M&A wrap: Coronavirus, Apple, Riverside, Paul Hastings, Intuit, Credit Karma, TurboTax, Perrigo, Ghost Kitchens

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The Dow Jones Industrial Average plunged more than 1,000 points on Monday, posting its worst day in two years as the coronavirus triggered fears of a global economic slowdown. To gauge the potential impact on the middle market, we look at recent comments made by CEOs of public companies, and we hear from Hong Kong-based dealmakers at the Riverside Co. and Paul Hastings. How it will play out in M&A and private equity is difficult to discern this early in the spread of the virus. To get a sense of the ramifications for the middle market, Mergers & Acquisitions examines several factors, including the current impact on China’s economic growth; how the virus was discussed in the earnings calls of U.S. public companies from Apple Inc. (Nasdaq: AAPL) to Walmart Inc. (NYSE: WMT); and the views of two prominent dealmakers who are based in Hong Kong. As this is an ongoing story, we’ll continue evaluating the economic and business effects. Analysts are already forecasting slowed growth for China, due to COVID-19. While the country’s economic growth was 6.0 percent in the fourth quarter of 2019, it may fall to as low as 3.5 percent in the first quarter of 2020, if the spread of the virus is not contained fast enough for manufacturing production to resume to normal levels, Morgan Stanley analysts wrote in a Feb. 19 report. While factories had started to come online, analysts found that production had only reached 30 to 50 percent of normal levels. Read our full coverage: Viral impact: How COVID-19 is affecting M&A and private equity

M&A in the manufacturing industry is flourishing, despite many challenges in the sector - or rather, because of those challenges. The Institute for Supply Management said that its manufacturing index fell in December 2019 to 47.2. That’s its lowest level since June 2009, when it hit 46.3. This, in addition to a tight labor market, China’s retaliatory tariffs and the upcoming presidential election, has made manufacturing a tricky sector to do business in these days. But M&A remains active. Interest rates are low, and companies as well as investors have cash to invest. Additional factors come into play, including the need for consolidation and globalization in the manufacturing industry. Robots are playing a role as well, and manufacturing automation has become appealing. “The tight labor market and increasing wages have led us to pursue a number of different initiatives at our companies to counteract the resulting pressures created,” says Brad Roberts, a partner with the Riverside Co. “Where economical, we are investing in increased automation to enable us to meet growing sales volume amidst this difficult hiring environment.” Read our full coverage: 5 trends driving manufacturing M&A.

DEAL NEWS
Intuit Inc. (Nasdaq: INTU) is close to buying Credit Karma Inc. for about $7 billion in cash and stock deal, the Wall Street Journal reported. The purchase will push the maker of TurboTax deeper into the consumer finance space. The acquisition would also be Intuit’s largest in its 37-year history. Broadening its sales base is important at a time when Morgan Stanley said it’s expecting tax-preparation software companies to face headwinds for the revenue they get from each tax return this year due to the combined effect of a rising mix of free filings and lower need for services that assist do-it-yourself filers, says Bloomberg News. Read the full story from Bloomberg: Intuit nears deal to buy Credit Karma.

Private equity firms Bain Capital and Boyu Capital are among bidders for SML Group Ltd., a closely held garment label maker for fashion brands and retailers globally, according to Bloomberg News: Buyout firms circle $500 million clothing tag maker SML.

Crane Co. (NYSE: CR) is buying Cummins-Allison Corp., which handles currency, ticket and check handling services, for $160 million. Livingstone is advising Cummins.

Perrigo Co. (NYSE: PRGO) is buying the oral care assets of High Ridge Brands for $113 million. The acquisition is subject to bankruptcy court approval in connection with High Ridge Brands’ chapter 11 cases. Sawaya Partners and Morgan Lewis & Bockius are advising Perrigo.

For more deal announcements, see Weekly wrap: Ally Financial, Franklin Resources, Morgan Stanley

For more on fundraising, see PE fundraising scorecard: Lakeshore, Pamlico, Water Street.

DEAL TRENDS
Rising demand for food delivery is driving investment in ghost kitchens, commercial spaces that let restaurants operate without brick-and-mortar dining locations, according to PitchBook. Ghost Kitchens are already supported by major delivery brands like Grubhub (NYSE: GRUB) and DoorDash as a way to both reduce costs and add new revenue streams.

PEOPLE MOVES
Michael Greenman and James Mitchel have been promoted to partners at private equity firm Harvest Partners. Josh Carter, Chris Peyser and Chris Schaller have been promoted to principal; Fabia DeCrescenzo has been promoted to director of finance; and Lucas Rogers has been promoted to vice president.

Laura Friedrich has joined law firm Willkie Farr & Gallagher LLP as a partner where she is focusing on private equity fund formation.

Gregory Hall has joined law firm Faegre Drinker. Hall was previously with DLA Piper and focuses on M&A.

FEATURED CONTENT
Artificial intelligence in healthcare saw about $4 billion in funding across 367 deals in 2019, according to data and research firm CB Insights. Amazon.com Inc. (Nasdaq; AMZN) is no exception. The tech conglomerate is using its recent deals for Health Navigator and PillPack to launch new software services in healthcare. Health Navigator works with companies like Microsoft Corp. (Nasdaq: MSFT) in offering services such as remote diagnoses, and with triage to help patients figure out whether to stay at home, see a doctor or go straight to the emergency room. Read our full coverage: How Amazon is using M&A to revolutionize healthcare.

Pushed by a groundbreaking California law mandating it, more companies are putting women on their public corporate boards. The law faces pressure in court and may not stand, but its rippling effect has already started to increase the visibility and awareness of the important benefits of board diversity. Investors are taking notice and trying to get ahead of the curve. According to a study published by MSCI in March 2018, having three or more women on a company’s board of directors translates to a 1.2 percent median productivity above competitors. Read the full guest article by Venable's Belinda Martinez Vega: Why businesses are adding women to their boards.

If there’s anything M&A professionals dislike, it’s uncertainty. And heading into 2020, there’s more than enough uncertainty to go around, including questions about the economy, international trade, impeachment, domestic politics and more. The funny thing is, the lack of clarity may actually make the first half of the year a great time for M&A, as dealmakers push to close transactions before the looming uncertainty of Election Day and its outcome. We conducted interviews with 8 investment bankers and other M&A advisors. Some said the first half of the year will be robust, while others said the uncertainty may have a negative impact throughout 2020. Read the full story, What’s ahead for M&A in 2020? We ask 8 advisors.

Mergers & Acquisitions has named the 2020 Most Influential Women in Mid-Market M&A. This marks the fifth year we have produced the list, which recognizes female leaders with significant influence inside their companies and in the wider dealmaking world. It’s been gratifying to watch the project evolve over the years – and become more influential itself. This year, we received more nominations than ever before. As a result, we expanded the number honored to 42 in 2020, up from 36 in 2019. Many dealmakers are new to our list, including Rockwood Equity Partners' Kate Faust, William Blair's Shay Brokemond and Avante Capital Partners' Ivelisse Simon. Read our full coverage of all the champions of change on our list, including Q&As with each individual.

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.

EVENTS
ACG New York is hosting the 12th annual healthcare conference and bourbon tasting at the Metropolitan Club in New York on Feb. 27.

ACG Raleigh Durham's 18th annual capital conference is being from March 31-April 1 at the Raleigh Marriott Crabtree Hotel in Raleigh, North Carolina.

InterGrowth 2020 is taking place at the Aria Resort & Casino in Las Vegas from April 20-22.

The 4th annual Emerging Manager Connect conference is taking place at the Harvard Club in New York on July 22nd.

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