The private equity model has held up very well over the decades, continuing to outperform the public markets, even as economic cycles come and go. But the rate of growth has slowed, leading PE firms to seek adjacent areas of business to expand. As PE firms face increased pressure to produce higher returns on their investments, many of them are turning to a familiar area of business: lending. Middle-market loans offer a potential growth path for PE firms, Including Adams Street, Balance Point. Carlyle Group (Nasdaq: CG) and VSS , many of whom view credit as a natural extension of their bread-and-butter operations. Expanding its credit business is a top priority for Carlyle. The firm’s co-CEO expects the private debt market to grow at a faster pace than the private equity market in the coming years. Most recently, in July 2019, Carlyle raised $2.4 billion for Carlyle Credit Opportunities Fund, which will pursue deals with upper-middle market borrowers, including deals that are not private equity sponsored, but sponsored by family or entrepreneur-owned companies and seeking an alternative to traditional capital markets. “Our LPs want this risk/return exposure,” says Alex Popov (pictured), a managing director and head of Carlyle Credit Opportunities Fund “The private equity industry has grown tremendously, and private debt is next. The larger firms have the resources and competitive advantage to offer investors credit opportunities.” Read our full coverage: Private equity firms are becoming lenders. Here’s why.
At Mergers & Acquisitions, we’ve begun work on one of our most popular projects of the year: the Most Influential Women in Mid-Market M&A. The deadline for nominations is Oct. 14. Last year, we honored 36 women, including Marilyn Adler (Medley Capital), Jennifer Cotton (Madison Capital Funding), Nishita Cummings (Kayne Anderson), Venita Fields (Pelham S2K), Jeri Harman (Avante Mezzanine Partners), Pam Hendrickson (the Riverside Co.), Gretchen Perkins (Huron Capital) and Trisha Renner (Baird). Who will make it on this year’s list? To be considered, candidates must be women who are outstanding dealmakers both inside and outside of their firms. Evidence of influence in the broader M&A industry is essential. When nominating a candidate, please explain how she outperforms her colleagues at her firm and in the industry. Please provide examples of deals she has led, initiatives she has launched and other instances that show evidence of her influence in the middle market. An important guide to what we’re looking for can be found in the dealmakers we’ve honored in previous years. See profiles of, and Q&As with, past honorees here.
TO NOMINATE A CANDIDATE, CLICK HERE.
Forever 21 Inc. filed for bankruptcy protection, the latest big fashion merchant who couldn’t cope with high rents and heavy competition as the shift to e-commerce cut a swathe through traditional retailers. Once popular among teenagers in the 2000s for its affordable but eye-catching designs, Forever 21’s signature bright-yellow shopping bags have become a rarer sight as Generation Z consumers — those born from 1998 onwards — shifted rapidly over to e-commerce and streetwear brands in recent years. Read the full story from Bloomberg News: Forever 21 files for bankruptcy, adding to retail apocalypse.
Blackstone Group Inc. (NYSE: BX) has acquired more than 1 billion square feet of logistics space since 2010 as part of the firm’s global bet that the rise of e-commerce is driving demand for last-mile real estate. The private equity giant is extending that effort, agreeing to acquire Colony Industrial, the warehouse arm of Colony Capital Inc., for $5.9 billion. The unit’s properties mostly serve as the last mile of the logistics chain and are crucial for companies seeking to make speedy deliveries to consumers. Read the full story by Bloomberg News: Blackstone extending warehouse bet with Colony deal.
Siemens Medical Solutions USA Inc., a subsidiary of Siemens Healthineers AG, is acquiring ECG Management Consultants from Gryphon Investors. The target offers operational, financial and technology-related consulting services to health systems, hospitals, medical groups and academic medical centers. William Blair and Kirkland & Ellis are advising ECG.
Francisco Partners is buying Orchard Software Corp., which focuses on developing software that improves clinical and pathology laboratory workflow. Advisors to the target include: Brentwood Capital Advisors and Bose McKinney & Evans LLP. The advisor to FP is Wilson Sonsini Goodrich and Rosati.
Brookfield Business Partners (NYSE: BBU) is buying about half of Clayton, Dubilier & Rice’s stake in Brand Industrial Services, a provider of infrastructure services to industrial and commercial facilities. Debevoise & Plimpton LLP is advising CD&R and Paul, Weiss, Rifkind, Wharton & Garrison LLP is advising Brookfield.
Cybersecurity is becoming a rising factor when conducting M&A, according to a survey from Cybersecurity Assessments in Mergers and Acquisitions. About 77 percent of deal pros have recommended one acquisition target over another based on the strength of a cybersecurity program, and nearly 49 percent have seen a deal fall apart over data breach concerns. The survey is based on results from 250 U.S.-based M&A professionals.
PE mega-funds, those valued at $5 biillion and above, have outperformed smaller funds over the past 20 years by posting the highest internal rate of return average, according to Pitchbook. Across all fund sizes, PE mega-funds are the most likely to achieve total value to paid-in ratio (TVPIs) above 1.5 times. PE mega-funds have been most likely to outperform public indices when accounting for the performance drag of uncalled capital sitting in reserve accounts.
Observers predict the end of the year will be active in dealmaking. Among the deals that closed in August: Littlejohn’s acquisition of Kaman Corp.’s (NYSE: KAMN) distribution business; Sealed Air Corp.’s (NYSE: SEE) purchase of Automated Packaging Systems; and Piper Jaffray’s (NYSE: PJC) deal for Weeden & Co. Read the full story: Littlejohn’s purchase of Kaman’s distribution business among deals that closed in August.
Matt Anderson has been hired as chief digital officer at the Carlyle Group (Nasdaq: CG) and Stefan Grunwald has been hired as chief procurement officer. Anderson was previously with Arrow Electronics and Grunwald was most recently with Cardinal Health.
David Christmas has been named CEO at Trilantic North America-backed Fluid Delivery Solutions. He was previously with Schlumberger Ltd.
It’s a milestone year for the Blackstone Group Inc. (NYSE: BX), which transitioned from a publicly-traded partnership to a corporation on July 1. Most recently, the New York firm announced on Sept. 11 the final close of its latest global real estate fund. With $20.5 billion of total capital commitments, Blackstone Real Estate Partners IX is the largest real estate fund ever raised. Mergers & Acquisitions spoke with Stephen A. Schwarzman, the firm’s co-founder, chairman and CEO, on the occasion of his new book, What It Takes: Lessons in the Pursuit of Excellence, published by Avid Reader Press/Simon & Schuster, and released on Sept. 17. Schwarzman, who is speaking at the Economic Club of New York on Sept. 18, shared his perspective on the private equity model, its resilience during recessions and how the industry has evolved over three decades. Read the full story: “Complete control” is the beauty of private equity, says Blackstone’s Stephen A. Schwarzman.
Bank M&A has been soaring, creating the perfect backdrop for Piper Jaffray’s announced acquisition of Sandler O’Neill & Partners LP. “There has been a lot of consolidation in the bank space,” Piper Jaffray CEO Chad Abraham told Mergers & Acquisitions. “But there are still 5,000 banks, and we expect the pace of consolidation to continue.” Piper Jaffray is determined to be the market leader in all the industries it does business in. The Minneapolis-based boutique investment bank currently dominates some of the sectors it serves, especially healthcare. With the acquisition of New York-based Sandler the renamed firm Piper Sandler will instantly become a leading investment bank in financial services, a sector Piper has sought to expand in for several years. For analysis of the deal, see Counting on bank M&A: Why Piper Jaffray bought Sandler O’Neill.
One sector that private investors are increasingly turning to is packaging, which remains saturated with untapped opportunities. Changing consumer behaviors, sustainability demands and market fragmentation all create a significant opportunity for PE firms to partner with packaging companies looking to remain competitive. Read the full guest article by Sun Capital’s Jeremy Stone: Why private equity likes packaging.
Activity and urgency characterize the current dealmaking environment, say investment bankers and other M&A advisors interviewed by Mergers & Acquisitions. After a record-breaking 2018, forecasts for 2019 remain bullish. Advisors point to a lot of cash that must be deployed by strategic buyers and private equity firms alike; a healthy U.S. economy; and low interest rates. Competition for high-quality targets has never been more intense, especially for technology providers, they report, which means sellers are commanding high prices. It all adds up to a sellers’ market. Read the story: 8 M&A advisors urge closing deals now, while economy stays strong.
The New York Yankees are in first place in the American League East division and have one of the best overall records in Major League Baseball. Alex Rodriguez is best known as the former Yankees star who hit 696 home runs over the course of his 22-year baseball career, but today he’s making a name for himself as an investor as the founder and CEO of A-Rod Corp. One recent example: While serving as a guest judge on CNBC’s Shark Tank, Rodriguez backed Ice Shaker, an insulated bottle maker founded by former National Football Leaguefullback Chris Gronkowski. Rodriguez talked about his life off the field at EisnerAmper’s 4th annual Alternative Investment Summit. Among the topics discussed: Rodriguez’ childhood as the son of a single mom; his investment thesis, which shares much with other middle-market investors; how he’s helping singer/dancer/actress Jennifer Lopez (to whom he became engaged in March) transition her business initiatives from licensing her brands to owning them; and how one day he just might buy a baseball team. Read the full story: A-Rod talks Ice Shaker, NRG eSports, J. Lo & maybe buying a baseball team.
Looking for a glimpse of what’s to come in the private equity industry? Meet Mergers & Acquisitions’ 2019 Rising Stars of Private Equity. As the PE industry undergoes a generational shift, and many firm founders retire, it’s well worth getting to know these emerging leaders, including Branford’s Austin Collier, Sterling Partners’ Shawn Domanic and Summit Partners’ Sophia Popova. For profiles and video interviews, see Meet Mergers & Acquisitions’ 2019 Rising Stars of Private Equity For Q&As, see 10 Rising Stars of Private Equity tell their tales.
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 Influential Women in Mid-Market M&A. For more on the timeline and nomination process for each, see Special reports overview: M&A Mid-Market Awards, Rising Stars, Most Influential Women.
The Virginia Capital Conference is being held on Oct. 2 at the Jefferson Hotel in Richmond, Virginia.
Exponent Women is hosting a fall rooftop networking session at RSM in New York on Oct. 7.
M&A East is taking place at the Pennsylvania Convention Center in Philadelphia Oct. 22-23.
ACG Charlotte is hosting Deal Crawl at the Mint Museum in Charlotte, North Carolina Nov. 6-7.
Third Annual Women in Alternative Investments Career Forum is taking place at the New York Hilton on Nov. 8.
ACG New York is hosting Middle Market Week in New York from Nov. 11-15.