M&A wrap: Thoma Bravo, Quorum, Coastal Flow, Genstar, KKR, Foot Locker
Thoma Bravo-backed Quorum Software is buying Coastal Flow Measurement Inc., a provider of gas and liquids measurement, analytical services and software resources to the energy industry. Quorum offers software to about 75 percent of the largest oil and gas producers in the U.S. “As the energy industry continues to develop the digital oilfield, our employees and customers will recognize the benefits of a Quorum and Coastal Flow combination to effectively deliver an integrated and comprehensive business process automation solution," says Coastal Flow president Mark Fillman. Companies are becoming more efficient, and businesses are relying on data to improve their operations. Data management, data virtualization and artificial intelligence are among the software developments appealing to investors. Earlier in 2019, Genstar Capital-backed Drillinginfo has bought Cortex, a software provider for the energy sector. Cortex's technology allows for the automation of accounts payable and receivable processes for the oil and gas industry. Drillininfo is a data analytics company for the energy sector. Advisors to Quorum include: Credit Suisse Securities, Macquarie Capital and Kirkland & Ellis. Advisors to Coastal Flow include: PPHB Securities and Locke Lord LLP. Financing is being provided by: Credit Suisse, Macquarie Capital, PSP Investments Credit USA LLC and Angel Island Capital.
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.
Strattam Capital has raised its second fund at $230 million. The PE firm focuses on the data analytics, IT and software sectors. Weil Gotshal & Manges advised Strattam and UBS Securities served as placement agent.
HSBC has partnered with fintech firm Neptune Financial to expand their middle market services in the U.S. The partnership will give Neptune customers access to HSBC's commercial banking services. Neptune serves businesses that have up to $100 million in revenue.
Marks & Spencer Group Plc and online delivery startup Ocado Group Plc are discussing a joint venture that would hitch the fortunes of a struggling U.K. retailer to one of the country’s biggest tech success stories. Read the full story from Bloomberg News: Marks & Spencer in talks with Ocado on grocery joint venture.
CyberRisk Alliance has acquired cybersecurity tradeshow InfoSec World from MIS Training Institute. The buyer was founded by Doug Manoni, who formerly served as the CEO of SourceMedia, which owns Mergers & Acquisitions. Corporate Solutions advised MIS.
Rhône Capital is buying Newell Brands' (Nasdaq: NWL) Rexair business. The target makes vacuums and other consumer cleaning products under the Rainbow brand. BMO Capital Markets is advising Newell.
Foot Locker Inc. (NYSE: FL) has acquired a minority stake in children's apparel company Rockets of Awesome for $12.5 million. The target simplifies the way parents shop by delivering high-quality, on-trend, handpicked pieces directly to customers. The investment is part of Foot Locker's strategy to diversify its customers and products offerings.
KKR & Co. (NYSE: KKR) is buying Exact Software, a business and accounting software company in Europe, from Apax Partners. Rothschild & Co. is is advising Apax. KKR Capital Markets is providing financing.
Orix Capital Partners LLC-backed Hoffman Southwest Corp. has bought Tri-State Utilities Co. Matrix Capital Markets Group Inc. advised the sellers.
Littlejohn Capital-backed Hospitality Staffing Solutions has acquired Foodstaff, a provider of food and beverage personnel.
John Childs has retired from middle-market private equity firm J.W. Childs, which he co-founded in 1995. Childs isn't currently active in the PE firm. The news comes days after Childs was one of the 165 people charged solicitation of prostitution. Childs told Bloomberg News: “The accusation of solicitation of prostitution is totally false. I have retained a lawyer.” Read the full story by Bloomberg news: John Childs retires from namesake firm.
M&A in the cybsersecurity sector set a record in 2018 with 183 transactions for $15.5 billion in deal value, according to Momentum Cyber. Private equity accounted for about 40 percent of deal volume with 44 completed deals. There were more than 1,000 data breaches reported in the U.S. in 2018, including Starwood and MyFitnessPal. Companies putting emphasis on data security is expected to drive more interest in cybersecurity providers.
The majority of divestment deals have underpeformed the market, according to a study from Willis Towers. There were over 5,500 divestment deals worth $3.9 trillion completed between 2010-2018. About 54 percent of those deals underperformed market indices. The study showed that companies engaged in divestment deals underperformed the global index by an average of –2.1 percentage points.
In Mergers & Acquisitions' annual look at strategic buyers, we see significant deals aimed at enhancing the customer relationship, including Amazon.com Inc.'s (AMZN) purchase of PillPack, Nike Inc.'s (NYSE: NKE) acquisitions of Invertex Ltd. and Zodiac Inc. and Target Corp.s' (NYSE: TGT) acquisition of Shipt. Technology plays a key role in many transactions. But while technology is enabling developments, it’s not an end unto itself for many corporations. Instead, strategic buyers are using innovations as a means to achieve goals. Based on analyzing hundreds of recent deals, Mergers & Acquisitions has identified seven goals corporate dealmakers hope to accomplish through M&A transactions today: Integrate data with software; improve the customer experience and relationship; expand and improve distribution; process payments more efficiently; leverage tech trends, like autonomous vehicles; make manufacturing processes more efficient; and achieve better outcomes and efficiencies in healthcare. “Strategics have been really active,” says John Neuner, managing director, Harris Williams. “They are aggressive in pursuing the assets they want, as long as it fits within their strategy. Scale is critical to them, and they have to meet consumer demands by adding new capabilities.”
"Companies that are inclusive and also diverse tend to outperform companies that aren't,"says investor Lorine Pendleton of Pipeline Angels and Portfolia in a video interview shot at Exponent Exchange, a gathering of 200 female dealmakers hosted by Exponent Women. Pendleton looks to invest in companies led by diverse entrepreneurs, which she defines as entrepreneurs of color, LGBT entrepreneurs, women, veterans, and disabled entrepreneurs. She also backs companies that have products and services that cater to those markets. "People think that they are niche markets, but they're actually growing in terms of spending dollars and market size."
Related: M&A Insights: Inclusion investing, a video interview with Lorine Pendleton.
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.
Mergers & Acquisitions has closed the nomination process for the 2018 M&A Mid-Market Awards. We look forward to announcing the winners 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.
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 Philadelphia is hosting its 2nd annual Industry Tour focused on SaaS & Tech-Enabled Services on March 12 at the Union League of Philadelphia. Last year's event brought together 200 PE investors, investment bankers, operating companies and industry advisors from around the country.
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.