M&A wrap: Insight Partners, Recorded Future, Genstar, Thoma Bravo

cyberattack
Hooded computer hacker stealing information with Tablet PC, Server in the background

Insight Partners is buying the majority stake it does not already own in cybersecurity company Recorded Future for $780 million. Recorded Future is the largest privately-held threat intelligence software provider in the world, with more than 400 clients, including Morgan Stanley (NYSE: MS), Target Corp. (NYSE: TGT) and Verizon Communications Inc. (NYSE: VZ), according to the company. Recorded Future helps companies find cyber threats before they impact business by automatically collecting data and information from open web and dark web sources. "Everyday, we see firsthand the challenges security teams, enterprises, and even nations face in the fight against cyberattacks," says Recorded Future co-founder Christopher Ahlberg in a blog posted on the company's wesbite. "There is no question that the need for better cybersecurity exists, and our clients have confirmed time and time again that threat intelligence is the key ingredient for defending critical systems and information. We view Insight’s financial commitment as further validation that we are on the right track to improving security for organizations around the globe." The majority of businesses have yet to migrate to the cloud, which means there’s still lots of room for growth in the cybersecurity sector, and buyers have been eagerly snatching up service providers." Insight Partners is a New York-based technology and software-focused private equity firm that has over $20 billion in assets. Advisors to Recorded Future include: PJT Partners and Foley Hoag LLP. The legal advisor to Insight Partners is Willkie Farr & Gallagher.

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 seller’s market. A mood of urgency prevails, as dealmakers seek to close deals quickly, while conditions remain favorable. The advisors interviewed for this story say they don’t see signs of a recession this year; however they are closely monitoring bellwethers, including corporate earnings, wage pressure, global supply chains and slowdowns abroad. They are recommending that clients be prepared for an economic slowdown in the next two years. Specialization is the name of the game, and investment bankers advise clients to seek targets with business-model stability, limited cyclical exposure and a recurring revenue business model. Technology, business services, healthcare, consumer and manufacturing are among the most promising sectors. Read the story: 8 M&A advisors urge closing deals now, while economy stays strong, for our interviews with these prominent advisors:

Paul Aversano, Alvarez & Marsal
Cole Bader, Stifel
Karen Davies, Huntington National Bank
J.R. Doolos, KeyBanc Capital Markets
Andrew Jessen, William Blair
Derek Lewis, Harris Williams
Peter Lombard, Piper Jaffray & Co.
Christopher Stradling, Lincoln International

DEAL NEWS
Genstar Capital has bought a majority stake in Prometheus Group from Francisco Partners for about $1 billion. Prometheus offers plant maintenance operations and optimization software. Genstar Capital was advised by Irell & Manella LLP, and Francisco Partners was advised by Paul Hastings.

Thoma Bravo is buying a majority stake in Cority, a provider of environmental, health, safety and quality software from Norwest Venture Partners. The latter is keeping a stake in the target. Advisors to Cority include: Harris Williams, WIlliam Blair and Goodwin Procter. The legal advisor to Thoma Bravo is Kirkland & Ellis.

New Mountain Capital has invested in W20, which offers digital marketing and communications services to the healthcare sector. Mountaingate Capital has exited its stake in W20. Advisors to W20 include: CG Petsky Prunier and Houlihan Lokey (NYSE: HLI).

Golden Gate Capital has purchased a 51 percent stake in healthcare analytics company Ensemble Health Partners from Bon Secours Mercy Health. Guggenheim Securities Guggenheim Securities advised the sellers.

Crestview Partners has acquired steel molds manufacturer Concours Molds Inc. Advisors to Concours include: Scotiabank, Borden Ladner Gervais LLP and Holden & Moorhouse Professional Corp. Advisors to Crestview include: Gibson, Dunn & Crutcher LLP and Stikeman Elliott LLP.

Stone Canyon Industries Holdings is buying packaged ice distirbutor Reddy Ice from Centerbridge Partners. Advisors to the sellers include: BMO Capital Markets Corp., Jefferies LLC and Kirkland & Ellis LLP. Advisors to Stone Canyon include: Latham & Watkins LLP and Gibson, Dunn & Crutcher LLP.

Sunstone Partners has acquired cybersecurity firms Terra Verde Security LLC, TruShield Security Solutions and Sword & Shield Enterprise Security. The companies will operate under the name Avertium.

Sovos has acquired financial reporting software companies Eagle Technology Management and Foriba.

PEOPLE MOVES
Terry Kelly has joined private equity firm SFW Capital Partners as an operating partner. Kelly was previously a president at TA Instruments.

Heather Smith Thorne has joined TPG Growth as a partner, where she is leading consumer investing. Thorne was previously with Swander Pace.

Mike Gorman and Luis Pillich have joined investment bank Stout as directors, while Matthew Arden joined as vice president. Gorman and Arden were previously with SSG Capital Advisors, and Pillich was most recently with Versa Capital Management.

FEATURED CONTENT
Healthcare companies are spending more on information technology than ever before. Private equity firms including: Bain Capital, GTCR, Great Hill Partners, The Riverside Co. and New Heritage Capital, are investing in the innovations most in demand, including big data, SaaS and artificial intelligence, as we explore in depth in Mergers & Acquisitions' feature, Healthcare's must-have technologies. “Healthcare IT is the largest cottage industry in the world,” says Sam Hendler, who leads healthcare IT deals at Harris Williams.“Healthcare IT is a highly fragmented, multi-billion-dollar market with thousands of companies focused on different $250 million to $500 million sub-markets. Savvy investors see there is an opportunity to aggregate assets and build platforms of scale. It’s an incredibly exciting time in healthcare IT.” For recent transactions that showcase the trends, see 5 private equity-backed healthcare IT deals.

Huntington Bancshares’ chief financial officer laid out a few growth strategies the Columbus, Ohio, bank would pursue — as well as a couple that it wouldn’t. The $108 billion-asset bank expects organic loan growth and fee revenue to boost earnings in 2019, CFO Howell McCullough said at the Deutsche Bank Global Financial Services Conference. But though the board will evaluate any strategy it needs to, McCullough also threw cold water on the idea that Huntington would pursue a merger of equals. Read the full story: Huntington unlikely to pursue merger or online-only bank, top executive says.

Tech dominates dealmaking. The technology, media and telecom, or TMT, sector accounted for about 40 percent of total private equity deal volume and one-third of total capital invested by PE firms over the last five years, according to EY Private Equity. Looking forward, the next five years of M&A activity will be fueled by a whole new set of developments. As one wave of technological innovation crests, another is forming. “With themes such as cloud computing and mobility now mainstream, PE firms are focusing on the next wave of disruption — technologies such as artificial intelligence and machine learning, robotic process automation (RPA), Internet of Things (IoT), robotics, drones, blockchain, augmented reality and virtual reality,” finds the April edition of EY’s quarterly PE Pulse report. Read our full coverage: Smart cities, IoT, AI, robots, edge computing will fuel next wave of tech M&A.

Genstar Capital, Audax and HarbourVest ranked as the top U.S. private equity firms of 2018, based on volume of completed deals, according to PitchBook. Check out Mergers & Acquisitions' profiles of 21 firms that led the league tables. Top private equity firms: Genstar, Audax, HarbourVest.

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

At least two-thirds of U.S. homes have at least one pet, and people are spending more money on their pets than ever, driving M&A across the entire pet care sector. Read the full story: Demand for animal health products and services rises, driving deals.

One of the most significant opportunities to impact the success of due diligence is understanding how to leverage data. In today’s market, the ability to tap into the volume and variety of big data can provide private equity stakeholders with the competitive edge in operational due diligence. Read the full guest article by Maine Pointe's Mark McTigue and Nathanael Powrie: How data can help PE accelerate value at due diligence.

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: 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.

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 New York, ACG Boston and ACG Philadelphia 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.

ACG Boston brings together 700-plus dealmakers for DealFest Northeast and DealSource Select 2019 at the Cyclorama and the State Room, June 12-13.

Exponent Women hosts the Annual Exchange, which brings a trusted network of women dealmakers together for a focused day of robust content and networking, at Second in New York, on July 11. The Exchange provides attendees with opportunities to establish new connections, reinforce existing ones and absorb timely and relevant knowledge from industry leaders.

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