M&A wrap: Google, Fitbit, Alphabet, Silicon Valley Bank, Comerica, Pathlight, One Rock
More banks are getting comfortable with a source of loan growth that — for now — has shown little risk and good returns: private equity. And they’re eager to do more. “It's a business we like, and we definitely are going to continue to grow,” Silicon Valley Bank President Michael Descheneaux said about lending to private-equity firms on an Oct. 24 call with analysts. Private-equity managers have been stockpiling massive funds to buy stakes in promising companies then offloading them at a profit for their investors, which are often major institutions, pension funds and university endowments. But more of these funds have been tapping lines of credit offered by banks to either help pay for businesses they are investing in, or to improve a key accounting metric used to show the rate at which they are returning profits to their clients. Private-equity managers had typically used lines of credit from banks to bridge funding gaps for particular deals, but they are now more often using this financing to boost their internal rate of return, which is how these funds are graded for investors, who expect a certain profit within a certain time. “Banks' confidence in the robustness of fund finance as a business line is arguably backed by the relative rarity of default,” says Florin Vasvari, a professor at the London Business School. Read the full story: Banks extending more credit to PE. Will they regret it?
Alphabet Inc.’s (Nasdaq: GOOG) Google agreed to buy smartwatch maker Fitbit Inc. (NYSE: FIT) for $2.1 billion in cash, a move that could shore up the internet giant’s hardware business while also potentially increasing antitrust scrutiny. Google has a growing ecosystem of smartphones and laptops, and provides a free wearable operating system called Wear OS for other companies to use, but has yet to build its own watch. Buying Fitbit would give Google a new platform along with access to the company’s more than 27 million active users. Read the full story by Bloomberg News: Google buys Fitbit to boost hardware.
Pathlight Capital has raised its first funds, Pathlight Capital Fund I LP and Pathlight Capital Offshore Fund I LP, with $540 million in capital. Pathlight offers financing to allow management teams to access liquidity for working capital, refinancing, growth, acquisition, dividend and turnaround strategies. Morgan Lewis represented Pathlight.
One Rock Capital Partners has bought engineered components and systems from Enerpac Tool Group (NYSE: EPAC). The target serves the agriculture, constuction and transportation sectors with motion and control services.
Tyler Technologies (NYSE: TYL) has acquired Courthouse Technologies, a provider of jury management systems.
Investment bank ButcherJoseph & Co. has purchased investment adviser Laffer Investments.
James Kim was hired by investment bank Raymond James where he is concentrating on the healthcare sector. Kim was most recently with Cantor Fitzgerald.
Ashley Young has joined law firm Willkie Farr & Gallagher LLP as a partner. Previously with Kirkland & Ellis, Young focuses on cross-border debt transactions.
Jack Welch was hired by private equity firm Bridge Growth Partners as an executive partner. Welch was most recently with McKinsey & Co. and will advise Bridge Growth portfolio companies on operating initiatives.
Overall M&A activity in the third quarter saw $600 billion worth of deals closed, according to PitchBoook. So far in 2019, more than 8,000 deals have closed, worth about $1.6 trillion. The activity is on pace with the first three quarters of 2018. Among the deals that closed include: Cox Automotive's purchase of Rivian Automotive; TPG Sixth St Partners' deal for Smartdrive Systems and Boathouse Capital backing TapClicks. Read the full story: Key middle-market M&A deals completed in Q3 2019
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. Adams Street Partners, Balance Point Capital, Carlyle and VSS are all actively engaged in lending. Read the full story: Private equity firms are becoming lenders. Here’s why.
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. The New York firm announced the final close of its latest global real estate fund recently. 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. 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.” For analysis of the deal, see Counting on bank M&A: Why Piper Jaffray bought Sandler O'Neill.
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.
ACG Boston hosts The 2nd annual Healthcare Conference – Improving the Patient Experience - on Nov. 6 at the UMass Club in Boston, as a part of the ACG Northeast Industry Tour. Speakers include Mergers & Acquisitions editor-in-chief Mary Kathleen Flynn, who is moderating a panel.
ACG Charlotte brings M&A pros together for Deal Crawl at the Mint Museum in Charlotte, North Carolina, Nov. 6-7.
The 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. The 17th Annual Private Equity Wine Tasting Gala takes place on Nov. 13 at Gotham Hall.
Exponent Women is hosting a Family Office Event with Owens Group at LX Gallery in New York on Nov. 21. Mergers & Acquisitions editor-in-chief Mary Kathleen Flynn is moderating a panel.