M&A wrap: Morgan Stanley, E*Trade, Sycamore, Victoria's Secret, Forever 21, TA, Thompson Street

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Morgan Stanley (NYSE: MS) agreed to buy discount brokerage E*Trade Financial Corp. (Nasdaq: ETFC) for $13 billion, pushing further into the retail market with its biggest acquisition since the financial crisis. The all-stock takeover adds E*Trade’s $360 billion of client assets to Morgan Stanley’s $2.7 trillion, the companies said in a statement. Morgan Stanley also gets E*Trade’s direct-to-consumer and digital capabilities to complement its full-service, advisory-focused brokerage, reports Bloomberg News. “E*Trade represents an extraordinary growth opportunity for our wealth-management business and a leap forward in our wealth-management strategy,” says Morgan Stanley CEO James Gorman. “This continues the decade-long transition of our firm to a more balance-sheet-light business mix, emphasizing more durable sources of revenue.” The retail-brokerage industry is being reshaped by price wars and consolidation. In early October, Charles Schwab Corp. eliminated commissions for U.S. stock trading, forcing other brokerages to follow suit and sweeping away an important revenue stream. The following month, Schwab agreed to buy rival TD Ameritrade Holding Corp. for about $26 billion and create a mega-firm with $5 trillion in assets, forcing smaller brokerages like E*Trade to contend with a much more formidable competitor. Read the full story by Bloomberg: Morgan Stanley adds discount broker in $13 billion E*Trade deal.

Manufacturing in the U.S. has contracted to its lowest level in more than a decade. The Institute for Supply Management said that its manufacturing index fell in December 2019 to 47.2. That’s its lowest level since June 2009, when it hit 46.3. This, in addition to a tight labor market, China’s retaliatory tariffs and the upcoming presidential election, has made manufacturing a tricky sector to do business in these days. Still, despite some of the headwinds facing the manufacturing industry, the M&A deal market remains active. Interest rates are low, and companies as well as investors have cash to invest. Additional factors come into play, including the need for consolidation and globalization in the manufacturing industry. Robots are playing a role as well, and manufacturing automation has become appealing. “The tight labor market and increasing wages have led us to pursue a number of different initiatives at our companies to counteract the resulting pressures created,” says Brad Roberts, a partner with the Riverside Co. “Where economical, we are investing in increased automation to enable us to meet growing sales volume amidst this difficult hiring environment.” Read our full coverage: 5 trends driving manufacturing M&A.

DEAL NEWS
Sycamore Partners is buying a controlling stake in Victoria's Secret from L Brands in a deal that values the target at $1.1 billion. Victoria’s Secret, still tied to the push-up bra aesthetic the company projected for many years, has lost ground to competitors that market their products as comfortable and body-positive. A broader retail shift to e-commerce and away from shopping malls has also dealt a blow. Read the full story by Bloomberg News: Sycamore takes control of Victoria's Secret.

TA Associates, Genstar Capital and ST6 Partners-backed have purchased financial planning and tax software provider Longview Solutions.

Thompson Street Capital Partners has acquired residential plumbling contractor Len the Plumber.

B&G Foods Inc. (NYSE: BGS) has bought Farmwise, the owner of the Veggie Fries, Veggie Tots and Veggie Rings brands.

Hormel Foods Corp. (NYSE: HRL) is buying Sadler's Smokehouse, a maker of smoked meats for retailers and foodservice providers.

IQ-EQ has acquired Blue River Partners an investor services provider with $1.3 trillion in assets under management. The deal will allow Blue River Partners to offer their U.S. clients free and immediate access into European investment opportunities for the first time, and will give IQ-EQ a stronger presence in the U.S. alternatives market.

Enterprise software company Betterworks has acquired Hyphen, an employee listening and engagement platform.

DEAL TRENDS
Forever 21 Inc.’s new owners plan to keep most of the fast-fashion chain’s U.S. stores open under a new chief executive officer in the coming weeks when it emerges from bankruptcy. Owners Authentic Brands Group, Simon Property Group Inc. and Brookfield Property Partners LP are talking with other landlords about keeping as many of its 448 U.S. stores in business as possible, Authentic CEO Jamie Salter said tells Bloomberg News. Forever 21 filed for bankruptcy in September after struggling with large, expensive locations and losses in some international markets, while suffering from the same online competition that has forced U.S. retailers to close thousands of stores in recent years. The new owners agreed to pay $81 million and assume certain liabilities as part of the purchase. Read the full story by Bloomberg: Forever 21's new owners in talks to keep most stores open.

PEOPLE MOVES
Kieran Farrelly, Sheila Gibson, Adam Johnston and Suanne Tavill were promoted to partners at private markets investment firm StepStone Group.

Justin Rawlins was hired by law firm Paul Hastings as a partner where he is focusing on restructuring. Rawlins was previously with Winston & Strawn.

FEATURED CONTENT
Artificial intelligence in healthcare saw about $4 billion in funding across 367 deals in 2019, according to data and research firm CB Insights. Amazon.com Inc. (Nasdaq; AMZN) is no exception. The tech conglomerate is using its recent deals for Health Navigator and PillPack to launch new software services in healthcare. Health Navigator works with companies like Microsoft Corp. (Nasdaq: MSFT) in offering services such as remote diagnoses, and with triage to help patients figure out whether to stay at home, see a doctor or go straight to the emergency room. Read our full coverage: How Amazon is using M&A to revolutionize healthcare.

Pushed by a groundbreaking California law mandating it, more companies are putting women on their public corporate boards. The law faces pressure in court and may not stand, but its rippling effect has already started to increase the visibility and awareness of the important benefits of board diversity. Investors are taking notice and trying to get ahead of the curve. According to a study published by MSCI in March 2018, having three or more women on a company’s board of directors translates to a 1.2 percent median productivity above competitors. Read the full guest article by Venable's Belinda Martinez Vega: Why businesses are adding women to their boards.

If there’s anything M&A professionals dislike, it’s uncertainty. And heading into 2020, there’s more than enough uncertainty to go around, including questions about the economy, international trade, impeachment, domestic politics and more. The funny thing is, the lack of clarity may actually make the first half of the year a great time for M&A, as dealmakers push to close transactions before the looming uncertainty of Election Day and its outcome. We conducted interviews with 8 investment bankers and other M&A advisors. Some said the first half of the year will be robust, while others said the uncertainty may have a negative impact throughout 2020. Read the full story, What’s ahead for M&A in 2020? We ask 8 advisors.

Mergers & Acquisitions has named the 2020 Most Influential Women in Mid-Market M&A. This marks the fifth year we have produced the list, which recognizes female leaders with significant influence inside their companies and in the wider dealmaking world. It’s been gratifying to watch the project evolve over the years – and become more influential itself. This year, we received more nominations than ever before. As a result, we expanded the number honored to 42 in 2020, up from 36 in 2019. Many dealmakers are new to our list, including Rockwood Equity Partners' Kate Faust, William Blair's Shay Brokemond and Avante Capital Partners' Ivelisse Simon. Read our full coverage of all the champions of change on our list, including Q&As with each individual.

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.

EVENTS
ACG New York is hosting the 12th annual healthcare conference and bourbon tasting at the Metropolitan Club in New York on Feb. 27.

ACG Raleigh Durham's 18th annual capital conference is being from March 31-April 1 at the Raleigh Marriott Crabtree Hotel in Raleigh, North Carolina.

InterGrowth 2020 is taking place at the Aria Resort & Casino in Las Vegas from April 20-22.

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