M&A wrap: Genstar Capital, Irving Place Capital, OTC, Wells Fargo, PFC, IRT, Clearlake

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Genstar Capital, a private equity firm focused on investments in the industrial technology, healthcare, software, and financial services industries, has acquired Ohio Transmission Corporation (OTC), an industrial automation equipment distributor and technical service provider, from Irving Place Capital. The deal leverages the accelerating demand for factory automation. OCT is a technical distributor of highly engineered products including motion control, pumps, finishing products, robotics, motors and air compressors. OTC serves over 13,000 customers across diverse end-markets, providing highly technical sales consultation and aftermarket repair and services. Key end markets include transportation, industrial machinery, metals, chemicals, and food & beverage among others. Founded in 1963 and headquartered in Columbus, Ohio, OTC’s geographic footprint includes 38 branch locations in 17 states. “My father founded a company that for nearly 60 years has operated with an established culture and values rooted in integrity, achievement, and growth," said OTC CEO Philip Derrow. "Genstar has direct experience working with industrial technology companies like ours, and we look forward to working with their investment and operating partners to capitalize on numerous growth opportunities to broaden our geographic reach and enhance our technical solutions offerings to better serve our customers and suppliers and create opportunities for our associates.” OTC has been an active acquirer, having completed 16 acquisitions since 2010. “OTC operates at a pivotal point in the manufacturing sector, benefiting suppliers looking to partner with distributors with broader product and service capabilities and customers who are increasingly relying on distributors with strong technical resources," said Genstar managing director Rob Rutledge. "The company provides a leading brand portfolio of highly technical products, value-added services and specialized solutions with a proven track record of adding new product categories. We look forward to supporting management’s strategy of product and geographic expansion organically as well as through strategic acquisitions to better serve OTC’s customers.” Weil, Gotshal & Manges LLP acted as legal counsel to Genstar. Jones Day represented Irving Place Capital and OTC.

Genstar ranked as the most active U.S. private equity firm of 2018, based on volume of completed deals, according to PitchBook. The San Francisco firm recently raised its largest fund ever. Check out Mergers & Acquisitions' profiles of 21 firms that led the league tables. Top private equity firms: Genstar, Audax, HarbourVest and more

Also see: Top investment banks in PE-backed deals: KPMG, Houlihan, GS, William Blair.

Deal news
Principal Financial Group (Nasdaq: PFG) has agreed to buy Wells Fargo & Co.'s (NYSE: WFC) Institutional Retirement & Trust division, which includes retirement plan record-keeping and administrative services (401(k) and pension plans), executive deferred compensation (non-qualified plans), institutional trust and custody and institutional asset advisory businesses. The transaction, which is expected to close early in the third quarter of 2019 and is subject to receipt of required regulatory approval, will create one of the largest retirement providers in the industry. “The Institutional Retirement and Trust business is well-managed, award winning and highly respected in the market,” said Jon Weiss, head of Wells Fargo Wealth & Investment Management. “The scale derived from a combination of IRT and the Principal Financial Group will benefit clients, plan participants, and team members. At the same time this sale reflects Wells Fargo’s strategy to focus our resources on areas where we can grow and maximize opportunities within wealth, brokerage and asset management.” Principal Financial Group serves more than 24 million customers with retirement, asset management and insurance products and services. Founded 140 years ago, Principal is headquartered in Des Moines, Iowa, with 16,000 employees located around the world. Wells Fargo Securities, the investment banking arm of Wells Fargo, served as exclusive financial advisor to Wells Fargo in connection with the transaction. Skadden, Arps, Slate, Meagher & Flom LLP served as Wells Fargo’s legal advisor in connection with the transaction.

Clearlake Capital Group LP is making a significant equity investment in Appriss Holdings Inc., to support Appriss’ rapid growth and expansion into new markets. With the investment, Clearlake becomes an equal partner in the target alongside management and Insight Partners, which invested in Appriss in 2014. Since its founding in 1993, Appriss has focused on leveraging unique data and analytics to tackle issues related to crime, fraud and addiction in a strategy the company calls "knowledge for good." With thousands of customers spanning federal, state and local governments, health systems and retailers, Appriss supports users in over 40 countries. “We see a significant opportunity to build upon Appriss’s leadership position as a provider of critical data and analytics and accelerate its rapid growth," said Behdad Eghbali, Clearlake co-founder and managing partner. Golub Capital, Antares Capital and Bain Capital Credit provided fully committed financing for the transaction. William Blair and Jefferies served as co-financial advisers to Appriss and Insight Partners. Macquarie Capital and UBS Investment Bank served as financial advisers to Clearlake.

March featured deals closed by CACI International Inc. (NYSE: CACI),Centerbridge Partners, Stryker Corp. (NYSE: SYK) and Viacom Inc. (Nasdaq: VIA). See our monthly data wrap, March M&A buyers: CACI, Centerbridge, Stryker, Viacom

M&A trends
After setting an all-time high in 2018, venture capital investment maintained its momentum in the first quarter of 2019, according to the PitchBook-NVCA Venture Monitor, a quarterly report jointly produced by PitchBook and the National Venture Capital Association, with support from Silicon Valley Bank, Perkins Coie and Solium. Investors deployed $32.6 billion in VC funding across 1,853 deals, a 10.5 percent increase in value and a 22.5 percent decrease in volume, compared with the same period the previous year. Continuing the developments of the past few years, larger deals drove elevated total capital investment across fewer transactions as valuations have again climbed to unprecedented levels. These ongoing trends are largely due to increased investor competition and the prevalence of mega-funds (VC funds over $500 million). Corporate VC activity as a share of overall VC activity reached a new high, doubling over the past six years and underscoring the heightened role that CVC investors are taking in large rounds at later stages. The exit market retained some of its momentum from 2018, although the U.S. government shutdown contributed to a slow first quarter for VC-backed initial public offerings, with only 12 public listings closed. Lyft’s IPO and six VC-backed acquisitions over $650 million helped to carry exit value in Q1, delivering the highest quarterly value since 4Q 2014. A host of upcoming outsized IPOs are poised to buoy exit value throughout the year, predicts the report. VC fundraising in Q1 cooled compared with 2018 levels but appears primed to accelerate throughout the year, as several prominent firms are on the road with new vehicles seeking at least $1 billion. For the first time, the report includes a new section on venture investment in U.S.-female founded companies, which will be a recurring section in future reports.

The vast majority of senior leaders at private equity-backed companies are investing in digital transformation initiatives, according to a recent survey by CompleteSpectrum, which provides marketing services to PE firms and their portfolio companies. The firm surveyed 300 senior leaders at PE-backed companies with annual revenues between $15 million and $200 million, and 94 percent of them said they are putting digital transformation high on their list of 2019 priorities. Just under half, or 49 percent, said digital transformation initiatives are necessary prior to the completion of a merger or acquisition. More than half said they have already spent between $100,000 and $250,000 on digital transformation projects to date, and 70 percent have budgeted more than $100,000 for it.

Featured content
Excelled. Innovated. Inspired. That’s what the eight winners of Mergers & Acquisitions’ 12th Annual M&A Mid-Market Awards did in 2018. Our awards honor the leading dealmakers and deals that set the standard for transactions in the middle market. In addition to Nike, award winners include: Nike, Fortive, TA Associates, the Riverside Co., Harris Williams, Monroe Capital, Goodwin and Luminate Capital Partners' Hollie Haynes. Read our full coverage: Meet the winners of the M&A Mid-Market Awards: Nike, Fortive, TA, Harris Williams.

Related: Read more about Mergers & Acquisitions' three annual special reports, including the M&A Mid-Market Awards, the Rising Stars of Private Equity, and the Most Influential Women in Mid-Market M&A.

Mergers & Acquisitions has produced a wealth of compelling content recently. In case you missed any of it, we've put together a short list of 5 M&A stories you don't want to miss, including the winners of the 2018 M&A Mid-Market Award winners, top investment banks and PE firms doing tech deals. Here are more details on our recent coverage: 5 M&A stories you don't want to miss

Technology M&A is thriving, and private equity firms are hot on the trail of innovations that will drive sustainable value to customers and make companies more efficient, more effective and less expensive to run. Among the developments appealing to PE investors are: artificial intelligence, data management, data virtualization, digital marketing, healthcare IT, industrial automation, the Internet of Things, machine-to-machine learning, payment processing and Software-as-a-Service. To gain more insights into what kinds of tech deals will dominate the field in 2019, Mergers & Acquisitions reached out to 10 private equity firms that are active investors in technology: Francisco Partners, Genstar, Great Hill, HGGC, Insight, LLR, Riverside, Silver Lake, TA and Vista. Related: 10 private equity firms share strategies for tech M&A.

Mergers & Acquisitions has named 36 leaders the 2019 Most Influential Women in Mid-Market M&A, including Kainos Capital's Sarah Bradley, Kayne Anderson Capital Advisors' Nishita Cummings and Pelham S2K Managers' Venita Fields. All 36 are outstanding dealmakers both inside and outside of their firms. This year, we asked the featured dealmakers to tell their own stories through Q&As, including their advice for women. Related: Meet the 2019 Most Influential Women in Mid-Market M&A.

Events
ACG Boston hosts a 40th Anniversary Celebration and inaugural awards reception at the Boston Harbor Hotel's Wharf Room on April 24.

InterGrowth 2019 takes place May 6-8 at the Waldorf Astoria & Hilton Bonnet Creek in Orlando, Florida.

Innovation Works holds its second annual AI/Robotics Venture Fair in Pittsburgh May 15-16.

ACG Chicago hosts the Midwest Capital Connection, at The Marriott Downtown Magnificent Mile ,May 21-22.

ACG New York, ACG Boston and ACG Philadlephia are holding the Industrial Conference with Value Creation at the Infor in New York on June 6. The event is part of the Northeast Industry Tour.

ACG Minnesota hosts the The Upper Midwest ACG Capital Connection at the Renaissance Minneapolis Hotel, The Depot, June 10-11.

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