M&A wrap: Coronavirus, BorgWarner, Delphi, BabyQuip, 5Capital, Hampleton Partners, Alvarez & Marsal, Riverside, M33 Growth, Paul Hastings
BorgWarner Inc. (NYSE: BWA) may back away from its $1.5 billion deal for Delphi Technologies Plc after the latter auto parts supplier tapped out its credit line without receiving permission from its acquirer. Delphi drew down its full $500 million revolving credit facility to position for the downturn related to the coronavirus pandemic, the parts maker said. BorgWarner gave Delphi notice that this breached their agreement announced in January and that it has 30 days to resolve the issue. Read the full story from Bloomberg News: Delphi draws down credit facility, gets warning from BorgWarner about pending deal.
Baby equipment rental company BabyQuip has acquired Tot Squad's baby gear cleaning and repair service. The combined company will offer cleaning services to parents and families who are concerned about sanitizing their baby strollers, cribs and car seats. "Given the heightened concern due to Covid-19, our community of quality providers will soon provide these cleaning services to local parents concerned about the gear they already own," says BabyQuip CEO Fran Maier.
Placement agent 5Capital is dedicating resouces to help venture capital and private equity firms raise capital in the healthcare services, bio-pharma, medtech, digital health, diagnostics, and wellness sectors. “The post-Covid world will witness an unprecedented attention towards all aspects of human health – promising and sustainable biopharma companies, advanced research and drug development, innovative digital health, cutting-edge medical devices, effective and efficient healthcare services, and a global wellness mindset," says 5Capital managing partner Allan Majotra.
The digital commerce sector finished the second half of 2019 with 778 disclosed deals, up from 664 transactions in the first half of 2019, led by Charles Schwab’s (NYSE: SCHW) $26.3 acquisition of Ameritrade, according Hampleton Partners. However, there is uncertainty in the sector as the coronavirus spreads. “Unfortunately, the growing effect of Covid-19 means that M&A in the digital commerce field is extremely uncertain for 2020 – at least for now," says Hampleton sector principal Ralph Hübner. "Retail is grappling with a sudden drop in spending and consumption as fewer shoppers commit their finances to non-essential goods and services. The funding market is also set to suffer for a while."
MORE ON CORONAVIRUS IMPACT
The coronavirus, also known as Covid-19, continues to impact the global economy. In the middle market, companies are proactively drawing down on revolving lines of credit and other sources of financing to put cash on the balance sheet to weather the storm. Mergers & Acquisitions interviews dealmakers from Alvarez & Marsal, Merrill Corp., M33 Growth, M-III Partners, Paul Hastings and the Riverside Co. Read our full coverage: “Brace for impact,” say private equity firms to portfolio companies about the coronavirus
Merrill Corp., best known for its virtual data room, is rebranding the company and renaming itself Datasite, after its well-known VDR. The move comes amid the coronavirus crisis. "Virtual collaboration is more important than ever, and we are here to ensure secure and efficient ways of work remain possible," Rusty Wiley, CEO of Datasite, tells Mergers & Acquisitions in an interview. See Why Merrill Corp. is rebranding as Datasite: Q&A with CEO Rusty Wiley.
The economic impact of the coronavirus pandemic will likely lead to an uptick in bank failures, but when and how many will depend on an array of factors. The Labor Department on Thursday reported over 3 million jobless claims last week, the most ever, as businesses struggle with the effects of the virus outbreak. Analysts said over time it will be hard for some smaller banks already facing headwinds to stay open without being acquired. Read the full story from American Banker: Will coronavirus lead to a wave of bank failures?
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.
The coronavirus 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.
Exponent Women is hosting a virtual meeting on Tuesday March 31, called Unpacking the Stimulus Package. The conversation will be led by Duane Morris partners Nanette Heide and Sandra Stoneman.
Chad Gardiner was hired by Bridgepoint Investment Banking as director of investment banking. He was previously with KPMG Corporate Finance.
Thomas Biaggi and Keshav Lall have joined advisory firm M-III Partners where they are focusing on restructuring and turnaround situations. Biaggi was previously with Bank of America Merrill Lynch, while Lall comes from Essar Capital Americas.
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.
In a period of accelerating technology innovation and investment, it’s critical to stay aware of new technologies, offerings, data and analytics types and business models in your space, and adjacent spaces. Most companies are looking for ways to get better and earlier access to the startup space. While corporate venture capital (CVC) is only one method, it can be a fairly powerful one. Read full coverage: How corporations can benefit from VC investments in technology
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.
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.