M&A wrap: Angelo Gordon, Twin Brook, Thoma Bravo, AUA, West Monroe

Private equity firms appreciate the value of digital. Half the private equity respondents to a recent survey said they always include digital value creation as part of their investment thesis, and another 34 percent say they often include it. More than 82 percent say they view digital investments at a portfolio company as a value driver for an exit, while 75 percent responded they make digital investments to improve a sale price of a portfolio company. Delineating where digital and technical debt reside within a company and what areas need to improve will help a private equity firm define its approach to technology in its target company. Thoma Bravo-backed Quorum Software has bought Archeio Technologies, a provider of oil and gas document classification and smart search technology, as the energy sector becomes digitized. And in the construction industry, and there is a growing demand for technology that will help contractors. “A documented digital strategy does one crucial and often overlooked thing: It identifies and prioritizes the highest potential digital value creation areas for the business,” says Nick Hahn, a director of digital at West Monroe Partners. The report is based on phone interviews with 100 senior PE executives conducted in the first quarter of 2019. Activity and urgency characterize the current dealmaking environment, say investment bankers and other M&A advisors interviewed by Mergers & Acquisitions. After a record-breaking 2018, forecasts for 2019 remain bullish. Advisors point to a lot of cash that must be deployed by strategic buyers and private equity firms alike; a healthy U.S. economy; and low interest rates. Competition for high-quality targets has never been more intense, especially for technology providers, they report, which means sellers are commanding high prices. It all adds up to a seller’s market. A mood of urgency prevails, as dealmakers seek to close deals quickly, while conditions remain favorable. The advisors interviewed for this story say they don’t see signs of a recession this year; however they are closely monitoring bellwethers, including corporate earnings, wage pressure, global supply chains and slowdowns abroad. They are recommending that clients be prepared for an economic slowdown in the next two years. Specialization is the name of the game, and investment bankers advise clients to seek targets with business-model stability, limited cyclical exposure and a recurring revenue business model. Technology, business services, healthcare, consumer and manufacturing are among the most promising sectors. Read the story: 8 M&A advisors urge closing deals now, while economy stays strong. DEAL NEWS Twin Brook Capital Partners has raised $2.75 billion in its third direct lending fund. Twin Brook is Angelo Gordon's middle-market direct lending subsidiary. Twin Brook targets senior financing opportunities, focusing on lower middle-market private equity-backed companies that have up to $50 million in Ebitda. Hitachi Automotive Systems is buying Chassis Brake International Group from KPS Capital Partners for about $775 million, according to a source familiar with the deal. Advisors to the sellers include: Citigroup Global Markets and Paul, Weiss, Rifkind, Wharton & Garrison LLP. AUA Private Equity has acquired snack food contract manufacturer TruFood Manufacturing. Advisors to AUA include: McDermott Will & Emery and Mandelbaum Salsburg. Brightstar Capital Partners has purchased Gateway Bobcat, a provider of Bobcat and Doosan-branded industrial equipment. Genstar-backed Mercer Advisors has acquired wealth management firm Jackson Financial Management to expand its presence in southern California. Granite Creek Capital Partners has invested in medical device company Royal Biologics. HKW-backed Xirgo Technologies has purchased automotive software company UAB Baltic Car Equipment. PEOPLE MOVES Yolanda Williams has joined investment bank Matrix Capital Markets Group as a controller, where she is responsible for the firm’s accounting, banking and financial reporting. Williams was most recently a controller at TDBBS LLC, doing business as Best Bully Sticks, Paw Love and Bark Worthies. FEATURED CONTENT Healthcare companies are spending more on information technology than ever before. Private equity firms including: Bain Capital, GTCR, Great Hill Partners, The Riverside Co. and New Heritage Capital, are investing in the innovations most in demand, including big data, SaaS and artificial intelligence, as we explore in depth in Mergers & Acquisitions' feature, Healthcare's must-have technologies. “Healthcare IT is the largest cottage industry in the world,” says Sam Hendler, who leads healthcare IT deals at Harris Williams.“Healthcare IT is a highly fragmented, multi-billion-dollar market with thousands of companies focused on different $250 million to $500 million sub-markets. Savvy investors see there is an opportunity to aggregate assets and build platforms of scale. It’s an incredibly exciting time in healthcare IT.” For recent transactions that showcase the trends, see 5 private equity-backed healthcare IT deals. Recent deals from Bain Capital, KKR and TPG Capital suggest that big funds are waking up to the unlocked potential in the education sector, both in the U.S. and globally. Read the full guest article by MHT Partners' Alex Hicks: Why impact investors love the education sector. Tech dominates dealmaking. The technology, media and telecom, or TMT, sector accounted for about 40 percent of total private equity deal volume and one-third of total capital invested by PE firms over the last five years, according to EY Private Equity. Looking forward, the next five years of M&A activity will be fueled by a whole new set of developments. As one wave of technological innovation crests, another is forming. “With themes such as cloud computing and mobility now mainstream, PE firms are focusing on the next wave of disruption — technologies such as artificial intelligence and machine learning, robotic process automation (RPA), Internet of Things (IoT), robotics, drones, blockchain, augmented reality and virtual reality,” finds the April edition of EY’s quarterly PE Pulse report. Read our full coverage: Smart cities, IoT, AI, robots, edge computing will fuel next wave of tech M&A. Big data, Artificial Intelligence (AI), the Internet of Things (IoT) and 5G are transforming the business world. By embracing these technologies, organizations across the globe are realizing untapped potential in efficiency, customer experience, talent and profitability, and have been able to make better, more streamlined mergers and acquisitions, writes Bank of America Merrill Lynch's Robert Arth in a guest article. Read the full story: Why the middle market needs big data. Excelled. Innovated. Inspired. That’s what the eight winners of Mergers & Acquisitions’ 12th Annual M&A Mid-Market Awards did in 2018. Our awards honor the leading dealmakers and deals that set the standard for transactions in the middle market. In addition to Nike, award winners include: Fortive, TA Associates, the Riverside Co., Harris Williams, Monroe Capital, Goodwin and Luminate Capital Partners' Hollie Haynes. Read our full coverage: Meet the winners of the M&A Mid-Market Awards: Nike, Fortive, TA, Harris Williams. Mergers & Acquisitions has named 36 leaders the 2019 Most Influential Women in Mid-Market M&A, including Kainos Capital's Sarah Bradley, Kayne Anderson Capital Advisors' Nishita Cummings andPelham S2K Managers' Venita Fields. All 36 are outstanding dealmakers both inside and outside of their firms. This year, we asked the featured dealmakers to tell their own stories through Q&As, including their advice for women. Related: Meet the 2019 Most Influential Women in Mid-Market M&A. EVENTS ACG Tennessee hosts the Mid-South ACG Capital Connection at the Omni Louisville Hotel in Louisville, Kentucky from June 20-21. Exponent Women hosts the Annual Exchange, which brings a trusted network of women dealmakers together for a focused day of robust content and networking, at Second in New York, on July 11. The Exchange provides attendees with opportunities to establish new connections, reinforce existing ones and absorb timely and relevant knowledge from industry leaders. The Women's Connection Golf Clinic & Networking event is taking place on July 17 at the Granite Links Golf Club in Quincy, Massachussets. The event is being hosted by ACG Boston. ACG Seattle hosts the Northwest Middle Market Growth Conference at the Fairmont Olympic Hotel in Seattle on July 25. The Great Lakes ACG Capital Connection is taking place at theWestin Book Cadillac Detroit Hotel in Detroit from Sept. 4-6. ACG New York's summer dealmaking conference is being held from July 31-Aug.1 at Gurney's Star Island Resort & Marina in Montauk, NY. M&A East is taking place at the Pennsylvania Convention Center in Philadelphia from Oct. 21-23.