M&A wrap: Coronavirus, Alvarez & Marsal, Riverside, Fox, Fiserv, A&M Capital, Amazon, Google, Intel, Microsoft, Salesforce

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CORONAVIRUS IMPACT
The Dow Jones Industrial Average plunged more than 1,200 points on Wednesday morning, as the number of the worldwide coronavirus cases soars. On Monday, the Dow posted its biggest percentage decline since the stock market crash of 1987 and its biggest single-day point drop on record. Read our full coverage: Viral impact: How COVID-19 is affecting M&A and private equity

Genuine economic deterioration is a primary risk to private capital markets – PE tends to behave as a GDP-linked business. As consumer spending and business investment is set to decline, we expect to see a slowdown in PE transaction volume that follows the expected economic contraction. Tighter credit markets will force adjusted transaction capital structures; create private debt and special situations opportunities – With tighter lending, PE firms will be forced to enter transactions with more conservative capital structures that include a larger equity proportion. But, PE is well positioned to adapt with over $2.4 trillion in dry powder. Read the full story: Private equity deals will slow down, as global economy stalls amid coronavirus pandemic.

For the past two months, the coronavirus, also known as Covid-19, has been front page news across the world, as the situation escalates with new cases and an increased number of fatalities. While the long-term economic impact on American companies remains uncertain, there are important lessons to learn on how to manage future pandemic risks. Read the full story: Coronavirus contingency planning checklist for the middle market.

The coronavirus threat is the type of risk that material adverse change, or MAC, clauses are designed to address in M&A. The MAC clauses are used to qualify representations, warranties and covenants in an acquisition agreement, establish a threshold for determining the scope of disclosure or compliance relating to risks associated with the target’s business, and to delineate the circumstances in which a bidder is permitted to a transaction without liability. Read our full Q&A with Nixon Peabody's Dick Langan: Why the coronavirus makes material adverse change (MAC) clauses more important than ever.

The coronavirus may cause a drastic change in payment habits, as consumers shift to digital channels to reduce their risk of infection from handling cash, reports PaymentsSource, published by Mergers & Acquisitions parent company, Arizent. Many regions are already seeing a rise in contactless transactions, which could be seen as less prone to spreading disease than the handling of cash or paper checks. Travel advisories could lead to a drastic drop in tourism spending, which could hurt the growth of global payment systems that rely on foreign travel for growth. At the same time, companies that have been undergoing a digital transformation, or promoting new technologies such as cashier-free checkout, may see more rapid adoption if their offerings can reduce the risks of transmitting the virus through human interactions. See the full story, How coronavirus could change the payments industry.

DEAL NEWS
Fox Corp. (Nasdaq: FOXA) is buying streaming service Tubi for $440 million. The deal is part of Fox's strategy to expand its direct-to-consumer content. "Tubi will immediately expand our direct-to-consumer audience and capabilities and will provide our advertising partners with more opportunities to reach audiences at scale," says Fox CEO Lachlan Murdoch. Allen & Co., Jenner & Block and Kirkland & Ellis are advising Fox. Qatalyst Partners and Fenwick & West are advising Tubi.

A&M Capital Opportunities has invested in auto repair company Pacific Elite. The latter is merging with Crash Champions, another auto repair business. B. Riley FBR Inc. and Ferruzzo & Ferruzzo LLP are advising Pacific Elite. Goodwin Procter is advsing A&M. Madison Funding, Antares Capital and BMO Sponsor Finance are providing financing.

Fiserv Inc. (Nasdaq: FISV) has bought Bypass Mobile, a provider of point-of-sale systems to sports and entertainment venues and restaurant chains. “In an age of increasing customer expectations, it is critical that businesses have a robust and easy-to-use omni-commerce platform," says Bypass CEO Brandon Lloyd.

FEATURED CONTENT
Once venture capital-backed startups themselves, today’s tech giants know a thing or two about VC seed money. It’s fitting that many of them have created corporate venture capital groups of their own. These CVCs help their owners experiment and nurture new technologies and ideas in the early stages, without requiring the commitment of an acquisition.The CVC strategy often augments a company’s research and development efforts as well as complementing its M&A strategy. Middle-market dealmakers would be wise to track the VC investments of the five companies we highlight: Amazon.com Inc. (Nasdaq: AMZN), Google (Nasdaq: GOOG), Intel (Nasdaq: INTC), Microsoft Corp. (Nasdaq: MSFT) and Salesforce.com Inc. (NYSE: CRM. Read our full coverage: Venture forth: How five of the biggest tech companies explore new territory through early-stage investments.

Houlihan Lokey, Lincoln International, Jefferies Financial Group, William Blair and Piper Sandler Cos. rank as the top five most active M&A investment banks in 2019, based on the volume of completed private equity-backed deals in the U.S., according to PitchBook. Besides advising on M&A deals, the investment banks on the top 10 list also had a busy year with acquisitions of their own in 2019, including two acquisitions by Houlihan Lokey and three by Stifel Financial. Piper Sandler Cos., was created when Minneapolis-based Piper Jaffray Cos. acquired New York-based Sandler O’Neill & Partners in a deal representing more than half of Piper Jaffray’s $930 million market capitalization. The firm also had another acquisition in 2019 and sold a company to exit the traditional asset management business. See our full coverage: Top investment banks for PE-backed deals in 2019: Houlihan Lokey led the pack.

Audax, HarbourVest and Genstar ranked as the top three most active private equity firms in 2019, based on the volume of completed deals in the U.S., according to PitchBook. Three companies tied for fourth place: Abry, Carlyle and Shore Capital. Where were these PE firms looking for deals? Eight of the firms on our list name the software and technology sector among their top investment targets, and seven put healthcare companies on their priority list. Financial services and consumer services are each named by five of the firms as industries they focus on, with four naming business services companies. Fundraising from investors in 2019 led to two notable fund launches earlier in 2020: KKR’s Global Impact Fund and HarbourVest’s $2.6 billion HarbourVest Fund XI. See our full coverage: Top private equity firms in U.S. deals in 2019: Audax Private Equity ranked No. 1.

“The manufacturing industry is changing so quickly, and on a global basis, that the sector presents an enormous investment opportunity,” says Michael Psaros, co-founder and managing partner of KPS Capital Partners, a manufacturing-focused private equity firm that recently raised $6 billion and $1 billion funds in four weeks. “Companies and entire industries are being transformed by technology and by globalization, We see value in manufacturing where others do not and we make these manufacturers better. It’s a great time to invest in the sector and we are excited about what’s to come.” Mergers & Acquisitions explores five trends fueling manufacturing deals. Read our full coverage: 5 trends driving manufacturing M&A.

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.

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