U.S. middle-market dealmaking in the first three quarters of 2018 surpassed the same period in 2017, according to PitchBook. If the pace continues in the fourth quarter, middle-market deal value may surpass $400 billion for the first time ever. The volume of deals valued between $25 million and $1 billion completed in the first nine months of the year tallied 2,171, up about 19 percent from the previous year. Deal value totaled $311.7 billion, up 13 percent. The number of private equity funds that raised funds was down by 19 percent, but the total amount raised was $88.1 billion, about 20 percent higher. Fund size has risen, with the average fund ballooning to $890.2 million, up from $604.2 million, a 47 percent increase. In the third quarter, several well-known firms closed big funds, including Audax Group (Audax Private Equity Fund VI at $3.5 billion); Platinum Equity (Platinum Equity Small Cap Fund at $1.5 billion); and Sycamore Partners (Sycamore Partners III at $4.8 billion). The trend of growing fund sizes is occurring across the wider private equity environment and broader private markets in general, though the jump in average fund size is more pronounced within the middle market, reports PitchBook.

The week is jam-packed with networking opportunities for dealmakers on the East Coast. M&A East, hosted by ACG Philadelphia at the Pennsylvania Convention Center is underway, and Mergers & Acquisitions managing editor Demitri Diakantonis is conducting video interviews on Oct. 25. In the evening in New York, women dealmakers gather for an Exponent Evening with Tequila Casa Dragones. The event features tequila sipping and a fireside chat with Bertha Gonzalez Nieves, conducted by Mergers & Acquisitions editor-in-chief Mary Kathleen Flynn. Nieves co-founded Tequila Casa Dragones in 2008 with Bob Pittman, the prolific media executive best known for co-founding MTV Networks. “Casa Dragones is a small batch tequila producer with a passion for crafting extraordinary tequilas one bottle at a time,” as the company’s website puts it. The tequila has become a favorite of connoisseurs, including Oprah Winfrey. At the Exponent event, Nieves will share stories about the company’s founding and growth. Exponent Women is a new group for female dealmakers, and it is gaining momentum quickly, attracting sponsors, including Merrill Corp., Duff & Phelps, J.P. Morgan for Thursday’s event. For more Exponent and previous events, see Exponent drew 200 women dealmakers to event featuring Sallie Krawcheck.

Deal news
Franklin Resources Inc. (NYSE: BEN), a global investment management organization operating as Franklin Templeton Investments, has agreed to acquire Benefit Street Partners LLC, an alternative credit manager with approximately $26 billion in assets under management. The acquisition is expected to bolster Franklin Templeton’s alternative offerings and expand its fixed-income capabilities to include an array of alternative credit strategies. The deal comes at a time when investors are increasingly allocating capital to less liquid and higher yielding credit opportunities, explains the company in a statement. Morgan Stanley & Co. LLC served as financial advisor to Franklin Templeton, and its legal counsel was Willkie Farr & Gallagher LLP. BofA Merrill Lynch served as BSP’s financial advisor on the transaction, and Skadden, Arps, Slate, Meagher & Flom LLP was its legal advisor.

Roark, an Atlanta-based private equity firm focused on franchise and multi-unit businesses, has completed fundraising for its two newest funds, Roark Capital Partners V LP and Roark Capital Partners II Sidecar LP, raising a combined total of $6.5 billion. Fund V, Roark’s main fund, targeted $4 billion and closed on $5 billion of capital commitments. The Sidecar Fund targeted $1 billion and closed on $1.5 billion of capital commitments alongside the main fund. Roark focuses on investing in franchised and multi-unit businesses in the food and restaurant, specialty retail, health and wellness, retail healthcare, consumer and business services, and education sectors. Since the firm’s founding in 2008, affiliates of Roark have acquired 65 franchise/multi-unit brands that have generated approximately $32 billion in annual system revenues from 32,000 locations in 50 states and more than 80 countries. In August, the firm announced that its portfolio company Focus Brands is purchasing Jamba Juice owner Jamba Inc. (Nasdaq: JMBA) for about $200 million. Jamba Juice operates more than 800 smoothies and juice stores worldwide. Credit Suisse Securities (USA) LLC acted as placement agent and Paul, Weiss, Rifkind, Wharton & Garrison LLP as legal counsel to Roark on the fundraise.

KNPC Holdco LLC (known as Kar’s Nuts), a manufacturer of nut and trail mix snacks sold under the Kar’s and Second Nature brands, has completed its Morley Candy Makers LLC, a maker of confectionary products sold under the Sanders Fine Chocolatiers brand. Kar’s Nuts is a portfolio company of Platinum Equity Partners.

Falfurrias Capital Partners, a Charlotte, North Carolina-based middle-market private equity firm, has closed its investment in Best Impressions Caterers, which provides culinary services for corporate, philanthropic and social clients in the Southeast.

Infogix, a provider of data management tools, has acquired Datum, a provider of data governance software and strategic services, for undisclosed terms. The deal marks Infogix’s fourth acquisition since tech-focused private equity firm Thoma Bravo LLC bought the company in 2016.

NexPhase Capital LP, an operationally-focused private equity firm, has recapitalized Action Behavior Centers LLC, an Austin-based provider of applied behavior analysis therapy for children diagnosed with autism spectrum disorder. The deal marks the New York PE firm’s fourth platform investment in 2018 and its third in the healthcare sector. Cain Brothers, a division of KeyBanc Capital Markets, acted as the exclusive financial advisor to Action Behavior Centers, and Honigman Miller Schwartz & Cohn LLP served as its legal advisor. NexPhase was advised by McDermott Will & Emery.

Featured content
The Miami Dolphins take on the Houston Texans Thursday night in NFL Week 8. Off the field, New England 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, which has raised $3 million in venture capital funding from CourtsideVC and Advancit Capital. Many NFL players invest in companies. 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. Mergers & Acquisitions takes a look at star players who invest in companies through private equity, venture capital and other investment vehicles.

Mergers & Acquisitions identifies 15 cities as fertile communities for dealmaking. We look at metropolitan areas from Austin (where Michael Dell launched a PC business out of his dorm room back in the day and where thousands gather every year for SXSW) to St. Louis (home of private equity firm Thompson Street Capital Partners). Be sure to check out Milwaukee (with private equity firm Robert W. Baird & Co. and investment bank Clearly Gull) and Minneapolis (home of strategic buyers 3M, Best Buy, General Mills, Hormel and Target). And don’t forget Boston, Chicago, New York, San Francisco and Los Angeles and more. See our list, Dealmaker’s guide to 15 cities where M&A thrives.

Why investors like diversity. “Companies that are inclusive and also diverse tend to outperform companies that aren’t,” says investor Lorine Pendleton of Pipeline Angels and Portfolia in this video interview shot at Exponent Exchange, a gathering of 200 female dealmakers. Watch the full video: M&A Insights: Inclusion investing.

Canada legalized recreational marijuana on Oct. 17, marking the first G7 nation and the second country in the world to enact full legalization. To investors in the still developing cannabis industry, many believe the market is just now approaching its own inflection point, as it transitions from a black to gray market, characterized by a more attractive risk profile and outsized growth potential. The sticking point is that as a Schedule I drug illegal under federal law, cannabis still presents imposing obstacles for traditional investors, ranging from capital markets that remain inaccessible to uncertainty over bankruptcy proceedings. Yet, ironically, it’s these very same obstacles that make the opportunity so appealing to investors willing to operate in an indefinite gray area to create an ecosystem for a market expected to reach $75 billion in size by 2030. Salveo Capital managing partner Jeffrey Howard shares advice about investing in cannabis in a guest article. Read the full story: How to seize M&A opportunities in marijuana’s gray market.

Events
ACG Chicago’s Family Office Conference, held Nov. 8, at the Westin Chicago River North, brings deamakers together for a “deep dive” into family offices. The event features a keynote by Laurent Roux, Gallatin Wealth Management, and panels, including: Current State of Family Office Direct & Co-Investment Activity, with Gary Levenstein, Nixon Peabody; and Impact of Millennial Generation on Family Office Investment Strategy including Social Impact Investing, with Adam Lieb and Tony Oommen, Fidelity Family Office Services.

ACG Florida Capital Connection, held Nov. 12-14, at the Vinoy Renaissance St. Petersburg Resort & Golf Club, puts “sun and fun” into dealmaking for the middle market, bringing together hundreds of dealmakers. The keynote speaker is Forbes Media CEO Steve Forbes, and the featured speaker for the Women’s Forum is Valerie Crites Fowler, who served as a diplomat in the U.S. Foreign Service for over 29 years, reaching the rank of Minister Counselor in the Senior Foreign Service.

Middle Market Week, hosted by ACG New York and held Nov. 26-30 at various locations throughout New York, brings together leading global middle-market dealmaking professionals to develop and enhance their dealmaking activities, strengthen their long-term relationships, and provide numerous opportunities for networking all week long. Mark your calendar for the Private Equity Annual Wine Tasting Gala on Nov. 28 at Gotham Hall. The building was constructed in the 1920s as the headquarters of the Greenwich Savings Bank. The gala brings together the leading middle market private equity firms for an evening of fine wines and networking.