M&A wrap: Uber, Postmates, Clearlake, Apollo, Grain Management, Summit, Mainsail, Palladium, GTCR, TA
Mergers & Acquisitions is recognizing nine dealmakers as the 2020 Rising Stars of Private Equity:
These outstanding up-and-coming investment professionals have been excelling during a period of profound change in the U.S. and in the world. The publication of this list comes at a pivotal moment in time. The country is beginning to open up after three months of quarantine from the coronavirus, while a second wave picks up steam in the Sun Belt from South Carolina to California and including Texas. Dealmaking under quarantine while working from home has proved challenging, to say the least.
Social justice issues have taken on fresh urgency. There is heightened awareness of systemic racial injustice and police brutality against Blacks after the deaths of George Floyd and many others. Meanwhile, the U.S. Supreme Court ruled recently that, “An employer who fires an individual merely for being gay or transgender defies the law.” On immigration policy, the Court recently put the brakes on dismantling the Deferred Action for Childhood Arrivals, or DACA. Meanwhile, the President is asking the Court to overturn the Affordable Care Act, also known as Obamacare.
Click here for full coverage of Mergers & Acquisitions' 2020 Rising Stars of Private Equity.
Ten private equity firms have pledged to each create and post five board seats to make them available to minority and women candidates, participating in an initiative to increase diversity on company boards of directors. Aurora Capital Partners, Clearlake Capital, Genstar Capital, Grain Management, Hellman & Friedman, Hg, Insight Partners, K1 Investment Management, TA Associates and Vista Equity Partners have committed to the board initiative announced by Diligent Corp., provider of company governance software and a portfolio company of Clearlake and Insight. Read our full coverage: Clearlake, Insight, Vista and other private equity firms create 50 new board roles for diverse candidates.
Uber Technologies Inc. (NYSE: UBER) is buying Postmates Inc. in a $2.65 billion all-stock takeover deal. The takeover would help Uber gain ground against privately-held DoorDash Inc., the current market leader in U.S. food delivery. While Postmates hasn’t kept pace with DoorDash, it maintains a strong position in Los Angeles and the American Southwest, both of which could be valuable to Uber Eats. Read the full story by Bloomberg News: Uber buys Postmates in a $2.65 billion deal.
Clearlake Capital-backed Unifrax has acquired Rex Materials Group, a manufacturer of engineered thermal parts.
Paceline Equity Partners LLC has purchased R.E.L.A.M Inc., which leases railroad maintenance equipment. The PE firm also bought track maintenance service companies Acme Construction Co. and Timiny RR Construction Inc.
Salt Creek Capital has acquired of IT Assist Inc., a leading provider of outsourced technology services and IT consulting. The target is the number one franchise operator of TeamLogic IT.
Warren Equity Partners has acquired Gunnison Tree Services LLC and New Urban Forestry LLC, providers of residential and commercial tree removal and management services.
For more deal announcements, see Weekly wrap: Amazon, Lululemon, Platinum.
For more on fundraising, see PE fundraising scorecard: BC Partners, Harvest, Yellow Wood.
Apollo Global Management Inc. (NYSE: APO) has formed Apollo Strategic Origination Partners. The latter will provide $12 billion in loans over the next three years, targeting deals of approximately $1 billion to meet growing demands for direct lending services. Mubadala Investment Co. is backing the new company. Paul, Weiss, Rifkind, Wharton & Garrison LLP advised Apollo.
Dime Community Bancshares and Bridge Bancorp are sticking with a traditional playbook for their $489 million merger — despite the unconventional future all banks face. The companies will rely on a bigger branch network and more lending capacity to build a sizable bank around New York City. And they plan to reduce technology costs, with no expected branch closings, at a time when other deals have been built around fewer physical locations and more tech spending. The approach seems outmoded as the coronavirus pandemic steers more banks and borrowers to digital channels. Read the full story: Dime-Bridge a conventional deal in unconventional times.
Don Joos has been named CEO at Siris Capital-backed TPx Communications. He was most recently the CEO of PGI, another Siris portfolio company.
Girish Satya has been promoted to principal, portfolio operations, at private equity firm TSG Consumer Partners. He joined the firm in 2016.
Under normal circumstances, M&A demands a robust set of tools and services to be successful. In today’s environment in which the stakes have been raised by the coronavirus crisis, professional help from service providers is more important than ever. Private equity firms and their portfolio companies want to know what actions they can or should take, and what their peers are considering, to make the best decisions possible in response to the Covid-19 pandemic. Through talking with many different affected parties, service providers have streams of data and information that can help investors make informed decisions and minimize negative economic impacts on their investments. Mergers & Acquisitions examines offerings from EHE Health, Norgay Partners, Cepres, Valuation Research Corp. and Axial. “The stakes are high today,” says Greg Mansur, chief client officer at EHE Health, which provides a playbook on getting companies back to work safely. “We want to be part of the solution for our clients. We want to help them through this and help America get back to work.” Read our full coverage: 5 service providers guide dealmakers through the next phase of the pandemic.
As transactions previously delayed due to the pandemic begin to pick up, acquirors and investors in the middle market should evaluate the target’s performance during the unprecedented disruption presented by the pandemic, and adjust expectations for the immediate and medium term. Supplemental due diligence is not only prudent -- it is likely to be required as a condition to the placement of any representations and warranties insurance. Essential considerations include whether the target has been able to innovate and whether the valuation agreed to in a letter of intent should be revisited. Buyers should also review any termination provisions to determine whether any breakup fee would be payable. See our full coverage: 11 factors for dealmakers to consider before buying a company during the pandemic.
Many companies are unprepared to face the tremendous economic challenges brought on by the pandemic. For buyers, navigating this new world of distressed M&A may be the hardest obstacle to overcome in transactions with insolvent organizations. Read the full article: Coronavirus puts spotlight on distressed M&A.
Digital technologies like artificial intelligence and advanced analytics can help organizations to accelerate their pace and expand their insights quickly—advantages that are especially crucial in times of rapid change. See the full story: How analytics can rebalance M&A in the wake of the coronavirus.
Arizent, the parent company of Mergers & Acquisitions, released a new survey May 15 to understand how executives across industries were dealing with the impacts of the Covid-19 crisis after operating in a “new normal” environment for two months. As the coronavirus pandemic continues to extend its grip on the globe — infecting more than 1.41 million Americans (over 4.44 million globally) by the middle of May — executives must navigate their organizations through uncharted territory, with the possibility that the virus may not disappear any time soon. This is forcing C-suites to make big, lasting decisions with few guideposts to aid them. The April survey found that there was a surprisingly smooth, albeit hurried transition to remote, with most companies, including private equity firms and investment banks, feeling that they performed on par or above their own expectations. However, technology gaps did arise, as some companies found that customers either didn’t have the equipment to access their accounts digitally or needed training from staff working remotely. In the middle market, dealmakers report that “opportunities have thinned somewhat but have not disappeared," as one private equity investor put it. "Investor base still has liquidity to invest." Said one investment banker focused on real estate: "Pending deals were either put on hold, cancelled or delayed. Asset prices for listings are being re-evaluated or renegotiated with the sellers and buyers expecting discounts." For more, see: Exclusive survey: How private equity firms, investment banks and other companies are surviving the pandemic.
What do you do when you’re a dealmaker under quarantine, and face-to-face meetings are out of the question? For Work from Home (WFH) strategies, Mergers & Acquisitions turns to eight prominent dealmakers from private equity firms, investment banks, lenders and law firms. “I miss the excitement of a great conference; wearing my nice clothes, early morning breakfasts, the one-on-ones, drinks with my women ‘tribe,’ and dinner at a steakhouse, even though I am a vegan,” says Amy Weisman, managing director, business development, Sterling Investment Partners. In some respects, it is easier to build relationships now, explains Nanette Heide, partner, co-chair, private equity group, Duane Morris. “Meeting folks over a video conference from their home is immediately humanizing.” M&A pros also point out that human factors play a role. "Emotional Quotient (EQ) is more important than ever during trying times,” says Jeremy Holland, managing partner, origination, The Riverside Co. “It’s critical to remember that the dealmaker on other side of the (now figurative) deal table is a person, too. They have good and bad days and presumably know many people in high-risk categories, potentially even themselves. Being extra thoughtful about each interaction is important." Read our full coverage: Dealmaking under quarantine: 8 private equity and M&A pros share strategies while social distancing.
Portfolia Rising America Fund "invests directly in early and growth-stage companies in the U.S. led by people of color and/or LGBTQ founders, or products and services that cater to these markets," says investment partner Lorine Pendleton in a Q&A with Mergers & Acquisitions. "These are founders, ecosystems, products and services historically overlooked by traditional venture capitalists but positioned for significant growth and profitability." The firm is led by five women of color. In addition to Pendleton, the firm's leaders are: Noramay Cadena, co-founder and managing partner of MiLA Capital; Daphne Dufresne, a managing partner of GenNx 360 Capital Partners; Juliana Garaizar, an angel investor; and Karen Kerr, executive managing director at GE Ventures. "We believe that strength lies in differences and seek out entrepreneurs and startups who are using shifting demographics and their own diversity of experience and thought to create innovation that offers outsized opportunities for returns and impact." The fund had its first close earlier in 2020 and has made two investments to date: The first investment is in MoCaFi, a fintech startup founded by Wole Coaxum, a former JPMorgan Chase commercial banking executive and entrepreneur, who is African American. "MoCaFi offers a mobile-first banking platform that brings digital banking products to underbanked or unbanked communities (an 88 million U.S. market), allowing them to build credit and financial mobility," Pendleton explains. The second investment is in a women’s tele-medicine network. For more, read the full interview: Led by 5 women of color, Portfolia Rising America Fund backs mobile banking and women's telemedicine startups.
"As stewards of capital we have an outsized role in determining which businesses to support," says Mina Pacheco Nazemi of Barings Alternative Investments. "As asset allocators, we need to hold ourselves accountable. I can do more. Will you join me?" Dealmakers begin to weigh in, as Gerge Floyd's death sparked two weeks of Black Lives Matter protests against police brutality and racial injustice. Read the story: "Justice doesn’t just happen. It requires action, dedication and accountability," says one private equity investor.
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.
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: M&A wrap is a bi-weekly column, published on Mondays and Thursdays