Forescout (Nasdaq: FSCT) and the Advent International private equity firm have reached an amended $1.43 billion merger agreement to settle a lawsuit over Advent’s attempt to back out of the deal based on Covid-19 concerns. “The fundamental strengths that first attracted Advent to Forescout – its differentiated technology, record of innovation, talented employee base and relentless focus on its customers – continue to make this business a compelling platform and critical player in the cybersecurity ecosystem,” says Bryan Taylor, head of Advent’s technology investment team. According to lawyers for Wilson Sonsini Goodrich & Rosati who argued the case for Forescout, the agreement marks the first “material adverse event” related to Covid-19 where a temporary restraining order was granted and a settlement was reached. Advent had announced in May that it wanted to back out of the sale as a result of the effect that the pandemic had on Forescout’s security device business. In response, Forescout sued Advent in Delaware Chancery Court, arguing that the purchase agreement specifically barred Advent from citing the coronavirus as creating a material adverse change that would excuse the investment fund from finalizing the deal. The trial had been scheduled to start July 20. The transaction is now expected to close in the third quarter. Crosspoint Capital Partners, Morgan Stanley and Ropes & Gray also advised on the deal.
Guiding portfolio companies through the Covid-19 pandemic is the biggest challenge facing private equity firms and service providers today. Firms throughout the middle market are focused now on helping portfolio companies make decisions about reopening their businesses, assessing the impact of the coronavirus on their businesses and forging a strategy on moving forward. For example, Boston-based Watermill worked with portfolio company Enbi to reimagine its business to make face shields. “They are a high-tech company with deep market knowhow that make rollers for printers,” says Julia Karol, president and COO of Watermill. “The company realized people who have to wear the face shields for long periods of time were getting deep welts on their foreheads. Enbi was able to make a high-grade compound that used foam across the front of the shields, so they are comfortable. Enbi will continue to make masks and explore other innovations. It’s awesome to see the whole manufacturing community using their skills and expertise to help.” For more insights from Watermill, New Heritage, Monroe, Cushman & Wakefield and EisnerAmper, see the story Switching gears: 5 ways private equity firms and service providers are helping portfolio companies adapt in the Covid-19 pandemic.
In 2019, Saudi Aramco, the world’s biggest oil producer, was set to buy a 20 percent stake in Reliance Industries Ltd.’s refining and petrochemicals business, valuing it at $75 billion. But Mukesh Ambani, Asia’s richest tycoon, said on Wednesday that a deal hadn’t been worked out yet with the delay partly down to the coronavirus.
Technimark, manufacturer of plastic packaging and components based in North Carolina, has acquired Tool & Plastic Industries Ltd., a supplier of injection molded products for the medical device, pharmaceutical and consumer product sectors headquartered in Longford, Ireland. Terms were not disclosed. Technimark is backed by Pritzker Private Capital.
Payments company Square has acquired Stitch Labs, an operations management platform. Stitch Labs builds tools for businesses for inventory and orde r management, channel management and fulfillment solutions. Stitch Lab’s products will continue to operate for existing customers until the spring of 2021.
Triller, a music-video streaming platform owned by the Los Angeles-based Proxima Media investment firm, has acquired Halogen Networks and its patents for live video streaming and monetization. Triller plans to use Halogen’s technology to deliver live-streamed, large-scale free and pay-per-view events.
MP Materials, producer of rare earth minerals, will be listed on the New York Stock Exchange following a merger with Fortress Value Acquisition Corp. The combined company will be valued at about $1.5 billion, and current MP Materials shareholders JHL Capital Group and QVT Financial will roll their existing equity holdings into equity of the combined company.
CB Insights has acquired VentureSource data from Dow Jones. According to CB Insights, the VentureSource data assets will significantly expand its private markets coverage and strengthen its position in emerging technology information and private market data.
Los Angeles middle-market PE firm RLH Equity Partners has invested in MCA Connect, one of the largest independent Microsoft Dynamics firms that had not been controlled by private equity or acquired by a large corporation, according to RLH.
Berlin-based RSG Group is acquiring the Gold’s Gym fitness chain for $100 million. With the acquisition, RSG Group will have more than 900 fitness locations on six continents. Gold’s Gym had filed for Chapter 11 bankruptcy protection from creditors in May.
Meridia Private Equity has invested in Vetsum, a veterinary care provider in Spain. Alongside Kipenzi, the company’s majority shareholder, Meridia plans to grow Vetsum by accelerating its “buy and build’ consolidation strategy.
Bear Down Brands, a portfolio company of Topspin Consumer Partners, has acquired Verilux Inc., a Waitsfield, Vermont-based provider of lighting products that simulate natural light indoors for reading and seasonal light therapy. Huntington Beach, California-based Bear Down is a developer and marketer of home, health and wellness products marketed under the Pure Enrichment, Bentgo, Brusheez and EasyLunchboxes brands. Intrepid Investment Bankers advised on the deal.
Attom Data Solutions, curator of a national property database, has acquired Home Junction Inc., a real estate data technology company. Monroe Capital supported the deal through an increased credit facility to Attom.
Trident Energy, an independent oil and gas company operating in Equatorial Guinea, has acquired the Pampo and Enchova offshore oil basins from the Brazil-run Petrobras.
A June survey of senior executives and M&A professionals found that the Covid-19 pandemic is creating uncertainty about the strength of the U.S. economy over the next 12 months, with respondents evenly split between positive, neutral or negative outlooks. But looking out 24 months, respondents are overwhelmingly positive about the U.S. economic outlook, reports Dykema and the Association for Corporate Growth—Detroit, San Antonio/Austin and Columbus Chapters, which conducted the survey. The survey respondents also say that the No. 1 driver of U.S. M&A deal activity is the health of the U.S. economy, and most believe their company or portfolio companies will be involved in an M&A transaction in the next 12 months.
In an echo of the 2016 presidential election, bankers are contributing more to the Democratic candidate for president, Joe Biden, than to Donald Trump. But bankers are giving more overall to Republicans and donations for 2020 congressional races appear to be spread more evenly between the parties. Observers say that the donations reflect bankers’ interest in maintaining influence over the party in power. Read more in Why banks are steering more political donations to Democrats.
After a three-month decline that brought U.S. manufacturing activity to its lowest level since the global financial crisis, the industry showed signs of slight recovery in May and June, according to Capstone Headwaters’ Industrials & Manufacturing Update. Capstone reported that from speaking to industry players and private equity firms about how Covid-19 has impacted their business model and merger and acquisition appetite, the firm has found that while activity has slowed, select M&A transactions are still underway.
First-time share sales in Hong Kong are proving to be extremely popular with investors as markets have been awash with money and stocks in the financial hub have staged impressive rallies. Healthcare and biotech IPOs have been among the most high-profile, with retail investors putting in orders for so much stock that institutional buyers have often struggled to get an allocation under the city’s claw-back rules.
Adam Cook, former CEO of Glebar Co., has formed Culper Capital Partners, a New Jersey-based private investment company. The new company plans to provide debt and equity capital to middle-market companies while partnering with their management teams to drive growth and enterprise value. Culper Capital will also invest in alternative credit and equity vehicles and real estate.
Bain Capital-backed Diversey, a hygiene and cleaning company, has appointed Philip Wieland as ongoing CEO of the company. He had served as Interim CEO and a member of the board of directors since January.
William Blair has added two senior investment bankers: Jamie Hamilton as managing director, financial technology investment banking, and B.T. Remmert as managing director, IT services investment banking, both in Atlanta.
Kirkland & Ellis has hired Manas Chandrashekar for its Hong Kong office as a partner in the debt finance practice group. He joins from Latham & Watkins.
EQUALITY AND INCLUSION
A 2019 report from the Institute for Policy Studies shows that the median wealth for Black families in 2016 was $3,557—about 2% of the median wealth owned by white families, which owned nearly $147,000 in the same year. For banks to play a major role in closing the income gap between whites and Blacks, they’ll need to diversify their top leadership and middle-management ranks. New hiring and promotional policies could reshape banks’ understanding of local communities’ needs and expand who gets mortgages or small-business loans and which families build lasting wealth. Including more people of color in bank management would diversify the flow of capital, says Malia Lazu, the chief experience and culture officer at Berkshire Hills Bancorp in Boston. See the full story: How banks aim to close racial wealth gap: More minorities in leadership.
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.
Economic activity has gained, but it hasn’t come close to pre-pandemic levels, according to the Federal Reserve’s Beige Book, released Wednesday. “Contacts in nearly every district noted difficulty in bringing back workers because of health and safety concerns, childcare needs, and generous unemployment insurance benefits,” the report said. Employment improved in nearly all districts as states allowed businesses to reopen and consumer spending also rebounded with the reopening. For more, see the story: Beige Book: Outlook ‘highly uncertain’ with no timeline or gauge of effects.
Under normal circumstances, M&A demands a robust set of tools and services to be successful. In today’s environment in which the stakes have been raised by the coronavirus crisis, professional help from service providers is more important than ever. Private equity firms and their portfolio companies want to know what actions they can or should take, and what their peers are considering, to make the best decisions possible in response to the Covid-19 pandemic. Through talking with many different affected parties, service providers have streams of data and information that can help investors make informed decisions and minimize negative economic impacts on their investments. Mergers & Acquisitions examines offerings from EHE Health, Norgay Partners, Cepres, Valuation Research Corp. and Axial. “The stakes are high today,” says Greg Mansur, chief client officer at EHE Health, which provides a playbook on getting companies back to work safely. “We want to be part of the solution for our clients. We want to help them through this and help America get back to work.” Read our full coverage: 5 service providers guide dealmakers through the next phase of the pandemic.
As transactions previously delayed due to the pandemic begin to pick up, acquirors and investors in the middle market should evaluate the target’s performance during the unprecedented disruption presented by the pandemic, and adjust expectations for the immediate and medium term. Supplemental due diligence is not only prudent — it is likely to be required as a condition to the placement of any representations and warranties insurance. Essential considerations include whether the target has been able to innovate and whether the valuation agreed to in a letter of intent should be revisited. Buyers should also review any termination provisions to determine whether any breakup fee would be payable. See our full coverage: 11 factors for dealmakers to consider before buying a company during the pandemic.
Many companies are unprepared to face the tremendous economic challenges brought on by the pandemic. For buyers, navigating this new world of distressed M&A may be the hardest obstacle to overcome in transactions with insolvent organizations. Read the full article: Coronavirus puts spotlight on distressed M&A.
Digital technologies like artificial intelligence and advanced analytics can help organizations to accelerate their pace and expand their insights quickly—advantages that are especially crucial in times of rapid change. See the full story: How analytics can rebalance M&A in the wake of the coronavirus.
What do you do when you’re a dealmaker under quarantine, and face-to-face meetings are out of the question? For Work from Home (WFH) strategies, Mergers & Acquisitions turns to eight prominent dealmakers from private equity firms, investment banks, lenders and law firms. “I miss the excitement of a great conference; wearing my nice clothes, early morning breakfasts, the one-on-ones, drinks with my women ‘tribe,’ and dinner at a steakhouse, even though I am a vegan,” says Amy Weisman, managing director, business development, Sterling Investment Partners. In some respects, it is easier to build relationships now, explains Nanette Heide, partner, co-chair, private equity group, Duane Morris. “Meeting folks over a video conference from their home is immediately humanizing.” M&A pros also point out that human factors play a role. “Emotional Quotient (EQ) is more important than ever during trying times,” says Jeremy Holland, managing partner, origination, The Riverside Co. “It’s critical to remember that the dealmaker on other side of the (now figurative) deal table is a person, too. They have good and bad days and presumably know many people in high-risk categories, potentially even themselves. Being extra thoughtful about each interaction is important.” Read our full coverage: Dealmaking under quarantine: 8 private equity and M&A pros share strategies while social distancing.
MORE FEATURED CONTENT
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