M&A wrap: Johnson & Johnson, Auris Health, Alphabet, Verily, Bain Capital, U.S. Renal Care

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Johnson & Johnson (NYSE: JNJ) subsidiary Ethicon Inc. has agreed to acquire robotic surgery developer Auris Health Inc. for approximately $3.4 billion in cash, plus contingent payments up to $2.35 billion based on achieving milestones. Auris Health is a privately held developer of robotic technologies, initially focused on lung cancer, with an FDA-cleared platform currently used in bronchoscopic diagnostic and therapeutic procedures. The acquisition accelerates Johnson & Johnson's entry into robotics with potential for growth and expansion into other interventional applications. "In this new era of healthcare, we're aiming to simplify surgery, drive efficiency, reduce complications and improve outcomes for patients, ultimately making surgery safer," said Ashley McEvoy, executive vice president, worldwide chairman, medical devices, Johnson & Johnson. "We believe the combination of best-in-class robotics, advanced instrumentation and unparalleled end-to-end connectivity will make a meaningful difference in patient outcomes." Auris Health's technology is designed to support Johnson & Johnson's vision of being a world leader across the continuum of surgical approaches, including open, laparoscopic, robotic and endoluminal. The move is also complementary to the acquisition of Orthotaxy's robotic technology for orthopaedics and the continued development of the Verb Surgical Platform, through a strategic partnership with Verily, a life sciences and healthcare subsidiary of Google parent Alphabet Inc. (Nasdaq: GOOGL). "We are very committed to our partnership with Verily on the development of the Verb Surgical Platform," said McEvoy. "Collectively, these technologies, together with our market-leading medical implants and solutions, create the foundation of a comprehensive digital ecosystem to help support the surgeon and patient before, during and after surgery." With the acquisition, Frederic Moll, M.D., CEO and founder of Auris Health and a visionary in the field of surgical robotics, will be joining Johnson & Johnson upon completion of this transaction. Cravath, Swaine & Moore LLP is representing Johnson & Johnson in the transaction.

Deal news
U.S. Renal Care Inc., a provider of dialysis services for patients suffering from end stage renal disease (also known as kidney failure), has agreed to be acquired by a group of investors led by founder and CEO Chris Brengard and including the company's management team, Bain Capital Private Equity, Summit Partners, Revelstoke Capital Partners, and Mark Caputo, the founder and CEO of Liberty Health Partners. U.S. Renal Care will continue to operate under its current management team, who will remain significant investors in the company. Financial terms of the private transaction were not disclosed. Goldman Sachs and Barclays are serving as financial advisors, and Latham & Watkins is serving as legal counsel to U.S. Renal Care. Ropes & Gray is serving as legal counsel, and PwC is acting as accounting advisor, to the investor group. Weil, Gotshal & Manges LLP is serving as legal counsel to the management team.

Descartes Systems Group (Nasdaq: DSGX), which develops software and services for logistics-intensive businesses, has closed the acquisition of Visual Compliance, a provider of software that automates customs, trade and fiscal compliance processes, for approximately US $250 million.

Featured content
Mergers & Acquisitions has closed the nomination process and is now looking forward to announcing the 2018 winners of the M&A Mid-Market Awards in March. The Awards are one of three special reports we produce each year to celebrate deals, dealmakers and dealmaking firms. The other two are The Rising Stars of Private Equity and The Most Influential Women in Mid-Market M&A.

Related: For a look at the three special reports, including timelines and criteria for nominations, see Special reports overview: M&A Mid-Market Awards, Rising Stars, Most Influential Women.

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 asked leading dealmakers about their outlook for the middle market in 2019. Watch the video conversations, shot at ACG Philadelphia's M&A East: It is a seller's market, and deal activity is expected to remain steady, says Ramsey Goodrich of Carter Morse & Goodrich: Outlook 2019: Great time to sell. Private equity firms and strategic buyers will use their excess cash and capital to look for deals, says Bharat Ramprasad of Stifel Nicolaus: Outlook 2019: Excess capital to fuel M&A. Rising interest rates and regulatory changes may increase volatility, cautions Mark Emrich of Murray Devine: Outlook 2019: Keep an eye on rising interest rates.

Bank volume was steady, but deal values would have been the lowest in years if not for one big, and very intriguing, transaction. For more, see: Bank M&A: What January data hints about 2019.

Not only do carve-outs account for 10 percent of all M&A activity, the percentage of carve-outs conducted by buyout firms (as opposed to strategic buyers) is on the rise, and sharply at that. And that’s important, because, at the risk of overextending the curveball analogy, the carve-out is ‘filthy stuff.’ The inherent complexities of the deal can puzzle even serial acquirers. Write Accordion's Gary Appelbaum and Eric Salit in this guest article: Carve-out curveball: How to hit a home run.

Consumerization of healthcare, high-deductible health plans, and more self-payment by patients are contributing to the overall increased demand for PT services, write Battery Ventures general partner Chelsea Stoner in this guest article: Rising demand for physical therapy drives deals.

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
The SBIA and the AM&AA are hosting a Deal Summit at The Doral in Miami from Feb. 20-22. The gathering offers networking opportunities with senior-level M&A advisors and lower middle-market private equity investors.

ACG New York hosts the 11th Annual Healthcare Conference at the Metropolitan Club in Manhattan on Feb. 28. Dealmakers network with healthcare-focused private equity investors and other industry professionals.

ACG Minnesota and Corvus North are hosting AIM: A Women's Leadership Conference at the Minneapolis Hyatt on March 7. The conference is designed to support and encourage female leaders to grow and achieve success throughout their career journeys.

ACG New York's Women of Leadership is hosting a golf event and reception on March 21 at Konnect Golf in Manhattan. The event brings together female dealmakers from private equity firms, investment banks and lenders.

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