Guiding portfolio companies through the Covid-19 pandemic is the biggest challenge facing private equity firms and service providers today. Firms throughout the middle market are focused now on helping portfolio companies make decisions about reopening their businesses, assessing the impact of the coronavirus on their businesses and forging a strategy on moving forward. For example, Boston-based Watermill worked with portfolio company Enbi to reimagine its business to make face shields. “They are a high-tech company with deep market knowhow that make rollers for printers,” says Julia Karol, president and COO of Watermill. “The company realized people who have to wear the face shields for long periods of time were getting deep welts on their foreheads. Enbi was able to make a high-grade compound that used foam across the front of the shields, so they are comfortable. Enbi will continue to make masks and explore other innovations. It’s awesome to see the whole manufacturing community using their skills and expertise to help.” For more insights from Watermill, New Heritage, Monroe, Cushman & Wakefield and Eisner Amper, see the story Switching gears: 5 ways private equity firms and service providers are helping portfolio companies adapt in the Covid-19 pandemic.
Technology company Analog Devices Inc. (Nasdaq: ADI) is acquiring Maxim Integrated Products Inc. (Nasdaq: MXIM) in an all-stock transaction that values the combined enterprise at more than $68 billion. BofA Securities; J.P. Morgan; Morgan Stanley; Wachtell, Lipton, Rosen & Katz; and Weil, Gotshal & Manges advised on the deal.
The E.W. Scripps Company (NASDAQ: SSP) is selling podcast company Stitcher to SiriusXM for $325 million, more than doubling Scripps’ investment in podcasting over the last five years, according to the company. Stitcher includes three podcast business lines: the Midroll advertising rep firm; owned-and-operated podcast networks including the comedy-focused Earwolf; and the Stitcher podcast listening platform. BakerHostetler, Guggenheim Securities and Weil, Gotshal & Manges advised on the deal.
Advisory company BIP, a European advisory company backed by the Apax Partners PE firm, is investing in Chaucer, a UK-based consultancy firm. The investment is the largest in BIP’s 20-year history and the partnership is expected to take BIP’s revenues to €350 million (£313 million) ($398 million) at the end of 2020. Allen & Overy; EQUITA; Ludovici, Piccone & Partners; Mischon de Reya and PwC advised on the deal.
Chicago PE firm Madison Dearborn Partners is acquiring Benefytt Technologies Inc. (NASDAQ: BFYT), a health insurance technology company and distributor of Medicare-related health insurance plans, and taking the company private in an all-cash deal. BofA Securities; Kirkland & Ellis; SunTrust Robinson Humphrey Inc.; Truist Bank; and Weil, Gotshal & Manges advised on the transaction.
Web.com Group, a web technology company, is acquiring Webcentral Group (ASX:WCG), provider of digital services for small and medium Australian businesses. Web.com Group is owned by Siris Capital, a New York and Palo Alto, California, PE firm. The deal extends Web.com Group’s strategic move into the Australian, New Zealand, and Southeast Asian markets with its acquisition of Dreamscape Networks last year. Webcentral serves approximately 330,000 customers through its Netregistry, Melbourne IT and WME brands.
Kearny Financial Corp. (Nasdaq: KRNY), the holding company for Kearny Bank, has closed on its acquisition of MSB Financial Corp. (Nasdaq: MSBF) and Millington Bank subsidiary, which adds branches for Kearny in Northern New Jersey. FinPro Capital Advisors Inc., Jones Walker, Luse Gorman and PNC FIG Advisory Inc. advised on the deal.
MedCore Partners has purchased 582 units of independent living, assisted living and memory care projects in seven markets in Washington and California. MedCore will retain Tacoma-based Senior Services of America as the manager of operations and spend $13 million on improving the properties.
Middle-market PE firm BV Investment Partners has invested in Becklar, which offers mobile personal emergency response and critical event monitoring solutions through its Freeus and AvantGuard subsidiaries. The Edmonds Group advised Becklar on the deal.
First Eagle Alternative Credit is expanding into asset-based lending in a bid to capitalize on higher yields and expectations of comparatively lower defaults. The firm has tapped Larry Klaff and Lisa Galeota, both previously at Gordon Brothers Finance Co., to lead the effort; they will report to Chris Flynn, president of First Eagle. First Eagle joins other firms including JPMorgan Asset Management and Arena Investors in seeking opportunities in asset-backed debt, particularly in the wake of the Covid-19 pandemic.
Groundworks Companies of Virginia Beach, Virginia, has purchased Foundation Services Michigan, its 16th acquisition in four years. In January, Groundworks partnered with Cortec Group, a middle-market PE firm. Groundworks, which bills itself as the nation’s largest privately-owned foundation services company, provides foundation repair, basement waterproofing, crawl space repair and concrete lifting in 24 states.
Wolfe Research and Nomura Group say they have entered into a “strategic alliance agreement” to collaborate on their research and trading technology offerings to institutional and corporate clients while retaining the current ownership structure of both firms.
Matthew Wesley is joining Guggenheim Securities in March 2021 as a managing director to expand its private capital advisory business.
Jason Kantor has joined Nurix Therapeutics Inc., a company developing targeted protein modulation drugs, as senior vice president, finance and investment strategy. He previously was a senior biopharma analyst at Artisan Partners.
Jay Coogan has joined Ballard Spahr as a partner in the business and transactions department. He was formerly a partner at DLA Piper.
EQUALITY AND INCLUSION
A 2019 report from the Institute for Policy Studies shows that the median wealth for Black families in 2016 was $3,557—about 2% of the median wealth owned by white families, which owned nearly $147,000 in the same year. For banks to play a major role in closing the income gap between whites and Blacks, they’ll need to diversify their top leadership and middle-management ranks. New hiring and promotional policies could reshape banks’ understanding of local communities’ needs and expand who gets mortgages or small-business loans and which families build lasting wealth. Including more people of color in bank management would diversify the flow of capital, says Malia Lazu, the chief experience and culture officer at Berkshire Hills Bancorp in Boston. See the full story: How banks aim to close racial wealth gap: More minorities in leadership.
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.
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.
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.
MORE FEATURED CONTENT
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.
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