M&A wrap: Coronavirus, TA, Levine Leichtman, Butterfly, Bolthouse, Jefferies, Alvarez & Marsal, Riverside, M33 Growth, Paul Hastings
Stocks were trading more than 800 points higher on Thursday morning after a $2 trillion stimulus deal was approved by the Senate. 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
Jefferies is leading an intiative to raise up to $1 billion to help develop a high-volume drug packaging product related to the coronavirus. The firm is supporting a public-private consortium that was launched by the U.S. Department of Health and Human Services, which joined ApiJect Systems America. The consortium is called Rapid, which is "intended to establish critically needed surge capacity to fill and finish, on a rapid basis, hundreds of millions of prefilled syringes to respond quickly and efficiently to widespread health emergencies, such as the novel coronavirus outbreak.” "We are ready to put the firm’s capital to work in smart solutions, such as Rapid, that are critically needed to help America and the world win the battle against this pandemic," said Jefferies CEO Rich Handler and president Brian Friedman.
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.
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, 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.
TA Associates has invested in software engineering firm Accion Labs. TA joins Basil Technology Partners. The target focuses on technologies including artificial intelligence, automation, big data, Internet of Things and SaaS. "Spending in the digital engineering market is being driven by technology and business model innovations, growth in technology companies, including start-ups, and the emergence of a global digital ecosystem,” says TA managing director Dhiraj Poddar. K&L Gates, KPMG, Lexygen India and Avendus Capital advised the sellers. Goodwin Procter and EY advised TA.
Levine Leichtman Capital Partners has invested in Blue Ridge ESOP Associates. The latter offers technology enhanced services for the administration and recordkeeping of employee stock ownership plans and associated 401(k) plans. Honigman advised Levine Leichtman and Deutsche Bank Securities Inc. advised Blue Ridge.
Butterfly Equity-backed Bolthouse Farms is buying Rousseau Farming Co.'s carrot operations. “This acquisition will help us scale to serve our customers better by bringing more fresh and healthy, locally grown carrots to them in the Southwest,” says Bolthouse Farms CEO Jeff Dunn.
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.