Looking for a glimpse of what’s to come in the private equity industry? Meet the 10 dealmakers named by Mergers & Acquisitions as the 2019 Rising Stars of Private Equity:
Austin Collier, Branford Castle Partners
Kevin Cunningham, LNC Partners
Shawn Domanic, Sterling Partners (pictured)
Stephen Jeschke, GTCR
Danielle Lalli, Huron Capital
Jason Mironov, TA Associates
James Oh, Transom Capital Group
Sophia Popova, Summit Partners
Pavan Tripathi, Bregal Sagemount
Christine Wang, Francisco Partners
The Rising Stars share a common set of core values. They are passionate about building companies. They are naturally curious and interested in changing things for the better. They enjoy working with portfolio company managers, investment bankers and other deal team members. They appreciate the responsibility and autonomy their firms have given them. They are grateful for the leaders who have helped shape their careers, and they are generous with their own time when it comes to nurturing the next generation. As the PE industry goes through a generational shift and many firm founders retire, it's well worth getting to know these emerging leaders. They represent the future of private equity. For profiles and video interviews, see Meet Mergers & Acquisitions' 2019 Rising Stars of Private Equity For Q&As, see 10 Rising Stars of Private Equity tell their tales
DEAL NEWS
Apple Inc. (Nasdaq: AAPL) is acquring most of the smartphone modem business of Intel Corp. (Nasdaq: INTC) for $1 billion. Talks between the two companies were reported earlier in the week. The deal will bring 2,200 Intel employees to Apple, along with intellectual property, equipment and leases. Apple will hold more than 17,000 wireless technology patents when the transaction closes, which is expected by yearend. Intel is retaining the option to develop modems for PCs, Internet-of-Things devices and autonomous vehicles. Intel CEO Bob Swan says his company will focus on developing technology for the 5G network. Goldman Sachs & Co. LLC (NYSE: GS) and Skadden, Arps, Slate, Meagher & Flom LLP advised Intel on the deal. For more, see Apple to buy Intel's struggling modem unit for $1B.
The U.S. Department of Justice has approved a merger between T-Mobile US Inc. (Nasdaq: TMUS) and Sprint Corp. (NYSE: S). A condition of the department’s approval is that T-Mobile and Sprint must divest businesses and assets to Dish Network Corporation (Nasdaq: DISH) so Dish can build out its own 5G network and become the fourth major wireless competitor in the U.S., along with Verizon (NYSE: VZ), AT&T (NYSE: T) and the merged T-Mobile-Sprint. T-Mobile and Sprint must divest prepaid business and spectrum assets to Dish, and make available at least 20,000 cell sites, hundreds of retail locations and access to the T-Mobile network to Dish. Advisors to Sprint include: Skadden Arps Slate Meagher & Flom LLP and Morrison & Foerster LLP. Advisors to T-Mobile include: Cleary Gottlieb Steen & Hamilton LLP and Latham & Watkins.
Charles Schwab Corp. (NYSE: SCHW) is acquiring assets of USAA Investment Management Co. for $1.8 billion. The assets include more than $1 million in brokerage and managed portfolio accounts, and Schwab will become the exclusive wealth management and brokerage provider for USAA members, who are current and former members of the U.S. military and their families. The deal is expected to close in 2020. Credit Suisse Securities LLC (NYSE: CS), Davis Polk & Wardwell LLP, Goldman Sachs & Co. LLC (NYSE: GS) and Simpson Thacher & Bartlett LLP advised on the deal.
HGGC is acquiring Monotype Imaging Holdings Inc. (Nasdaq: TYPE) for $825 million. The deal between the middle-market PE firm and the digital typesetting and typeface design company is expected to close by yearend. However, Monotype’s board of directors will conduct a 30-day “go-shop” process to initiate, solicit and potentially negotiate alternative deals, and the board could terminate the HGGC deal if it finds a better one. Goodwin advised Monotype on the HGGC deal.
Danfoss Power Solutions Co. is buying QM Technologies Inc. (NYSE: UQM), developer of electric propulsion. Danfoss, a subsidiary of Denmark-based Danfoss A/S, builds hydraulics for construction, agriculture and other off-highway vehicles. The transaction was cleared by the Committee on Foreign Investment in the United States.
OFG Bancorp (NYSE: OFG) is acquiring Scotiabank’s (NYSE: BNS) US Virgin Island operations. OFG will make the acquisition through its Oriental Bank, which has been granted approval to organize a bank in the US Virgin Islands by the Virgin Islands Banking Board. Oriental still needs further regulatory approvals.
Moody’s Corp. (NYSE: MCO) has acquired RiskFirst, provider of risk analytics for asset managers and pensions. RiskFirst’s PFaroe software, which supports more than 3,000 pensions with more than $1.4 trillion in assets, will be added to Moody’s Analytics, says Mark Almeida, president of the Moody’s subsidiary, which provides credit and economic analysis, as well as financial risk management.
Kuvare US Holdings Inc. is acquiring Lincoln Benefit Life Co., its third U.S. life insurance business acquisition since 2016. Kuvare, a life insurance and annuity company, is making the acquisition through its Guaranty Income Life Insurance Co., subsidiary; Lincoln is a subsidiary of RL LP, formerly Resolution Life LP. The deal is expected to close by yearend. J.P. Morgan Securities LLC (NYSE: JPM), Sidley Austin LLP, Morgan Stanley & Co. LLC (NYSE: MS) and Debevoise & Plimpton LLP advised on the deal.
Bigtincan has acquired Veelo Inc. Bigtincan sells software aimed at helping sales representatives engage with customers more effectively; Veelo’s software trains and coaches sales reps. Bigtincan plans to integrate the two platforms, and the acquisition will help fill out its geographic footprint with more employees throughout the U.S., says David Keane, Bigtincan CEO.
Limestone Bancorp Inc. (NASDAQ: LMST) is buying four Kentucky banks from Republic Bancorp Inc. (NASDAQ: RBCAA). The transaction will be between their subsidiaries: Limestone Bank and Republic Bank & Trust Co. The deal includes loan and credit card balances of about $112 million and deposits of about $153 million, and it’s expected to close by yearend.
3i Infrastructure PLC is buying Ardian’s stake in Ionisos, provider of cold sterilization services. 3i Infrastructure is an infrastructure investment company; Ardian is a private investment company. Ionisos, which serves medical, pharmaceutical and cosmetics industries, has made five acquisitions since 2016, when Ardian acquired its stake.
Wealthcraft Capital Inc. is acquiring Infinite Product Company LLC, maker of Infinite CBD products with cannabidiol, or CBD, an active ingredient in marijuana. Wealthcraft, which is focused on acquiring companies in the hemp and CBD industry, will pay $2 million cash plus Wealthcraft stock for a controlling interest in Infinite. Wealthcraft CEO Robert Wilson says his firm will grow Infinite organically and through acquisitions.
Editor's note: Due to vacation schedules, our regular Friday departments, Weekly wrap and PE fundraising scorecard, will be published on Monday, July 29. For last week's installments, see: Weekly wrap: Blackstone, EagleTree, Hillenbrand and PE fundraising scorecard: AEA, Ares, Hamilton Lane, Platinum Equity.
DEAL TRENDS
Second-quarter oil and gas M&A deals totaled $118.7 billion, the highest second-quarter total since 2002, when PwC started tracking transactions, according to the firm. Yet despite three megadeals — deals of $5 billion -plus — in the quarter, oil and gas deal totals are not expected to reach 2018 levels, which had 11 megadeals. The biggest second-quarter deals involved Occidental Petroleum Corp. (NYSE: OXY) buying from Anadarko Petroleum Corp. (NYSE: APC); MPLX LP buying from Andeavor Logistics LP; and IFM Investors buying from Buckeye Partners LP.
DIVERSITY IN DEALMAKING
Women hold just 9.4 percent of senior positions at PE firms globally, according to a recent study by HEC Paris. The low representation underscores the importance of projects that feature successful female dealmakers, such as Mergers & Acquisitions' Most Influential Women in Mid-Market M&A. The special report profiles 36 women M&A pros and includes interviews with them.
“There is this idea in sociology: You've got to see it to be it,” said NBC News correspondent Stephanie Rhule about the importance of building communities of women in the financial services sector, where they are woefully underrepresented. Rhule spoke at the second annual Exponent Exchange, hosted by Exponent Women, a group devoted to nurturing the financial services careers of its female members. Read the full story: Exponent Exchange brings together 200 women dealmakers for second annual event.
Gender-diverse PE investment committees outperformed all-male investment committees substantially, finds a recent study by HEC Paris professor Oliver Gottschalg. The results are compelling: Gender-diverse PE investment committees outperformed all-male investment committees substantially, as measured by several metrics: 7 percent more alpha; .52x more total value to paid-in multiple; and 12 percent higher internal rate of return. Also impressive: the failure rate of gender-diverse investment committees was 8 percent lower. The findings provide concrete evidence showing the value of including women on deal teams and may help to convince skeptics. For more, read Why private equity firms should include more women on deal teams.
A new payment company is attacking the hurdles professional women face when returning to the workforce after time away, a distinct problem borne out of the broader gender gap in financial services. “This is an economic problem, where you have something like a parent who left the workforce and then could not get back in,” said Samantha Ettus, founder and CEO of Park Place Payments. Read the full story: Behind a payment startup's battle to bridge the gender gap.
FEATURED CONTENT
Alex Rodriguez is best known as the New York Yankees star who hit 696 home runs over the course of his 22-year baseball career, but today he’s making a name for himself as an investor as the founder and CEO of A-Rod Corp. One recent example: While serving as a guest judge on CNBC’s Shark Tank, Rodriguez backed Ice Shaker, an insulated bottle maker founded by former National Football League fullback Chris Gronkowski. Rodriguez talked about his life off the field as a savvy investor since his 20’s as the keynote speaker at EisnerAmper’s 4th annual Alternative Investment Summit at the The Museum of Modern Art on June 19. Among the topics discussed in a conversation led by Charles Weinstein, CEO of EisnerAmper: Rodriguez’ childhood as the son of a single mom; his investment thesis, which shares much with other middle-market investors; how he’s helping singer/dancer/actress Jennifer Lopez (to whom he became engaged in March) transition her business initiatives from licensing her brands to owning them; and how one day he just might buy a baseball team. Read the full story: A-Rod talks Ice Shaker, NRG eSports, J. Lo & maybe buying a baseball team.
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.
Organizations in industries, ranging from manufacturing to healthcare, are using M&A to add automated technology in their processing systems. Advances in robotic technology are making it possible to complete more complex tasks at higher speeds and with improved control and outcomes. Read the full story: Accelerating automation through M&A.
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.
EVENTS
ACG New York's summer dealmaking conference takes place at Gurney's Star Island Resort & Marina in Montauk, NY, July 31-Aug.1.
The Great Lakes ACG Capital Connection is being held at the Westin Book Cadillac Detroit Hotel in Detroit from Sept. 4-6.
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