(Bloomberg) -- When Brookfield Asset Management Inc. announced the sale of Westinghouse Electric Co. for about six times its invested capital, it was a much-needed win for the world’s second-biggest alternative-asset manager. 

Until that point, some investors had grown impatient with Brookfield’s publicly traded buyout arm, as questions mounted about how much time it was taking to sell portfolio companies and free up capital for new investments.

That’s happening now, private equity chief Cyrus Madon told investors in September, noting that the firm planned to proceed with the long-anticipated sale. The $8 billion deal was formalized weeks later, when Brookfield said one of its own affiliates, Brookfield Renewable Partners LP, and uranium miner Cameco Corp., were acquiring the nuclear power services provider.

“Westinghouse is really just a precursor of what’s to come,” Madon said.

But building on that success might prove challenging. Dealmaking has slowed as central banks hike interest rates to tackle runaway inflation, exacerbated by the war in Ukraine and other geopolitical tensions. Private equity firms, meanwhile, are seeking alternatives to unloading assets in the open market, where pricing power has shifted to buyers.

Read more: Blackstone’s Profit Falters as Rising Rates Chill Dealmaking

The Westinghouse sale by Brookfield’s buyout arm, Brookfield Business Partners, may not have been possible at that valuation without help from its corporate parent, which was on both ends of the transaction. 

“The sale of Westinghouse does not prove the company’s ability to monetize large assets at attractive valuations, particularly in the current environment, because it was sold in large part to a related party,” said Dimitry Khmelnitsky, an analyst with Veritas Investment Research. “I am not convinced Brookfield Business Partners would have received the same price and generated such an attractive return if the deal was done between truly independent third parties.” 

Still, in a statement announcing the transaction, Brookfield Business Partners said that an independent valuator and financial adviser determined that the $1.8 billion it received for its 44% stake in Westinghouse was fair.

Moving an asset from from one fund to another is controversial among investors because it allows the fund manager -- in this case, the corporate parent -- to record carried interest on an asset without actually selling it. Brookfield is the largest investor in its private funds, including those of its buyout arm, which it says guarantees that the firm’s interests are aligned with those of external investors.

Revived Plans

Brookfield’s roots date to the late 19th century. It started as a Brazilian utility company that was later acquired by an entity that managed the wealth of Canada’s Bronfman family. 

Bruce Flatt became chief executive officer in 2002, when the firm was known as Brascan, and renamed it Brookfield Asset Management three years later. He turned it into a sprawling asset manager that, as of midyear, oversaw $750 billion of investments through its real estate, infrastructure, renewables, private equity, reinsurance and credit businesses. 

The firm remains best known as an investor in real assets, making it harder for Madon’s private equity business to stand out. His unit, which launched its first fund in 2001 and was spun off from its parent in 2016, is still considered to be a relative newcomer compared with other Brookfield businesses.

It’s a pivotal moment for the $110 billion buyout arm, which has invested or committed almost $15 billion in about a dozen companies since the beginning of 2021. Brookfield is targeting $12.5 billion for its sixth buyout fund in one of the toughest environments since the 2008 financial crisis. 

While Brookfield Business Partners generated $1.8 billion from the sale of public equities over the past three years, it continued holding portfolio companies that it had targeted for sale, missing out on frothier valuations last year. 

The buyout arm is now looking to revive some of those exit plans, including the potential sale of UK-based biofuel provider Greenergy, as well as positioning car battery-maker Clarios for a possible public listing that it shelved last year. 

In total, the private equity funds have sold nine investments since 2016, excluding Westinghouse, with an average hold period of six to seven years. 

Read more: Brookfield Is Said to Revive Sale of Biofuel Supplier Greenergy

Madon, 56, was reluctant to fully part with Westinghouse, which Brookfield successfully turned around after acquiring it out of bankruptcy in 2018. In the four years since, it increased earnings before interest, taxes, depreciation and amortization by more than 60%, according to a September investor presentation. 

Still, Westinghouse was saddled with billions of dollars of debt, making it harder for Brookfield to extract maximum value from its investment, especially at a time when interest rates are surging.

In the first half of 2021, Madon floated the idea of selling a minority stake in Westinghouse, but later told analysts that Brookfield wasn’t happy with the level of interest. Then market conditions deteriorated this year, torpedoing a potential initial public offering. 

Meanwhile, some investors who were weighing whether to put money into Brookfield’s sixth private equity fund were waiting to see earlier funds sell investments and return cash. The firm had its first close of the new buyout pool at $8.4 billion, with most of the outside capital coming from investors in existing Brookfield funds.  

Even though a transaction involving two Brookfield subsidiaries “will likely raise some eyebrows,” the Westinghouse price was fair and reviewed by independent directors and outside valuators, Bank of Nova Scotia analyst Robert Hope said in a note to clients. 

The deal, which is expected to be completed in the second half of next year, will leave majority control of Westinghouse under the Brookfield umbrella, which avoids triggering a change in control and forcing an accelerated debt repayment. 

Nuclear power is re-emerging as a critical tool in the fight against climate change -- particularly after the war in Ukraine revealed Europe’s dependence on Russian natural gas. Westinghouse is a good fit for Brookfield’s renewables business, Hope said.

The process “was run completely with a Chinese wall,” Brookfield Renewable CEO Connor Teskey said in an interview at the time the deal was announced, noting that a third-party investor, Cameco, did its own due diligence. “Our combined bid was deemed to be the most attractive by the sellers.”

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