Private equity firms must conduct digital transformations at their portfolio companies, not just cut costs and improve operations, finds Boston Consulting Group in a new report, titled Private Equity Is Hot but Not Overheating. Most PE firms haven’t gone far enough in changing their internal operations to accommodate their robust growth over the last decade. Top-performing PE firms are supplementing the traditional formula by bringing in digital expertise for their companies to help develop new products and services, meet customer needs better and generate top-line growth. “Many of the owners at target companies understand the need for digital transformations in their businesses, but they lack the relevant expertise, time and capital to launch a transformation,” the report says. Private equity firms that can offer a digital value proposition—such as helping digitize supply chains or improve go-to-market processes—will be more more attractive buyers and more successful in unlocking new value. The report also recommends that PE firms develop a talent strategy defining essential in-house skills and skills that are best outsourced, such as data scientists, macroeconomists and consumer insight specialists. PE firms have been reluctant to outsource, the report states, but “as value creation becomes more difficult, cutting-edge specialization becomes more important, and few firms will be able to retain in-house staff to cover the full breadth and depth of topics required to succeed.”
NewSpring Health Capital, NewSpring’s healthcare fund, has co-led an investment in Vybe Urgent Care along with the Philadelphia College of Osteopathic Medicine. Vybe is using the investment to exapand its locations and services. Based in Philadelphia, Vybe operates four local centers that provide treatment for a broad range of illnesses and injuries. “In today’s market, urgent care is a more cost-effective and timely setting to provide care to patients versus the emergency room,” says NewSpring partner Kapila Ratnam. “As patient care continues to evolve, urgent care is becoming a larger part of the healthcare delivery system,” adds PCOM CEO Jay Feldstein.
Aveanna Healthcare has agreed to buy Premier Healthcare Services. Financial terms were not disclosed. Aveanna is backed by Bain Capital and J.H. Whitney. Based in Pasadena, California, Premier provides pediatric services to patients in California, Colorado and Texas. “The home healthcare market provides a vital service to our nation as it strives to help the over 10 million children with special health needs, says J.H. Whitney senior managing director Bob Williams. Edge Healthcare Partners and Greenberg Traurig are advising Aveanna. Dechert is representing J.H. Whitney. Kirkland & Ellis is representing Bain. Lincoln International and Proskauer Rose are advising Premier.
Huron Capital has invested in Indianapolis-based Direct Connect Logistix to form a new logistics platform. Direct Connect works with a network of carriers to offer truckload, partial truckload, expedited freight, small parcel, and air freight brokerage services to customers primarily in industries including food and beverage and consumer packaged goods. Michigan’s most active private equity firm and winner of Mergers & Acquisitions’ M&A Mid-Market Award for 2017 Seller of the Year, Huron recently raised the $141 million Huron Flex Equity Fund for making non-control investments. Read our Q&A with managing partner Brian Demkowicz.
Twin Brook Capital Partners grew significantly 2017, including doubling deal value from the previous year, raising a second fund of $2.3 billion, and building the three-year-old firm into a major source of loans in the lower middle market, earning the firm Mergers & Acquisitions’ M&A Mid-Market Award for 2017 Lender of the Year. The Chicago firm is the middle-market direct lending subsidiary of Angelo, Gordon & Co., a $28 billion alternative investment firm focused on credit and real estate investing. Twin Brook was founded in 2014 by seasoned middle-market lenders Trevor Clark and Christopher Williams, who had previously co-founded Madison Capital Funding. Twin Brook announced recently that Williams has stepped back from his role to attend to a health issue with an immediate family member. Read our Q&A with Clark about the firm’s growth and its future.
Gannett Co. (NYSE: GCI) has agreed to acquire digital market company WordStream Inc. for up to $150 million. The purchase price consists of an upfront payment of $130 million in cash and up to another $20 million that is based on the target achieving certain revenue goals. WordStream helps thousands of businesses to harness the power of Google, Facebook and Bing by leveraging its discovery and recommendation technologies, intelligent campaign optimization, and online training programs in its cloud-based SaaS services. “This acquisition marks another critical milestone in Gannett’s digital transformation, enhancing our ability to support businesses and agencies in our local markets with the intelligent, data-driven marketing solutions they need to drive growth,” says Gannett CEO Robert Dickey.
Cove Hill Partners has agreed to buy a minority stake in engineering simulation software provider Gamma Technologies LLC. TA Associates will remain majority shareholder. Gamma Technologies offers a highly sophisticated computer-aided engineering (CAE) software GT-SUITE that is used by engineers to execute large-scale, integrated simulations of powertrain and vehicle systems.
Replacement tire distributor Deal Tire LLC is making a “significant investment” in SimpleTire, a Philadelphia-based online tire retailer. Financial terms were not disclosed. Debevoise & Plimpton LLP is representing Dealer Tire and Perkins Coie is doing the same for SimpleTire.
Independent global content production company CreativeDrive has acquired Zebra Worldwide. The acquisition combines CreativeDrive’s network of over 150 studios in the U.S., Latin America, Asia and Europe with Zebra’s portfolio of video and content production and localization offices across London, Paris, Cape Town, Kiev and Sydney. Financial terms were not disclosed.
Private equity firms face more competition than ever. LLR Partners, which won Mergers & Acquisitions’ M&A Mid-Market Award for 2017 Private Equity Firm of the Year, wields social media and online content to help differentiate itself from competitors. The Philadelphia firm publishes an original series, called GrowthBits, to articulate the firm’s value as a long-term investor, and then deploys social media to amplify its message. Watch our video interviews with managing director Michael Sala: LLR leverages social media, online content to stand out in crowded PE field and LR Partners: what makes an ideal portfolio company. Follow LLR on Twitter: @LLRPartners. Follow Mergers & Acquisitions: @themiddlemarket.
Check out our Q&A with ParkerGale partner Devin Mathews about the tech-focused firm’s recent investment in CultureIQ/Corporate Executive Board, M&A investing trends and how the Chicago private equity firm uses its weekly podcast.
Artificial intelligence, the Internet of Things, wearable biometrics and precision medicine are transforming dealmaking in the healthcare sector, says Essam Abadir, the CEO of Aspire Ventures, which recently teamed with the Penn Medicine Lancaster General Health network of hospitals to launch a $300 million fund to invest in personalized medical devices and practices. Read our Q&A with Abadir.
Read our Q&A with GTCR managing director Aaron Cohen about The Leaders Strategy and the Chicago firm’s sale of Callcredit, a U.K. provider of real-time credit reports, to TransUnion (NYSE:TRU) for about $1.4 billion.
KKR, LLR Partners, the Riverside Co., Shore Capital Partners, TA Associates and other private equity firms and strategic buyers, including Cognizant (Nasdaq: CTSH), are investing in eye doctors, dentists and veterinarians, plus revenue cycle management providers and other areas of healthcare that are ripe for consolidation, as Mergers & Acquisitions explores in our in-depth feature,Why private equity firms like veterinarians, opthamologists and dentists,and slideshow, 6 healthcare specialties driving M&A deals.
Read full coverage of Mergers & Acquisitions‘ 11th annual M&A Mid-Market Award winners: Campbell Soup, Huron Capital, Idera CEO Randy Jacops, LLR Partners, McGuireWoods, Stryker, Twin Brook and William Blair.
Rothschild Global Advisory has strengthened its North American M&A group with the additions of Sumner Farren and Sara Coyle as managing directors in its Chicago office. They were both previously with UBS.