M&A wrap: TGI Fridays, Xerox, HP, KKR, India Grid Trust, Bank of Baroda, Steven Mnuchin, Boeing

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The coronavirus pandemic has already quashed a number of previously announced deals, including Xerox’s hostile takeover bid for HP. More deals are expected to fail, as companies focus on preserving cash and ensuring debt access just to make it through the challenging economic cycle. The auto, retail, restaurant, travel and manufacturing sectors have been particularly hit hard, as they face declining sales and location closures. Automotive manufacturers are restructuring their businesses, and car dealerships are seeing fewer people walk in the door. Manufacturers are cutting investments and production. The restaurant industry is also facing extreme challenges. Social distancing is restricting restaurants to take-out and delivery offerings only, and many chains have seen a drastic drop in sales, while others have gone bankrupt. “Many restaurants that are attempting to make the move are doing so with limited menu offerings and without the benefit of drive-thru lanes. Anecdotally, some operators are giving up the cause and closing altogether,” says NPD food industry advisor David Portalatin. The fallout is also causing some deals to fall apart. For example, special purpose acquisition company Allegro Merger Corp. (Nasdaq: ALGR) called off its merger with TriArtisan Capital Advisors LLC-backed casual dining restaurant chain TGI Fridays in a deal that was originally valued at $380 million. In a regulatory filing, Allegro cited “extraordinary market conditions and the failure to meet necessary closing conditions.” For more, read our full coverage: 5 derailed deals: HP, TGI Fridays among those losing buyers during coronavirus crisis.

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India Grid Trust, an infrastructure investment trust backed by private equity fund KKR & Co. and Singapore’s GIC Pte, is looking to add as much as 60 billion rupees ($786 million) of solar power projects to its portfolio and expects some financially stressed assets to become available in the wake of the coronavirus pandemic. Read the full story by Bloomberg News: KKR-backed IndiGrid seeks almost $800 Million in solar assets.

Bank of Baroda, India’s third-largest state-run lender by market value, plans to raise as much as 135 billion rupees ($1.8 billion) over the next 12 months to improve risk buffers and boost lending. Bank of Baroda joins private-sector peers including Kotak Mahindra Bank Ltd. and Yes Bank Ltd. in beefing up capital buffers, as Indian lenders brace for a surge in loan defaults due to a lockdown on the economy. Read the full story from Bloomberg: Bank of Baroda plans to raise $1.8 billion to boost buffers.

Treasury Secretary Steven Mnuchin will require public companies deemed critical to national security that seek a share of $17 billion in virus-related relief to offer an equity stake to the government. For private companies, Mnuchin “may, in his discretion, accept senior debt instruments” or other financial interests, the Treasury Department said in the 10-page loan application posted on its website. One obvious contender for the funds is Boeing Co. (NYSE: BA) which has so far said it might not request government support. Mnuchin said he has had multiple conversations with Boeing’s top executives but declined to say whether it intended to tap government funds. Read the full coverage from Bloomberg: Steven Mnuchin asks for equity stakes in exchange for $17 billion aid.

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.

FEATURED CONTENT
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.

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.

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