M&A wrap: Carlyle, Grand Rounds, J.C. Penney, Simon Property, Brookfield, Stone Point, Omnitracs, Leeds Equity
The Carlyle Group (Nasdaq: CG) is investing $175 million in healthcare benefits and technology company Grand Rounds. The target will use the investment to expand its virtual care services during the pandemic. “Digital health has grown rapidly in recent years due to the significant disruption and innovation it brings to the healthcare industry," says Carlyle principal Robert Schmidt. "Healthcare navigation, in particular, is playing a pivotal role in addressing every facet of an individual’s healthcare journey, at scale, by increasing access to high-quality care while reducing overall costs." PE firms have shown more interest lately in potential acquisitions of healthcare services that are not practice-management-driven, such as telehealth, healthcare IT and homebased healthcare. Healthcare services that bring care into the home or use technology to make care easier to navigate are attractive investments because of their focus on consumer engagement. In addition to launching several new virtual provider services as a result of Covid-19, Grand Rounds has expanded its relationships in healthcare benefits with companies including the Home Depot, Walmart, Salesforce and Travelers. Over the past year, the Grand Rounds has increased its covered lives by 55 percent. “We are at a turning point in American healthcare, a moment when healthcare has become virtual-first and data can be used to dramatically improve outcomes," adds Grand Rounds CEO Owen Tripp.
The coronavirus pandemic has disrupted entire industries in 2020, but perhaps none so much as healthcare. Contained in one industry is the global competition to develop test, manufacture and distribute a Covid-19 vaccine in record time and the fight to save patients from a virus that has infected more than 5 million people and killed more than 160,000 in the U.S. alone. The healthcare industry is also developing Covid-19 treatments; producing, administering and interpreting tests; and adapting new technologies and better methods for healthcare delivery and interaction with patients. For the full story, see: Covid-19 vaccines, tests and treatments spur healthcare M&A deals.
J.C. Penney Co.’s lenders have agreed to team up with mall landlords Simon Property Group Inc. and Brookfield Property Partners to buy the bankrupt chain of department stores. The $1.75 billion rescue deal, which would preserve about 70,000 jobs, includes a $300 million equity investment by the landlords, Joshua Sussberg of Kirkland & Ellis said on behalf of J.C. Penney in a bankruptcy hearing. It also calls for new financing from existing lenders and would ultimately leave the retailer with about $1 billion, subject to certain transaction costs and a working capital adjustment, Sussberg said. Read the full story by Bloomberg News: J.C. Penney lenders, landlords ink deal to keep chain open.
Radiology Partners is buying Mednax Radiology Solutions from Mednax Inc. (NYSE: MD) for $885 million. The target consists of more than 300 onsite radiologists and more than 500 teleradiologists. “We believe the benefits of increased scale, paired with local practice autonomy and physician leadership, will allow us to continue to advance patient care, improve clinical value and ultimately transform radiology," says Radiology Partners CEO Rich Whitney. Goldman Sachs and Kirkland & Ellis LLP are advising Radiology Partners. Barclays and DLA Piper are advising Mednax.
Stone Point Capital has acquired a majority stake in Bullhorn, a software provider for the staffing and recruitment industry. Insight Partners and Genstar will remain investors in the target. The staffing and recruiting sector is undergoing digital transformation, as businesses are dealing with a distributed workforce during the pandemic, according to Bullhorn. Lazard, District Capital Partners and Willkie Farr & Gallagher LLP advised Bullhorn.
Omnitracs is acquiring transportation technology company SmartDrive. The combined companies' software will help with driver routing, dispatch and safety. "The Covid-19 pandemic has underscored the significant role of commercial drivers, as the trucking sector has been instrumental to ensuring the availability of critical medical supplies and equipment, as well as essential consumer goods," says SmartDrive CEO Steve Mitgang. "Given the long-standing shortage of qualified drivers and high turnover rates, creating and sustaining a favorable driver experience is imperative to fleets’ success." Kirkland & Ellis LLP is advising Omnitracs. PJT Partners and Pillsbury Winthrop Shaw Pittman LLP are advising SmartDrive.
Leeds Equity Partners-backed LRN Corp. has acquired online learning firm Interactive Services. The combined company will offer ethics and compliance services across education, technology, advisory services and analytics. “We are in a time of increasing focus and scrutiny on corporate and individual conduct, accelerated by the global pandemic and an intensifying awareness of societal inequalities,” says LRN founder Dov Seidman. “In response, companies throughout the world are urgently reimagining the workplace, redefining leadership, and seeking to build cultures that are genuinely aligned and inclusive."
Alexandra Lebenthal was hired by investment bank Houlihan Lokey (NYSE: HLI) as a senior advisor. She will lead a new initiative focused on providing investment banking services, industry relationships, and growth opportunities to female entrepreneurs. Her family founded bond trading firm Lebenthal & Co., which was acquired by Merrill Lynch in 2007.
Catherine Arnold has joined investment bank Centerview Partners as a partner where she is focusing on the healthcare sector. She was previously with Wellington Management.
Alessandra Christiani was hired private equity firm Halifax Group as vice president, business development. She was previously with Capital Aviation Group.
Christopher Fraser was hired by PE firm SK Capital as a senior director. He was most recently the CEO of KMG Chemicals.
Ted Jeon has joined PE firm Levine Leichtman Capital Partners as a director on the investment management team. He was previously with Kohlberg & Co. In addition, Tannaz Chapman was promoted to managing director and Michael Knapp was promoted to director at the same firm.
Thomas Sarko has joined real estate investor Core Real Estate Capital as chief compliance officer. He was previously with J.P. Morgan Asset Management.
Terry Sutter was hired by Pritzker Private Capital as an operating partner. He was previously with Aurora Capital Partners.
The pet supply sector is soaring during the pandemic, as demand for companion animals, particularly dogs and cats, is rising with people turning to comfort while quarantined. Consumers continue to spend more money on their pets even while cutting back in other areas, and are treating pets as family members. Earlier in 2020, Petmate acquired Pet Qwerks, a maker of dog chews and toys. Carl Marks Advisors advised the target. Mergers & Acquisitions' spoke with Carl Marks managing director Chris Parisi about the deal and M&A trends in the sector. Read the full story: Q&A: Rise in pandemic-driven dog and cat adoptions attracts Petmate and other M&A buyers.
Today’s private equity firms face greater risk and uncertainty when evaluating potential portfolio acquisitions, in light of the Covid-19 pandemic. While things like market size and product quality are still important factors, private equity firms must also gauge a portfolio company’s character and ability to withstand economic turbulence. Read the full article: Agility matters: 4 signs PE firms should examine when considering acquisitions.
Car dealerships saw a drop in sales during the height of the pandemic from the slowdown in production with less people driving, and that impacted some deals. For example, Asbury Automotive Group Inc. (NYSE: ABG) originally backed away from its $1 billion acquisition of Park Place Dealerships. However, citing a pickup in business, Asbury revived the deal for $735 million. Now some dealmakers are predicting robust sector dealflow in the second half of 2020. Mergers & Acquisitions spoke with Erin Kerrigan, managing director of auto dealership-focused investment bank Kerrigan Advisors about deal trends in the industry. Read the full story: M&A among car dealers expected to reach record levels in the second half of the year.
With everything from Broadway to indoor dining closed, people are starved for entertainment. Enter mobile gaming. Despite restrictions slowly easing, mobile games are expected to see strong interest in the long-term and game makers are looking for acquisitions to keep their portfolios fresh. “There’s a lot of supply of great companies out there, big, small and different categories in different regions of the world," Zynga CEO Frank Gibeau recently told investors. He pointed out that Zynga has the cash to make more deals and will continue to look for them. "So, consolidation is obviously underway in the interactive category. We’re actively participating in growth through finding partnerships with companies out there. Scale is going to be increasingly important in mobile.” Read the full story: Quarantine drives M&A in mobile gaming.
Covid-19 and quarantines may lead to an increase in carve-out deals. The Covid quarantines across the globe led to economic disruption. All sectors of the economy are impacted. Many corporations looking to improve their financial situation will likely look to sell non-core units. Read the full article: More carve-out deals ahead, driven by pandemic.
The construction software industry is fragmented, and there is a growing demand for technology that will help contractors, drawing deal activity particularly from strategic buyers. One company that is active in the sector is Autodesk Inc. (Nasdaq: ADSK), which recently aquired Pype. Pype's software helps automate construction projects. Mergers & Acquisitions spoke with Sidharth Haksar, Autodesk's director of corporate development about the Pype deal. Read the full story: Autodesk seeks construction software deals during pandemic.
Deal activity in the cybersecurity sector is being driven by a combination of rising cyber threats and more people working from home. Earlier in 2020, Francisco Partners and Vector Capital-backed cybersecurity company WatchGuard Technologies acquired network security provider Panda Security. Mergers & Acquisitions spoke with WatchGuard CEO Prakash Panjwani about the Panda deal and M&A trends in the sector. "The security market will continue to experience significant consolidation throughout 2020 and beyond," says Panjwani. "This has been and will continue to be driven by customer needs. As the volume and sophistication of security threats continue to grow, vendors will answer with innovative new solutions. At the same time, the security expertise and resources required to deploy and manage those solutions will continue to be scarce." Read our full coverage: Work from home and increasing cyber threats will drive cybersecurity M&A.
While the novel coronavirus has reshaped the U.S. economy and the healthcare industry, pharmaceutical manufacturing has proven resilient—both in terms of business durability and its increasingly critical role in the global response to the virus. Covid-19 crystalized the U.S. dependence on overseas manufacturing for finished dose products as well as the active pharmaceutical ingredients necessary to produce life-saving medications. Read the full article: Why investors need to consider pharmaceutical manufacturing services.
EQUALITY AND INCLUSION
Bank of America Corp. invested $50 million in three Black-owned banks as part of its $1 billion pledge over four years to advance racial equality. The second-largest U.S. lender took equity stakes of about 5% in three minority depository institutions: First Independence Corp. in Detroit, Liberty Financial Services Inc. in New Orleans and SCCB Financial Corp. in Columbia, South Carolina. The bank also laid out plans for other initiatives aimed at promoting racial and economic equality, including $200 million allocated to direct equity investments in Black- and Hispanic-owned businesses. Read the full story by Bloomberg News: BofA invests $50 Million in black-owned banks in equality drive.
Ten private equity firms have pledged to each create and post five board seats to make them available to minority and women candidates, participating in an initiative to increase diversity on company boards of directors. Aurora Capital Partners, Clearlake Capital, Genstar Capital, Grain Management, Hellman & Friedman, Hg, Insight Partners, K1 Investment Management, TA Associates and Vista Equity Partners have committed to the board initiative announced by Diligent Corp., provider of company governance software and a portfolio company of Clearlake and Insight. Read our full coverage: Clearlake, Insight, Vista and other private equity firms create 50 new board roles for diverse candidates.
Portfolia Rising America Fund "invests directly in early and growth-stage companies in the U.S. led by people of color and/or LGBTQ founders, or products and services that cater to these markets," says investment partner Lorine Pendleton in a Q&A with Mergers & Acquisitions. "These are founders, ecosystems, products and services historically overlooked by traditional venture capitalists but positioned for significant growth and profitability." The firm is led by five women of color. In addition to Pendleton, the firm's leaders are: Noramay Cadena, co-founder and managing partner of MiLA Capital; Daphne Dufresne, a managing partner of GenNx 360 Capital Partners; Juliana Garaizar, an angel investor; and Karen Kerr, executive managing director at GE Ventures. "We believe that strength lies in differences and seek out entrepreneurs and startups who are using shifting demographics and their own diversity of experience and thought to create innovation that offers outsized opportunities for returns and impact." The fund had its first close earlier in 2020 and has made two investments to date: The first investment is in MoCaFi, a fintech startup founded by Wole Coaxum, a former JPMorgan Chase commercial banking executive and entrepreneur, who is African American. "MoCaFi offers a mobile-first banking platform that brings digital banking products to underbanked or unbanked communities (an 88 million U.S. market), allowing them to build credit and financial mobility," Pendleton explains. The second investment is in a women’s tele-medicine network. For more, read the full interview: Led by 5 women of color, Portfolia Rising America Fund backs mobile banking and women's telemedicine startups.
"As stewards of capital we have an outsized role in determining which businesses to support," says Mina Pacheco Nazemi of Barings Alternative Investments. "As asset allocators, we need to hold ourselves accountable. I can do more. Will you join me?" Dealmakers begin to weigh in, as Gerge Floyd's death sparked two weeks of Black Lives Matter protests against police brutality and racial injustice. Read the story: "Justice doesn’t just happen. It requires action, dedication and accountability," says one private equity investor.
MORE FEATURED CONTENT
Mergers & Acquisitions, the oldest trade publication serving the dealmaker community, has been acquired by Middle Market Information LLC from Arizent. Started in 1965 as Mergers & Acquisitions: a Dealmakers Journal, M&A’s print and digital magazine, news website, daily email newsletters and social media channels inform private equity firms, strategic acquirers, investment banks and other deal intermediaries on breaking news, emerging trends, and rising stars in the industry. Middle Market Information, a B2B data and information company, says M&A will retain its core values of providing quality intelligence to discerning professionals in the dealmaking community. “We are delighted to have an opportunity to invest in and grow Mergers & Acquisitions, a brand that’s been trusted by dealmakers for over 55 years,” said Middle Market Information CEO Jim Beecher. “This industry needs an independent voice that can deliver thoughtful analysis and deep coverage of both private equity and corporate deal activity. Through our website, www.themiddlemarket.com, and our publication, we will build upon the foundation of the brand and deliver an even better experience for the community in the coming months and years.” Editor-in-Chief Mary Kathleen Flynn adds: "The new challenges M&A and private equity professionals are facing in 2020 underscore the need for the trusted, insightful editorial content we produce at Mergers & Acquisitions and themiddlemarket.com. We've built a great foundation under Arizent, and we're looking forward to growing and extending our brand further with Jim and Middle Market Information." See full coverage: Middle Market Information LLC buys Mergers & Acquisitions publishing brand.
Mergers & Acquisitions is recognizing nine dealmakers as the 2020 Rising Stars of Private Equity:
These outstanding up-and-coming investment professionals have been excelling during a period of profound change in the U.S. and in the world. The publication of this list comes at a pivotal moment in time. The country is beginning to open up after three months of quarantine from the coronavirus, while a second wave picks up steam in the Sun Belt from South Carolina to California and including Texas. Dealmaking under quarantine while working from home has proved challenging, to say the least.Social justice issues have taken on fresh urgency. There is heightened awareness of systemic racial injustice and police brutality against Blacks after the deaths of George Floyd and many others. Meanwhile, the U.S. Supreme Court ruled recently that, “An employer who fires an individual merely for being gay or transgender defies the law.” On immigration policy, the Court recently put the brakes on dismantling the Deferred Action for Childhood Arrivals, or DACA. Meanwhile, the President is asking the Court to overturn the Affordable Care Act, also known as Obamacare.
Click here for full coverage of Mergers & Acquisitions' 2020 Rising Stars of Private Equity.
In the challenging times we face now, it’s more important than ever to come together as a community and recognize the people and companies that excel and lead. We invite you to join us in honoring the 2019 winners of Mergers & Acquisitions’ M&A Mid-Market Awards. In contrast with the volatile coronavirus-driven conditions unfolding in 2020, the dealmaking environment of 2019 was remarkably stable. Among the PE firms benefitting from the auspicious fundraising climate was Vista Private Equity, which raised a $16 billion fund – the largest technology-focused PE fund ever raised. Mergers & Acquisitions is honoring Vista founder and CEO Robert F. Smith with our 2019 Dealmaker of the Year award. In addition to leading his firm’s unprecedented fundraising, Smith excelled in philanthropy. When he spoke at the commencement of Morehouse College, he announced he would pay off all the student loans of the HBCU’s 2019 graduates, providing a helping hand in the student debt crisis facing many U.S. families. The financial services sector saw a lot of consolidation in 2019. Piper Jaffray wins our 2019 Deal of the Year for buying Sandler O’Neill to form Piper Sandler, which instantly became a leading investment bank in the financial services sector. And Stifel wins our 2019 Investment Bank of the Year for growing dramatically and making several acquisitions. Read our full awards coverage: Meet the winners of Mergers & Acquisitions’ M&A Mid-Market Awards.
To celebrate deals, dealmakers and dealmaking firms, Mergers & Acquisitions produces three special reports every year: the M&A Mid-Market Awards; the Rising Stars of Private Equity; and the Most Influenital Women in Mid-Market M&A. For an overview of what we're looking for in each project, including timelines, see Special reports overview: M&A Mid-Market Awards, Rising Stars, Most Influential Women.
Editor's Note: M&A wrap is a bi-weekly column, published on Mondays and Thursdays