Private equity courts OpenAI and Anthropic

One scoop to start: LVMH-backed private equity firm L Catterton is launching a $500mn fund with athletes including basketball star Kevin Durant, baseball slugger Mike Trout and golfer Patrick Cantlay, targeting investments in consumer companies.

Another thing: A consortium led by CVC and Prudential Financial is in pole position to take a £1bn-plus stake in Standard Life’s pension-risk transfer business, as investors chase opportunities to back UK retirement plans.

In today’s newsletter:

Can AI help private equity be more ruthless?

There’s a story people used to tell about private equity: firms come in, rip companies down to the studs, boost short-term profits, dividend out cash, and create massive windfalls for investors. 

That portrayal became outdated as private equity pivoted to more growth-oriented investment strategies in recent years. 

But the rise of AI has handed an industry synonymous with wielding a heavy scalpel what is arguably the most powerful tool yet to reshape corporate inner workings.

It arrived at an opportune time. Private equity performance overall has been bleak amid falling returns and struggles to exit investments. Perhaps firms once reluctant to admit that margins and cash flows can be dramatically boosted by cost cuts might more readily acknowledge this now.

The FT scooped on Wednesday that OpenAI is in talks to put up to $1.5bn into a joint venture with private equity firms including TPG, Bain Capital, Advent International, Brookfield and Goanna Capital, which will invest another $4bn.

The venture, aptly called DeployCo internally, is charged with getting businesses to adopt OpenAI’s tools in a bid to accelerate growth and juice margins. 

DeployCo’s clients will primarily be the portfolio companies of the venture’s private equity investors, and will pay the enterprise to embed AI into their businesses. 

The venture is hiring dozens of “forward-deployed engineers” who, armed with OpenAI’s technology, will be sent to portfolio companies and tasked with boosting the businesses.

The venture is a key part of OpenAI’s strategy to gain the upper hand on rival Anthropic. The rival start-up’s annualised revenue has more than trebled this year on the strength of its enterprise products such as Claude Code.

Anthropic is looking to partner with private equity too. The company is in talks with firms including Blackstone, Hellman & Friedman and General Atlantic about a joint venture to help deploy AI technologies inside a broad array of businesses, people briefed on the matter told the FT.

AI promises to automate work such as customer service, coding, data entry and rote legal, marketing and financial analysis tasks, something experts warn could cause mass white-collar job losses. That could be a panacea for an industry facing unforeseen risks. 

The PE industry is wildly overexposed to software companies and many “asset light” professional services firms that now face obsolescence risks in the face of new AI tools. Nearly half of industry-wide assets by some accounts are in these sectors, according to industry insiders. 

While private equity’s bear case involves AI disruption, large gains are also in the cards.

Firms known for their creativity and aggressiveness may be able to harness AI to unleash a wave of cost cuts, akin to the industry’s earlier eras like the 1980s, when pawning off corporate-owned country clubs and armadas of private jets were obvious ways to engineer profits.

Rarefied heir: the new Peltz on Wall Street

Following in a parent’s footsteps on Wall Street is a centuries-old tradition, as is wanting to prove yourself by striking out on your own.

The latest arrival to that hallowed ritual is Matt Peltz: the son of the hard-charging activist investor Nelson Peltz.

The Florida-based investor quietly founded his own hedge fund last year, called Lost Coast Collective, after working at his dad’s firm Trian for nearly two decades.

He started at Trian during the throes of the financial crisis, following a stint at Goldman Sachs. The FT has scooped his first activist position to go public, with a roughly 1 per cent stake in Intertek.

The FTSE 100 company has received plenty of attention recently. It has been both the target of a potential £9.7bn takeover by private equity group EQT, and is also separately considering a break-up.

The stake, which was made public in a regulatory filing this week, is worth roughly £88mn. Peltz had met with management and pushed for a potential break-up long before the company announced its own strategic review, according to people familiar with the matter.

The older Peltz, of course, has an aggressive reputation on Wall Street for waging full-bore proxy fights and not shying away from some of corporate America’s biggest names.

Over the course of two decades, he has taken on companies including Procter & Gamble, DuPont and Walt Disney. Most recently, he quietly agitated for a break-up of Unilever.

The Peltz family have offered many great newspaper plot lines in recent years: from the high-profile Disney proxy fight to his daughter Nicola Peltz’s marriage with Brooklyn Beckham, the obsession of tabloids.

Now, Intertek, a fairly obscure UK industrial company, has put the spotlight on another Peltz.

London law firms bet big on China 

In the face of Donald Trump’s beef with Xi Jinping and an exodus of American law firms from China, UK outfits are taking a different approach.

London firms have doubled down on the mainland over the past year, entering into partnerships with local Chinese law firms, in a sign that some of Britain’s elite players think there is more business to be had.

But operating in the mainland comes with a long list of caveats, many of which you won’t find written down.

The partition of foreign and domestic office space, and what information can be put on business cards, are just some of a long list of things international firms must be alert to if they want to operate under the watchful eye of Beijing.

And while four UK firms — Freshfields, Clifford Chance, Norton Rose Fulbright and Pinsent Masons — received approval to enter into partnerships with local outfits in the past year, it followed a period in which applications had been put on hold without explanation, according to Mark Evans, president of the Law Society of England and Wales.

“The business environment [in China] has not substantially improved for UK law firms over the past decade,” said Evans. However, he pointed to a “measured sense of optimism” that the UK government’s political efforts could reduce barriers. 

Given the added pressure of doing work in a lower-fee environment, UK firms will be hoping the bet pays off. 

Job moves

• KeyCorp has agreed to acquire investment banking advisory firm Clearwater UK, signalling Key’s entry into the western European market.

• Lululemon has named Heidi O’Neill as chief executive, beginning in September. She was previously president of consumer, product and brand at Nike. 

• Best Buy has named Jason Bonfig as chief executive to replace Corie Barry who will step down in October. Bonfig is currently chief customer, product and fulfilment officer.

• Former Starbucks CEO Howard Schultz has joined the board of rapid delivery start-up Gopuff.

• Simpson Thacher has hired Katie Taylor as a finance partner in San Francisco. She joins from Kirkland & Ellis.

Smart reads

Fallen off Nestlé paved the way for western multinationals in China, but in recent years the Nespresso maker has been floundering in the country, the FT reports. Distributors say the company has stuffed them with inventory they can’t sell.

Trading up Few predicted the astonishing growth of high-frequency trading. FT Alphaville digs into why the industry has crushed expectations, including the uncomfortable truth that markets increasingly resemble a casino.

Insured profits A few years ago US lawmakers cracked down on a healthcare practice that left patients with enormous surprise medical bills. But some doctors have found a way to use the new law to capture windfalls from insurance companies, The New York Times reports.

News round-up

Switzerland hits UBS with proposed $20bn capital increase (FT)

US may extend $500mn in rescue funding to Spirit Airlines (FT)

EQT warns AI fears will stall sales of private equity software stakes (FT)

Builder.ai founder Sachin Dev Duggal accused of receiving siphoned funds (FT)

Crypto billionaire Justin Sun sues Trump family’s World Liberty Financial (FT)

UK dilutes post-crisis ‘fit and proper’ rules for financial services staff (FT)

Ex-RBS banker sentenced over bribery linked to GRG scandal (FT)