M&A wrap: Sarah Bradley, Kainos, Arlington, Vicente, Descartes, Trive

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UPDATED: Kainos Capital LP co-founder Sarah Bradley, one of Mergers & Acquisitions' 2019 Most Influential Women in Mid-Market M&A, filed a lawsuit on Jan. 25 in the Delaware Court of Chancery, against Andrew Rosen, Robert Sperry, David Knickel, and Kainos. The suit alleges, inter alia, fraud, breaches of fiduciary duty and seeks millions of dollars of damages and the return of Bradley’s 25 interest in the fund manager, according to Reid Collins & Tsai, the law firm representing her. "Hailed as a private equity rising star, Bradley was recruited to launch the touted women-owned firm, and helped Kainos secure over a billion dollars in capital," says a representative of the law firm. "Following the firm’s initial success, defendants Andrew Rosen, Robert Sperry and David Knickel began promoting a 'frat house culture' filled with excessive drinking at the firm, and deceitfully strong-armed Bradley into converting Kainos Capital LLC into a limited partnership under the veil of 'tax purposes' – unbeknownst to Bradley, the move stripped her of her ownership rights." A spokesperson for Kainos shared a statement with Mergers & Acquisitions: "Ms. Bradley’s complaint lacks merit and its allegations are false. This is a financial dispute over something that happened nearly three years ago, and Ms. Bradley has been well aware that her ownership was reduced. Kainos has provided tremendous opportunities to its employees and partners, including Ms. Bradley, and, more importantly, has maintained an unrelenting focus on delivering results to its investors while upholding the highest standards of integrity in business. The Kainos team will not be influenced by improper litigation tactics and we intend to defend ourselves vigorously in this matter."

Technology permeates many of today’s private equity deals, and PE firms are hot on the trail of innovations that will drive sustainable value to customers and make companies more efficient, more effective and less expensive to run. Among the developments appealing to PE investors are: artificial intelligence, data management, data virtualization, digital marketing, healthcare IT, industrial automation, the Internet of Things, machine-to-machine learning, payment processing and Software-as-a-Service. “Technology, in and of itself, is invading every end market, and it is driving companies to be more competitive than their peers,” points out Richard Lawson, CEO of tech-focused PE firm HGGC. As PE firms consider the tech landscape, they are watching Amazon.com Inc. (Nasdaq: AMZN) closely. “We are always thinking about how we can help companies that are going to get dislocated and disintermediated by Amazon,” says Lawson. “End markets everywhere are being changed by Amazon. As Amazon scales, it will challenge all kinds of industries and it will have a cascading effect across all sectors. You are already seeing more companies trying to connect their brands with consumers in new ways.” To gain more insights into what kinds of tech deals will dominate the field in 2019, Mergers & Acquisitions reached out to 10 private equity firms that are active investors in technology: Francisco Partners, Genstar, Great Hill, HGGC, Insight, LLR, Riverside, Silver Lake, TA and Vista.

Related: 10 private equity firms share strategies for tech M&A.

Deadline approaches. Submit nominations by Feb. 8 for Mergers & Acquisitions' 12thAnnual M&A Mid-Market Awards, which will honor leading dealmakers and deals that set the standard for transactions in the middle market in 2018. Click here to submit nominations. Looking at past winners provides a good guide to what we’re seeking. Last year’s winners included Campbell Soup, Huron Capital, Idera, LLR Partners, McGuireWoods, Stryker, Twin Brook and William Blair.

Related: Call for Nominations: 12th Annual M&A Mid-market Awards.

Deal news
Arlington Capital Partners has acquired a majority stake in Intellectual Technology Inc. The target provides software and technology services to motor vehicles departments, allowing it to increase the speed, visibility, and security of motor vehicle transactions. Existing investor Vicente Capital is reinvesting in the deal. “We are a company dedicated to operational efficiency, and our collective vision for current and prospective customers is to leverage technology to address the repetitive and predictable tasks that DMVs must perform on a daily basis so that they can focus on complicated, more nuanced constituent interactions," says ITI president Drew Nicholson. Arlington is a Washington, D.C.-based middle-market private equity firm that focuses on the healthcare, aerospace and defense, government services, technology and business services sectors. The PE firm manages about $2.2 billion in capital. Piper Jaffray (NYSE: PJC) and Mitchell Silberberg & Knupp LLP advised Vicente and ITI. Goodwin Procter LLP and Sheppard, Mullin, Richter & Hampton LLP advised Arlington.

Dropbox Inc. (Nasdaq: DBX) is buying HelloSign, an eSignature and document workflow platform with more than 80,000 customers, for $230 million.

Descartes Systems Group (Nasdaq: DSGX) is acquiring Visual Compliance for $250 million. Visual Compliance is a software services company that automates customs, trade and fiscal compliance processes, with a focus on denied and restricted party screening processes and export licensing.

Trive Capital has bought EarthLink from Windstream Holdings Inc. for $330 million. The target offers Internet access, premium e-mail, and web hosting services.

Rockwell Automation Inc. (NYSE: ROK) has acquired Emulate3D, an engineering software developer whose products digitally simulate and emulate industrial automation systems.

LLR Partners has invested $44 million in Intelity, a guest engagement and staff management software provider for the travel and hospitality industry.

Flir Systems Inc. (Nasdaq: FLIR) has acquired Aeryon Labs Inc., a developer of high-performance unmanned aerial systems for the military, public safety, and critical infrastructure markets sectors for $200 million. Harris Williams advised Aeryon.

Chemical Financial and TCF Financial have announced a merger of equals that would create a $45 billion-asset institution with $34 billion of deposits and more than 500 branches in nine Midwestern and Western states. Read the full story: Chemical, TCF to merge, creating $45 billion-asset bank.

For more deal announcements, see The weekly wrap: EQT, Odyssey, Viacom.

For more on PE fundraising, see PE fundraising scorecard: Carlyle, Hancock Capital, Kinderhook.

People moves
Dion Camp Sanders has joined home fitness technology company Peloton as senior vice president, M&A. Peloton is a digital technology company that offers studio style workouts at home. Sanders previously led corporate development and M&A at Leaf Group (NYSE: LEAF), which owns the website Livestrong.com.

Featured content
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 and Pelham 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. "Actively lobby and ask from day one to work on deals, so you can gain dealmaking experience early in your career," advises Bradley. "Too often, women are steered into functions like marketing, business development, and investor relations – the 'softer side' where it is easier to place a female. The excuse often used is that the females don’t have the deal experience of their male counterparts. That is why you must be an advocate for yourself and work on deals from the very beginning."

Related: Meet the 2019 Most Influential Women in Mid-Market M&A.

Mergers & Acquisitions asked leading dealmakers about their outlook for the middle market in 2019. Watch the video conversations, shot at ACG Philadelphia's M&A East: It is a seller's market, and deal activity is expected to remain steady, says Ramsey Goodrich of Carter Morse & Goodrich: Outlook 2019: Great time to sell. Private equity firms and strategic buyers will use their excess cash and capital to look for deals, says Bharat Ramprasad of Stifel Nicolaus: Outlook 2019: Excess capital to fuel M&A. Rising interest rates and regulatory changes may increase volatility, cautions Mark Emrich of Murray Devine: Outlook 2019: Keep an eye on rising interest rates.

Family-owned businesses require a lot preparation to sell to PE firms, says Carls Marks Advisors' Warren Feder.Watch the video: How to prep a family biz for sale to private equity.

The New England Patriots and the Los Angeles Rams will face off in the Super Bowl. Off the field, Patriots quarterback Tom Brady recently teamed with former Giants defensive end Michael Strahan, who is the co-host of ABC’s Good Morning America, to launch a sports media startup called Religion of Sports Media. Muhsin Muhammad, who played wide receiver for the Carolina Panthers and the Chicago Bears, is a managing director of private equity firm Axum Capital Partners. Steve Young, former San Francisco 49ers quarterback, is a co-founder of private equity firm HGGC. Check out: NFL stars Tom Brady, Michael Strahan, Steve Young go PE.

ACG Boston, ACG Connecticut, ACG New Jersey, ACG New York & ACG Philadelphia host ACG Northeast Dealmaking at the Mountain at Stowe Mountain Resort in Stowe, Vermont Jan. 27-29. The event provides a chance for middle-market M&A professionals from across the northeast to come together for two days of close knit networking, shared conversations and valuable time spent to deepen your relationships within the deal community.

ACG New York hosts its 11th annual healthcare conference at the Metropolitan Club in New York on Feb. 28. Dealmakers get to network with healthcare-focused private equity firms and other industry professionals.

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