M&A wrap: Carlyle, David Rubenstein, US Foods, SGA's Food Group, AMC Networks
The Carlyle Group LP (Nasdaq: CG) closed its biggest fund yet, raising $18.5 billion as money pours into the private equity industry from investors seeking the high returns it has historically delivered. The fund will invest primarily in the U.S. across five industries, including aerospace, defense and government services, the Washington-based firm said in a statement. The buyout industry set a fundraising record last year. Firms are now faced with deploying more than a $1 trillion at a time when competition is increasing and prices on deals are reaching new highs, according to data provider Preqin. David Rubenstein founded Carlyle in 1987 with Bill Conway and Dan D’Aniello. Rubenstein and Conway said in October that they were ceding their roles as co-CEOs to Glenn Youngkin and Kewsong Lee at the start of this year, passing on control of the $201 billion firm to the next generation. Carlyle recently raised $6.5 billion for its fifth Asian fund. Read the full story from Bloomberg News.
Foodservice distributor US Foods Holding Corp. (NYSE: USFD) is acquiring SGA's Food Group of Companies for $1.8 billion. As part of the deal, US Foods is gaining five businesses: produce seller Amerifresh Inc.; meats distributor Ameristar Meats; food products distributor Food Services of America; logistics and delivery companies Gampac Express Inc. and Systems Services of America. The businesses mainly serve restaurant chains and grocery stores. The acquisition expands US Foods' business services along with the company's geographic presence. “This acquisition will significantly increase US Foods’ reach across key markets in the attractive and growing Northwest region of the U.S. and adds one of the most well-regarded regional distributors to our company,” says US Foods CEO Pietro Satriano. "The company’s unique merchandising programs, mature local sourcing capabilities and track record of operational excellence will be strong additions to our business." Centerview Partners, KKR Capital Markets, and Cravath, Swaine & Moore LLP are advising US Foods. Morgan Stanley (NYSE: MS) and Davis Polk & Wardwell LLP are advising SGA. Fried, Frank, Harris, Shriver & Jacobson LLP represented Centerview.
AMC Networks Inc. (Nasdaq: AMCX) is acquiring RLJ Entertainment Inc. (Nasdaq: RLJE), a company backed by Robert L. Johnson, the founder of Black Entertainment Television, for $274 million. RLJ Entertainment owns two streaming video services: Acorn TV, which broadcasts British mysteries and dramas, and Urban Movie Channel, which is geared to African-Americans. AMC invested $65 million in RLJ in 2016. Citigroup Global Markets Inc. (NYSE: C) and Sullivan & Cromwell are advising AMC Networks.
Apax Partners is buying sports data technology company Genius Sports Group from a group led by Three Hills Capital Partners. Genius Sports' software collects and distributes in-game statistics.
Aptar Group is purchasing CSP Technologies, a maker polymeric and protective packaging products, from Wendel for $555 million. Barclays, Goldman Sachs (NYSE: GS) and Fried, Frank, Harris, Shriver & Jacobson LLP are advising Wendel.
Johnson & Johnson Consumer Inc. is buying Zarbee's Naturals from L Catterton. Zarbee's makes over-the-counter cough syrups. Houlihan Lokey Inc. (NYSE: HLI) and Finn Dixon Herling are advising Zarbee's. Debevoise & Plimpton LLP is advising Johnson & Johnson.
Platinum Equity has acquired a majority stake in Yak Access LLC from Jones Cos. and Beasley Forest Products. Yak provides temporary roadway services to construction sites, serving the oil and gas and power sectors.
Vance Street Capital is investing in Jets Parts Engineering, a designer of alternative parts and repair services for the commercial aerospace industry. MLC, Lexington Partners, Neuberger Berman, and Private Advisors are co-investing alongside Vance Street. Vedder Price is representing Vance Street. Harris Williams & Co. and Perkins Coie LLP are advising Jet Parts. Neuberger Berman is providing financing.
For more deal announcements, see The weekly wrap: Grubhub, Krispy Kreme, LaSalle Capital.
For more on PE fundraising, see PE fundraising scorecard: Argonaut and Luminate Capital.
Mergers & Acquisitions has announced the Rising Stars of Private Equity. These 11 up-and-coming investors are expected to play significant leadership roles in the future. Congratulations to:
Daniel Hopkin, Partner, Kainos Capital
John Kos, Principal, GTCR
Erik Latterell, Director, Stone Arch Capital
Ethan Liebermann, Principal, TA Associates
Jaime McKenzie, Director, Monomoy Capital
Jennifer Roach, Vice President, Yellow Wood Partners
Joseph Rondinelli, Principal, Frontenac
David Shainberg, Vice President, Balmoral
Tom Smithburg, Vice President, Shore Capital Partners
Nicholas Stone, Managing Director, Cyprium Partners
Afaf Ibraheem Warren, Senior Associate, Siris Capital
For profiles of the emerging leaders, see Meet Mergers & Acquisitions' 11 Rising Stars of Private Equity.
Exponent, a new group of women dealmakers, brought together 200 women from private equity funds, investment banks, entrepreneurs and advisors for the Exponent Exchange, featuring Sallie Krawcheck as the keynote speaker. Previously the CEO of Wall Streetbanks, including Merrill Lynch Wealth Management and Citi Private Bank, Krawcheck serves as the CEO of Ellevest, an online investing platform for women. Mergers & Acquisitionsparticipated in the event as an in-kind sponsor, and editor-in-chief Mary Kathleen Flynnmoderated Spotlight Panel, From Startups to Showtime: Investment Case Studies. Check out our slideshow, Exponent drew 200 women dealmakers to event featuring Sallie Krawcheck.
The newly enacted tax act presents asset buyers, both large and small, with a new opportunity to increase post-transaction cash flow via tax savings. This opportunity results from the very generous expansion of an old rule with no prior significant relevance to asset acquisitions: bonus depreciation. Read the full guest article by Frank Vari of FJV Tax: Tax reform: how buyers and sellers can benefit from expanded bonus depreciation.
High valuations and abundant use of debt continued to mark completed deal activity in the first quarter of 2018, according to GF Data. Two hundred and eight private equity groups and other deal sponsors reported on 52 transactions closed in the quarter. The overall average valuation mark for the quarter was 6.9x valuation multiple, a marked retreat from the torrid 8.0x valuation multiple average in the prior quarter. At first blush, valuations in 2018 seem to have retreated to pre-2017 levels. However, GF Data gravitates to the view that the random fall of completed deals in 4Q 2017 versus 1Q skewed artificially high in the first period and low in the second. Averaged together, the result is a continuation of already unprecedented aggregate valuations attained in the middle quarters of GF Data. Read the full story: Valuations dropped slightly but are still higher than average.
Summer reading list: From stories of star athletes Arnold Palmer, Keith Hernandez and Tiger Woods to advice from entrepreneurs Bridgewater Associates’ Ray Dalio, KPCB’s John Doerr, Nike’s Phil Knight and Brava Investments’ Nathalie Molina Niño, plus strategies to help business leaders in general, and female dealmakers in particular, the 15 books on Mergers & Acquisitions’ list entertain, instruct and inspire. Check out our listicle: Dealmaker’s guide to summer reading: 15 new books.