M&A daily wrap: Dyal, Goldman's Petershill, Clearlake, KKR, BMC, JAB, Pret A Manger
Dyal Capital Partners, a division of Neuberger Berman, and Goldman Sachs Asset Management’s Petershill program have acquired a minority stake in private equity firm Clearlake Capital Partners. Dyal, founded in 2011, acquires minority equity interests in institutional alternative asset management businesses. In recent years, the firm has bought minority, non-voting stakes in private equity firms, including: H.I.G. Capital, KPS Capital Partners, Silver Lake, Vector Capital and Vista Equity Partners. For PE firms, selling minority stakes is a path to raising capital for expansion and for some general partners to gain liquidity. “We are excited to partner with Clearlake, which has a leading franchise, a unique sector-focused private equity approach, and an integrated special situations and credit capability," says Michael Rees, head of Dyal. "We believe that Clearlake’s track record, strategy, and depth position Clearlake for continued success and make the firm a good fit for our strategy of partnering with leading alternative asset management firms." The deal marks the first time Dyal and the Goldman's Petershill program have teamed up. "Clearlake stands out for their efforts to build a differentiated platform that incorporates a proven model of portfolio operations improvement coupled with a strong track record as well as an expanding and diverse international investor base," says Michael Brandmeyer, co-CIO of the alternative investments and manager selection group at Goldman. Clearlake’s existing partner, Landmark Partners, also invested. Clearlake was founded by José Feliciano and Behdad Eghbali in 2006 and closed its fifth fund in March. From the $3.6 billion fund, the firm has signed deals for Diligent Corp., Perforce Software, Janus International Group, ProVation Medical Inc. and Wheel Pros. Berkshire Capital Securities LLC, Goldman Sachs & Co. (NYSE: GS), Kirkland & Ellis LLP and Simpson Thacher & Bartlett LLP are advising Clearlake. Fried Frank Harris Shriver & Jacobson LLP is representing Dyal and Petershill.
KKR & Co. (NYSE: KKR) has agreed to acquire BMC Software from Bain Capital, Golden Gate Capital, Insight Venture Partners and Ellott Management. Founded in 1980, BMC is a systems software provider that helps businesses manage and optimize information technology across cloud, hybrid, on-premise, and mainframe environments. The company serves more than 10,000 customers including 92 percent of the Forbes Global 100. “In an ever-changing IT environment that is only becoming more complex, companies that help simplify and manage this essential infrastructure for their enterprise customers play an increasingly important role,” say KKR TMT head Herald Chen and member John Park. Goldman Sachs, Morgan Stanley (NYSE: MS), Credit Suisse and Kirkland & Ellis are advising BMC. Macquarie Capital and Simpson Thacher & Bartlett are advising KKR.
Madison Dearborn Partners and Covant Management have acquired LinQuest Corp. The target develops engineering and advanced technology systems for command, control, communications, intelligence, surveillance and reconnaissance programs. Baird, Alston & Bird, Squire Patton Boggs and Drinker Biddle & Reath are advising LinQuest. Kirkland & Ellis and Crowell & Moring are advising the buyers.
JAB Holding has agreed to buy a majority stake in Pret A Manger from Bridgepoint. Financial terms were not disclosed. JAB is making the investment through its consumer fund. Pret operates 530 stores worldwide and is known for its wraps, salads and sandwiches that are made fresh everyday. The company offers its unsold food to charity at the end of each day. The target has about $1.2 billion in annual revenue. JAB, the investment firm backed by Austria’s billionaire Reimann family, has been growing through acquisitions including deals for Panera Bread and Au Bon Pain. Many private equity investors are hungry for restaurants, despite intense competition and raised expectations on the part of consumers, according to consulting firm RSM. About $6.4 billion has been invested in the restaurant, hotel and leisure sector in the first quarter of 2018, compared with $30 billion for all of 2017. Tastes for healthy meals, ethnic foods and convenience, including delivery and mobile ordering, are among the main trends shaping the restaurant industry. For more, read: What's attracting hungry buyers to restaurants? Here are 7 trends.
MGM Resorts International (NYSE: MGM) and MGM Growth Properties LLC (NYSE: MGP) have agreed to acquire the Empire City Casino in Yonkers, New York for $850 million. MGM Resorts will pay up to another $50 million if Empire City is gets a live table game license before Dec. 31, 2022. MGP will buy Empire City's real estate and lease it back to MGM Resorts. Bank of America Merrill Lynch is advising MGM Resorts. Proskauer is advising Empire City.
Tronc Inc. (Nasdaq: TRNC) has purchased the Virginian-Pilot Media Cos. from Landmark Media Enterprises LLC for $34 million. The deal includes the Virginian-Pilot, PilotOnline.com, and Pilot Targeted Media. Honigman Miller Schwartz and Cohn LLP represented Tronc. Methuselah Advisors and Willcox & Savage advised Landmark Media.
Alleghany Capital Corp.'s subsidiary, Jazwares LLC, has bought the Russ Berrie and Applause Brands from Larsen & Bowman Holdings and Maple Licensing. The brands exchanging hands make stuffed animals, mugs, picture frames, figurines, greeting cards and stationery. Financial terms were not disclosed.
Sellers in middle-market private equity deals are driving harder bargains on the terms of the equity—or rollover--they receive as payment, according to a new report by Goodwin Procter. That trend and others outlined in the report, based on a survey of the law firm’s network of PE clients and associates, are signs that sellers seem to be gaining more of an upper hand in deal negotiations, says Goodwin partner Chris Wilson. Read the full story: Sellers gain upper hand in private equity deals, finds Goodwin Procter rollover report.
Private equity firms lead all asset classes in long term investment performance, according to the American Investment Council's 2018 Public Pension Study. Private equity's 10-year annualized return of 8.6 percent surpasses public equity’s 6.1 percent, fixed income’s 5.3 percent, and real estate’s 4.7 percent, the report finds. “Our annual Public Pension Study underscores private equity’s longstanding position as an essential component in achieving public pensions’ long-term investing goals,” says AIC CEO Mike Sommers. “The financial benefits of these returns directly impact millions of dedicated American public servants, like teachers, firefighters, and police officers, who rely on their pension income in retirement.” The study names the 10 funds with the highest private equity returns. The Massachusetts Pension Reserves Investment Trust (Mass PRIT) took home the top spot, earning a 10-year annualized return of 13.37 percent. The Ohio School Employees Retirement System earned 13.1 percent, and the Utah Retirement Systems earned 12.05 percent.
Think Gartner meets Angie’s List, and there lies BluWave. The idea for BluWave grew over a 20-year span, while Sean Mooney was working in a private equity firm and started to see a void in the market as the industry became increasingly competitive. “After 2008, the competition in private equity became fierce,” Mooney says. “Every deal wasn’t a slam dunk and as time went on, private equity firms were required to do more and more for returns.” Mooney founded BluWave to help private equity firms and their portfolio companies select the best service providers. In Mergers & Acquisitions’ updated Buyer’s Guide, we profile nine categories of product and services designed to help M&A professionals perform in today’s highly competitive dealmaking arena. Read the full story: From fund administrators to VDRs, dozens of firms help M&A pros compete.
“You have to go out and make deals happen; they’re not going to occur on their own,” says TA Associates managing partner Ajit Nedungadi about the private equity firm’s focus on deal origination. Headquarterd in Boston, TA has invested about $20 billion in nearly 500 companies since the firm was founded 50 years ago in 1968. TA backs companies in five industries: technology, healthcare, financial services, business services and consumer. The firm invests in companies across North America, Europe and Asia. Nedungadi co-heads the Core Investment Committee, heads the firm’s European efforts out of London and is actively engaged in investments in India. We asked Nedungadi about TA’s investment strategy in Europe and the firm’s culture, including the focus on proprietary deal flow. Read the full story: At TA Associates, “you’re either working a live deal or hunting for the next one.”
“At the end of the day, it really matters how you behave if there’s a problem,” says Karin Kovacic, managing director, East Coast region, of middle-market lender Monroe Capital. Watch our video interview, which was shot at ACG InterGrowth 2018: Trust counts in lending to the middle market, says Monroe Capital’s Karin Kovacic.
More covenant-lite loans are “bleeding down” to the middle market, says Twin Brook Capital Partners co-founder Trevor Clark in this video interview, in which he discusses the downside of loosening lender protections. “There are clearly some groups out there that haven’t had as much experience lending through a credit crisis." Twin Brook won Mergers & Acquisitions' M&A Mid-Market Award for 2017 Lender of the Year. Also, read our Q&A: Lenders must be active partners, says Twin Brook's Trevor Clark.
To gain insights on how lenders evaluate potential transactions in today's highly competitive market, we asked Madison Capital Funding's chief underwriting officer Jennifer Cotton to share her thoughts. Cotton oversees Madison's underwriting and portfolio management teams and serves as a member of the Investment Committee as well as the Senior Leadership team. Read the full story here: Abundance of capital drives highly competitive loan process, says Madison Capital's chief underwriter.
For recent deal announcements, including Kroger's acquisition of Home Chef, see The weekly wrap: Kroger, Fifth Third, Middleby.
To see which private equity firms are raising funds, including Gryphon Partners and MSouth Equity, see PE fundraising scorecard.
Brooks Crankshaw has joined investment bank the Chicago Corporation as a managing director and partner. Previously founder and CEO of Highland Ridge Capital, Crankshaw focuses on M&A and capital raises in the middle market.
Michael Moyer has joined BakerHostetler as a partner in Seattle. Previously with Cairncross & Hempelmann, Moyer concentrates on M&A in the life science and technology sectors.
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.