts Captek’s enterprise value at $417 million, according to a spokesperson for Swander Pace.

The GP and some existing investors in both funds rolled into the new vehicle, with Rabo Investments, the captive investment arm of Rabobank, also participating as a new investor.

Swander Pace acquired Captek in 2015 and added on health and wellness supplement manufacturer J+D Labs in 2017. The continuation fund includes add-on capital for new investments.

Inflation, rising interest rates and supply chain pressures have hurt the consumer sector in 2022, with the S&P 500 Consumer Discretionary Index down 15.5 percent year-to-date. The volume of PE-backed M&A in the sector was down 50 percent year-on-year to $11.83 billion in the first half of 2022, according to S&P Global.

Morgan Stanley has raised $2.2 billion for Ashbridge Transformational Secondaries Fund II out of a $3 billion target to invest in “growth-oriented” mid-market single-asset deals, Secondaries Investor reported in May.

It sees a particular opportunity in companies that have grown through making add-on acquisitions and need more capital to continue with the strategy, head of secondaries Nash Waterman told Secondaries Investor in February 2021.

First-half secondaries transaction volume saw a year-on-year increase of approximately 11 percent, standing at $53 billion, according to estimates from Evercore. GP liquidity solutions made up 51 percent of market share – a meaningful contraction compared with the first six months of 2021, when volume was around 60 percent.

Single-asset GP liquidity solutions captured 25 percent of market share in the first half of 2022.