M&A wrap: Franklin Resources, Legg Mason, Amazon, Jeff Bezos, Pier 1, 1-800 Flowers, Wind Point, Pamlico
In an era when traditional stock-pickers are under intensifying pressure, Franklin Resources Inc. (NYSE: BEN) has agreed to buy Legg Mason (NYSE: LM) to create a firm with a combined $1.5 trillion in assets. The two respected names are combining in an effort to compete against the rise of low-cost index funds. Customers are focusing more than ever on costs for money management, and a few large index fund managers dominate the field in managed assets globally, reports Bloomberg News. “This is a landmark acquisition for our organization that unlocks substantial value and growth opportunities driven by greater scale, diversity and balance across investment strategies, distribution channels and geographies,” says Greg Johnson, executive chair of Franklin. “Our complementary strengths will enhance our strategic positioning and long-term growth potential, while also delivering on our goal of creating a more balanced and diversified organization that is competitively positioned to serve more clients in more places.” M&A activity in the asset management sector has been increasing in recent years. Invesco Ltd. bought OppenheimerFunds from Massachusetts Mutual Life Insurance Co. in 2018, while both Janus Henderson Group plc and Standard Life Aberdeen plc were formed in mergers in 2017. In the brokerage sector, Charles Schwab Corp. agreed to buy TD Ameritrade Holding Corp. for about $26 billion in November. Read the full story by Bloomberg News: Franklin Resources buys Legg Mason to compete with low-cost index funds.
Manufacturing in the U.S. has contracted to its lowest level in more than a decade. 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. Still, despite some of the headwinds facing the manufacturing industry, the M&A deal market 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.
Amazon.com Inc. (Nasdaq: AMZN) founder Jeff Bezos announced he’s created the Bezos Earth Fund, his biggest-ever philanthropic investment to help counter the effects of climate change. Bezos is starting with $10 billion and will begin to issue grants in a few months. “It’s going to take collective action from big companies, small companies, nation states, global organizations and individuals,” he said in a post on Instagram. “We can save Earth.” Bezos, the world’s richest person, is under pressure to balance Amazon’s need to deliver goods quickly with the environmental consequences of the rapid growth of online shopping. Read the full story by Bloomberg News: Jeff Bezos commits $10 billion to fight climate change.
Pier 1 Imports Inc. filed for Chapter 11 bankruptcy protection to facilitate a company sale after the retailer of eclectic home furnishings found itself squeezed by online rivals and crushed under too much debt. The Fort Worth, Texas-based retailer is in talks with multiple potential buyers, according to a statement. Pier 1 also reiterated a plan to shut as many as 450 stores. Pier 1 was founded in 1962, and like other long-established retailers, it’s been hurt by the growth of new online rivals. Pier 1’s shoppers have been defecting to e-commerce players like Wayfair Inc., as well as conventional giants like Walmart Inc. that have expanded in the category. Read the full story by Bloomberg: Pier 1 files for bankruptcy, seeking time to sell troubled chain.
1-800-FLOWERS.COM Inc. (Nasdaq: FLWS) is buying PersonalizationMall.com, a online retailer of personalized products, from Bed Bath & Beyond (Nasdaq: BBBY) for $252 million. "The broad assortment of customizable products and processes that have made PersonalizationMall.com a premier provider of keepsake items will help us further our company’s vision to inspire more human expression," says 1-800 Flowers CEO Chris McCann. Citigroup and Cahill Gordon, Reindel LLP are advising 1-800 Flowers. Goldman Sachs (NYSE: GS) and Proskauer Rose LLP are advising Bed Bath. Consumers want more customization in their products and that is one of the trends driving deal activity in the retail sector. For more, see Mergers & Acquistions full coverage: Retail Tech M&A: 7 Technologies Driving Change.
Wind Point Partners-backed Stir Foods has acquired Celtrade Canada from the Succession Fund, a private equity firm managed by Argosy Partners. Celtrade is a private label and contract manufacturer of custom sauces, dressings and condiments for the retail and foodservice sectors. Reed Smith and Stikeman Elliott advised Stir. Osprey Capital Partners and Minden Gross advised Celtrade.
J.H. Whitney Capital Partners-backed C.J. Foods is buying American Nutrition. The target is a supplier of dry, canned and baked pet food and treats.
Center Rock Capital Partners has invested in Tag Manufacturing, a designer and manufactuer of engineer attachments for the construction sector.
Granite Bridge Partners-backed InterMed Group has purchased Sigma Imaging Technologies.
An investor group led by the Courtney Group has acquired the medical device repair and business of Tenacare Holdings.
For more deal announcements, see Weekly wrap: Apax, Salesforce, Sun Capital.
Lower middle-market private equity Pamlico Capital has raised its fifth fund at $1.4 billion. The PE firm invests up to $125 million in equity in businesses that have up to are valued up to $350 million across the communications, healthcare and businesses and technology services sectors. "We remain focused on pursuing the strategies that have made us successful over time, which include a commitment to the lower middle market and our three core industry verticals," says Pamlico partner Art Roselle. UBS Securities served as Pamlico's placement agent while Robinson, Bradshaw & Hinson provided legal advice. For more on fundraising, see PE fundraising scorecard: Carlyle, Intrepid, Searchlight.
Kevin Kemmerer has been named chair at Clearlake Capital-backed Dude Solutions. Kemmerer was previously with iPipeline.
Uzair Dossani, Evan Eason and Kevin Gregory were Intermediate Capital Group's North American mid-market private equity team. Dossani was most recently with Harvest Partners; Eason was previously with Olympus Partners; and Gregory comes from Aquiline Capital Partners.
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.
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.