M&A wrap: Sumeru, Vista, Piper Sandler, Stifel, KKR, Envision Healthcare, Credit, Morningstar, M&A Mid-Market Awards
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. Spun out from Silver Lake in 2015, Sumeru Equity Partners quickly established itself as a significant presence in the lower middle market technology buyout space. In 2019, the firm successfully exited five enterprise software investments and filed for an initial public offering of one of its portfolio companies to win Private Equity Seller of the Year. 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.
Envision Healthcare Corp. has hired restructuring advisers and is contemplating a bankruptcy filing after the Covid-19 pandemic halted elective surgeries and left the company struggling to manage the $7 billion of debt from its 2018 leveraged buyout, according to Bloomberg News. The KKR & Co.-backed company, one of the largest physician staffing firms in the U.S., has already been holding back pay for doctors, and it has struggled to convince its bondholders to take a haircut in exchange for a new loan that would pare its debt load. Read the full story by Bloomberg: KKR-backed Envision Healthcare considers bankruptcy
Central-bank balance sheets are expanding to record levels amid their latest buying spree, raising questions about how big they can get and whether those assets can ever be sold back to markets. Policy makers didn’t have much luck paring down much smaller portfolios in the decade since the financial crisis. And now they have to bankroll a coronavirus economy that’s putting government budgets under unprecedented strain and threatening to drive companies everywhere out of business. Read the full story by Bloomberg: The fed is buying $41 billion of assets.
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.
Deal structures are changing, especially in terms of what happens after a deal is completed. Read our story: How to manage post-closing disputes in M&A as a result of the coronavirus.
Covid-19 is forcing M&A practitioners to assess appropriate risk allocation mechanisms to address the impact of the virus on global business operations, including Representations and Warranties Insurance (RWI). Read the guest article: How the coronavirus forces dealmakers to assess effectiveness of RWI policies.
As consumer spending and business investment is declining, we expect a slowdown in private equity transaction volume. Read the story: Private equity deals will slow down, as global economy stalls amid coronavirus pandemic.
For more on how to cope with these challenging times, see: Coronavirus contingency planning checklist for the middle market.
CVC Credit Partners has raised its second U.S. direct lending fund at $657 million. The fund will back privately negotiated, senior-secured, floating rate loans to U.S. middle market businesses that have up to $40 million in Ebitda.. To date, CVC Credit has committed over $1 billion and made more than 70 investments. "Given the current market volatility, we are fortunate to have a significant amount of dry powder to invest," says Tom Newberry, global head of private debt at CVC Credit. "We continue to review attractive investment opportunities and expect to be able to construct a portfolio of high quality assets for Fund II."
Morningstar Inc. (Nasdaq: MORN) has acquired the 60 percent stake it does not already own in ratings and research company Sustainalytics. The deal values the target at around $185 million. "From climate change to supply-chain practices, the nature of the investment process is evolving and shining a spotlight on demand for stakeholder capitalism," says Morningstar CEO Kunal Kapoor. "Whether assessing the durability of a company's economic moat or the stability of its credit rating, this is the future of long-term investing."
Pascal Heberling has joined BC Partners where he is concentrating on healthcare private equity investments across Europe. Heberling was previously the head of healthcare at the Abu Dhabi Investment Authority.
Rainer Hepberger has joined investment bank William Blair as a managing director. He was most recently with Raymond James and focuses on the healthcare sector.
Jamie Toothman was hired by private equity firm Harvest Partners as general counsel and chief compliance officer. She was most recently a senior vice president at Oaktree Capital Management.
Once venture capital-backed startups themselves, today’s tech giants know a thing or two about VC seed money. It’s fitting that many of them have created corporate venture capital groups of their own. These CVCs help their owners experiment and nurture new technologies and ideas in the early stages, without requiring the commitment of an acquisition. The CVC strategy often augments a company’s research and development efforts as well as complementing its M&A strategy. Middle-market dealmakers would be wise to track the VC investments of the five companies we highlight: Amazon.com Inc. (Nasdaq: AMZN), Google (Nasdaq: GOOG), Intel (Nasdaq: INTC), Microsoft Corp. (Nasdaq: MSFT) and Salesforce.com Inc. (NYSE: CRM. Read our full coverage: Venture forth: How five of the biggest tech companies explore new territory through early-stage investments.
In a period of accelerating technology innovation and investment, it’s critical to stay aware of new technologies, offerings, data and analytics types and business models in your space, and adjacent spaces. Most companies are looking for ways to get better and earlier access to the startup space. While corporate venture capital (CVC) is only one method, it can be a fairly powerful one. Read full coverage: How corporations can benefit from VC investments in technology
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: the next edition of M&A wrap will be Thursday, April 23.