M&A wrap: Grubhub, Just Eat Takeaway, Uber, NewSpring, Iconiq, Simon, Balbec, Mason Wells, Morgan Stanley

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Europe’s Just Eat Takeaway.com NV is buying Grubhub Inc. (NYSE: GRUB) for $7.3 billion, in a deal that creates one of the world’s largest meal-delivery companies as the coronavirus pandemic drives a surge in orders. The deal sidelines Uber Technologies Inc. (NYSE: UBER), which had been in acquisition talks with Grubhub for months, according to Bloomberg News. Food delivery is one of the few parts of the economy to benefit from the spread of the coronavirus in 2020, thanks to people spending more time at home. Profit margins are tight or nonexistent in food delivery due to stiff competition to sign the most popular restaurants and add customers. Analysts have long said the unprofitable model in food delivery is unsustainable and expected consolidation. Grubhub will launch Just Eat Takeaway into the U.S. market, broadening its already-global reach that includes Australia, Brazil and Canada, in addition to its home base in Europe. Jitse Groen, the Dutch billionaire who created Takeaway in 2000 in his university dorm room, has been looking to expand aggressively over the last year. See the full story from Bloomberg: Just Eat Takeaway buy Grubhub for $7.3 Billion to enter U.S.

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.

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.

DEAL NEWS
NewSpring and TT Capital Partners have invested in health information technology company MacroHealth Solutions. The target offers healthcare network optimization and claims settlement services to insurers, third-party administrators and provider-sponsored health plans. American health service prices vary greatly where two different payers for the same procedure and diagnosis at a given provider can pay significantly different net prices, according to the buyers and MarcroHealth. The latter aims to solve this by providing an enterprise SaaS marketplace platform where healthcare is purchased more efficiently and at lower costs.

Iconiq Capital bought a majority stake in QGenda. Francisco Partners will keep a majority stake. QGenda offers scheduling, clinical capacity management and labor analytics to the healthcare sector. Evercore Group, Raymond James and Kirkland & Ellis LLP advised QGenda. Goodwin Procter LLP advised Iconiq.

Simon Property Group Inc. (NYSE: SPG) is calling off its $3.6 billion deal for mall operator Taubman Centers Inc. (NYSE: TCO). In a release, Simon cites: "Taubman has failed to take steps to mitigate the impact of the pandemic as others in the industry have, including by not making essential cuts in operating expenses and capital expenditures." The coronavirus pandemic has already quashed a number of previously announced deals. For more, see our full coverage: 5 derailed deals: HP, TGI Fridays among those losing buyers during coronavirus crisis.

Fundraising
Alternative asset manager Balbec Capital has raised its fourth credit fund at $1.2 billion. The firm focuses on investing in bankrupt and insolvent credit. PE firms have been raising capital to invest in distressed businesses that need funds to survive the pandemic and beyond. "We expect the pipeline of opportunities to remain robust as we look to build upon our track record of successfully investing across market cycles," says Balbec CEO Charles Rusbasan.

Mason Wells has raised its fifth private equity fund at $767 million. The fund will invest in lower middle-market businesses across the outsourced business services, consumer packaged goods, engineered products and packaging materials sectors in the Midwest.

For more fundraising news, see: PE fundraising scorecard: HGGC, Flat Rock, Plexus Fund.

DEAL TRENDS
Morgan Stanley expects to make acquisitions in the asset management industry, according to CEO James Gorman. “We’ll do deals,” Gorman said at the firm’s virtual financials conference. “I’ve been very clear about that. I am not shy about doing deals that hit our sweet spot.” The asset management industry faces pressure on fees from low-cost index funds, passive investing and other long-term challenges that have sparked a rush to consolidate. Recent tie-ups include Franklin Resources’ deal to buy Legg Mason in February and Invesco’s acquisition of OppenheimerFunds, completed in May 2019. Read the full story by Bloomberg: Morgan Stanley eyeing deals to get bigger in asset management.

PEOPLE MOVES
Patrick Mastan has joined KeyBanc Capital Markets as a managing director where he is focusing on technology. He was most recently with Lazard.

Rick Morrow was hired by the Halifax Group as an operating executive. He was most recently the COO of Kastle Systems International.

CORONAVIRUS IMPACT
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.

Arizent, the parent company of Mergers & Acquisitions, released a new survey May 15 to understand how executives across industries were dealing with the impacts of the Covid-19 crisis after operating in a “new normal” environment for two months. As the coronavirus pandemic continues to extend its grip on the globe — infecting more than 1.41 million Americans (over 4.44 million globally) by the middle of May — executives must navigate their organizations through uncharted territory, with the possibility that the virus may not disappear any time soon. This is forcing C-suites to make big, lasting decisions with few guideposts to aid them. The April survey found that there was a surprisingly smooth, albeit hurried transition to remote, with most companies, including private equity firms and investment banks, feeling that they performed on par or above their own expectations. However, technology gaps did arise, as some companies found that customers either didn’t have the equipment to access their accounts digitally or needed training from staff working remotely. In the middle market, dealmakers report that “opportunities have thinned somewhat but have not disappeared," as one private equity investor put it. "Investor base still has liquidity to invest." Said one investment banker focused on real estate: "Pending deals were either put on hold, cancelled or delayed. Asset prices for listings are being re-evaluated or renegotiated with the sellers and buyers expecting discounts." For more, see: Exclusive survey: How private equity firms, investment banks and other companies are surviving the pandemic.

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.

The coronavirus pandemic will change the world and how we live in it profoundly, with dramatic shifts in how we gather and meet, work and learn, make products and distribute them. But exactly how the transformations will play out in the middle market is difficult to discern. Several recent reports and surveys aim to provide a sense of direction. Read the full story: Coronavirus crisis is changing everything, including private equity and M&A.

To explore how the coronavirus is affecting the middle market, Mergers & Acquisitions interviews dealmakers from Alvarez & Marsal, Merrill Corp., M33 Growth, M-III Partners, Paul Hastings and the Riverside Co. Read our full coverage: “Brace for impact,” say private equity firms to portfolio companies about the coronavirus.

FEATURED CONTENT
"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.

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.

Houlihan Lokey, Lincoln International, Jefferies Financial Group, William Blair and Piper Sandler Cos. rank as the top five most active M&A investment banks in 2019, based on the volume of completed private equity-backed deals in the U.S., according to PitchBook. Besides advising on M&A deals, the investment banks on the top 10 list also had a busy year with acquisitions of their own in 2019, including two acquisitions by Houlihan Lokey and three by Stifel Financial. Piper Sandler Cos., was created when Minneapolis-based Piper Jaffray Cos. acquired New York-based Sandler O’Neill & Partners in a deal representing more than half of Piper Jaffray’s $930 million market capitalization. The firm also had another acquisition in 2019 and sold a company to exit the traditional asset management business. See our full coverage: Top investment banks for PE-backed deals in 2019: Houlihan Lokey led the pack.

Audax, HarbourVest and Genstar ranked as the top three most active private equity firms in 2019, based on the volume of completed deals in the U.S., according to PitchBook. Three companies tied for fourth place: Abry, Carlyle and Shore Capital. Where were these PE firms looking for deals? Eight of the firms on our list name the software and technology sector among their top investment targets, and seven put healthcare companies on their priority list. Financial services and consumer services are each named by five of the firms as industries they focus on, with four naming business services companies. Fundraising from investors in 2019 led to two notable fund launches earlier in 2020: KKR’s Global Impact Fund and HarbourVest’s $2.6 billion HarbourVest Fund XI. See our full coverage: Top private equity firms in U.S. deals in 2019: Audax Private Equity ranked No. 1.

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

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