M&A wrap: Walmart, JD.com, Alibaba, Jeremy Swan, Monument MicroCap Partners
Walmart Inc. (NYSE: WMT) and JD.com Inc. (Nasdaq: JD) have invested about $500 million in Chinese logistics company Dada-JD Daojia, with about $320 million coming from Walmart. Walmart owns more than a 10 percent stake in Dada. The target will use the investment to improve its supply chain technology services. Dada uses scooter-riding drivers in about 400 cities to deliver online orders ranging from packages to groceries, promising to deliver within one hour. The company works with about 1.2 million online merchants. Walmart's China-based supermarkets are one of Dada's clients. “Dada-JD Daojia will deepen our partnership with leading retail partners and improve supply chain efficiency via technology,” Dada CEO Philip Kuai said in a statement to Bloomberg News. Dada was created in 2016 when JD merged JD with Daojia. Walmart originally invested in Dada in 2016. Walmart is looking to counter Alibaba's Hema Fresh brick-and-mortar stores, which offer 24-hour delivery services in Shanghai and Beijing. Walmart operates more than 400 brick-and-mortar stores in China. "By working with strong partners, and investing in digital capabilities, we will create easier and more convenient shopping experiences for customers," Wern-Yuen Tan, president and CEO of Walmart China, said in a statement to CNBC. Morrison & Foerster represented Walmart.
In today’s M&A landscape, the definition of due diligence must expand beyond conventional financial metrics to include a company’s digital strategy and capabilities strengths and weaknesses as well. Traditionally, due diligence has focused on examination of the assets, liabilities and overall fiscal health of the target company. That will continue. Financial statements, quality of earnings reports, commercial diligence and legal are the backbone of the diligence process. But investors must now extend their M&A due diligence to include “digital diligence.” In our digital economy, every company is a technology company—which means every company lives and dies by how effectively it embraces technology and protects itself against cyber threats. That means acquirers need to take a hard look at everything digital to see if the target company has a true tech strategy in place. Read the full guest article by CohnReznick's Jeremy Swan: Giving digital diligence its due.
Private equity fundraising has slowed down in 2018, after a strong 8-year run. The amount of capital raised annually for new funds by U.S. private equity firms increased more than threefold from 2010 (when nearly $71 billion was raised) to 2017 (when $243 billion was raised). But U.S. PE firms closed only $69 billion worth of new funds during the first half of 2018, a far cry from 2017 and on pace for a six-year low, according to Pitchbook. See Mergers & Acquisitions' look at 10 PE firms that have succeeded in raising new funds recently despite the slowdown, including the Carlyle Group (Nasdaq: CG), PPC Partners, Soundcore Capital Partners and Sycamore Partners. For fundraising news on an on-going basis, see our weekly column, PE fundraisng scorecard: Canson Capital and G Squared Opportunities.
Former Hammond, Kennedy, Whitney & Co. executives have launched Indianapolis-based lower middle-market private equity firm Monument MicroCap Partners. The firm will seek investments in North American businesses that have up to $5 million in Ebitda. The firm will be led by former HKW CEO Roy Whitney who was with the latter from 1971 to 1999. Bob Irwin is serving as MMP's CEO. Irwin is a former managing director of Barings LLC's global private finance team. Also joining MMP are Glenn Scolnik, former HKW chairman; and partner Rob Troxel, the former CEO of utility equipment provider Nesco.
Acon Investments is buying Goody Products Inc. from Newell Brands Inc. (NYSE: NWL). Goody makes hair styling tools and accessories. Newell has been shedding noncore brands as part of its accelerated transformation plan. The company recently sold the Rawlings sports equipment brand to Seidler Equity Partners and Major League Baseball. Hogan Lovells LLP is advising Acon.
Central Oregon Truck Co., a subsidiary of truck operator Daseke Inc. (Nasdaq: DSKE), has merged with Leavitt's Freight Service. The target operates a fleet of about 120 trucks that transport utility poles and wood products. Daseke is growing through acquisitions. The company recently bought energy transportation company Aveda in Calgary, Alberta for about $102 million.
Federal Street Acquisition Corp. (Nasdaq: FSACU, FSAC, FSACW), a Thomas H. Lee Partners-backed special purpose acquisition company, is merging with Irving Place Capital-backed healthcare tech company Universal Hospital Services. The deal has an enterprise value of around $1.74 billion. Irving Place is keeping a minority stake in the target. J.P. Morgan Securities LLC (NYSE: JPM) and Weil, Gotshal & Manges LLP are advising Universal Hospital. Citigroup Global Markets (NYSE: C) and Kirkland & Ellis are advising Federal Street. JPMorgan, Citigroup and KeyBanc Capital Markets (NYSE: KEY) are providing financing.
KKR & Co. (NYSE: KKR) is buying a 60 percent stake in environmental services company Ramky Enviro Engineers Ltd. for about $530 million. Ramky collects and transports hazardous materials throughout India. Barclays and and Link Legal are advising Ramky. Ernst & Young, Cyril Amarchand Mangaldas and Simpson Thacher & Bartlett are advising KKR.
Thoma Bravo is buying Quorum Software from Silver Lake. Quorum offers financial and accounting software services to the oil and gas industry. Credit Suisse and Hogan Lovells are advising Quorum. Macquarie Capital and Kirkland & Ellis are advising Thoma Bravo. Credit Suisse and Macquarie are providing financing.
Universal Logistics Holdings Inc. (Nasdaq: ULH) has bought Southern Counties Express Inc. for $65 million. The target offers full-service harbor drayage, transloading, warehousing and cargo services to the electronics, health and fitness equipment and retail industries. Plethora Businesses advised Southern Counties.
For more deal announcements, see The weekly wrap: AT&T, Boston Scientific, TH Lee.
For more on PE fundraising, see PE fundraisng scorecard: Canson Capital and G Squared Opportunities.
Jennifer Graff was hired by Debevoise & Plimpton LLP as a counsel. Graff was previously with Paul, Weiss, Rifkind, Wharton & Garrison and focuses on the formation, management and organization of private investment funds.
Scott Li was promoted from principal to managing director at healthcare-focused investment firm CRG. Li joined the firm in 2015 and focuses on investments in healthcare information technology.
Mergers & Acquisitions has announced the Rising Stars of Private Equity. These 11 up-and-coming investors are expected to play significant leadership roles in the future. Congratulations to:
Daniel Hopkin, Partner, Kainos Capital
John Kos, Principal, GTCR
Erik Latterell, Director, Stone Arch Capital
Ethan Liebermann, Principal, TA Associates
Jaime McKenzie, Director, Monomoy Capital
Jennifer Roach, Vice President, Yellow Wood Partners
Joseph Rondinelli, Principal, Frontenac
David Shainberg, Vice President, Balmoral
Tom Smithburg, Vice President, Shore Capital Partners
Nicholas Stone, Managing Director, Cyprium Partners
Afaf Ibraheem Warren, Senior Associate, Siris Capital
For profiles of the emerging leaders, see Meet Mergers & Acquisitions' 11 Rising Stars of Private Equity.
Exponent, a new group of women dealmakers, brought together 200 women from private equity funds, investment banks, entrepreneurs and advisors for the Exponent Exchange, featuring Sallie Krawcheck as the keynote speaker. Previously the CEO of Wall Streetbanks, including Merrill Lynch Wealth Management and Citi Private Bank, Krawcheck serves as the CEO of Ellevest, an online investing platform for women. Mergers & Acquisitions participated in the event as an in-kind sponsor, and editor-in-chief Mary Kathleen Flynn moderated Spotlight Panel, From Startups to Showtime: Investment Case Studies. Check out our slideshow, Exponent drew 200 women dealmakers to event featuring Sallie Krawcheck.
Summer reading list: From stories of star athletes Arnold Palmer, Keith Hernandez and Tiger Woods to advice from entrepreneurs Bridgewater Associates’ Ray Dalio, KPCB’s John Doerr, Nike’s Phil Knight and Brava Investments’ Nathalie Molina Niño, plus strategies to help business leaders in general, and female dealmakers in particular, the 15 books on Mergers & Acquisitions’ list entertain, instruct and inspire. Check out our listicle: Dealmaker’s guide to summer reading: 15 new books.