February 14th, 2019

JPMorgan Chase Set to Be First Big U.S. Bank With Its Own Cryptocurrency

In 2017, Jamie Dimon, JPMorgan Chase’s chief executive, declared bitcoin a “fraud” and said any employee caught trading it would be fired for being “stupid.”

Maybe it’s not so stupid anymore.

On Thursday, JPMorgan became the first big United States bank to introduce its own cryptocurrency for real-world use. CNBC was the first to report the news.

The digital token, JPM Coin, will be tested “in a few months” as a way of instantly settling “a tiny fraction” of transactions between the corporate clients of its wholesale payments business. Each token will represent $1 in value.

Despite questioning bitcoin’s legitimacy, Mr. Dimon has said he recognizes the potential for the blockchain technology behind it and other cryptocurrencies to have a major role in the global financial system’s future. With the test announced Thursday, JPMorgan is clearly hoping to be ready for it.

February 14th, 2019

DealBook Briefing: JPMorgan Has Its Own Cryptocurrency

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JPMorgan Chase this morning announced the first cryptocurrency to be rolled out by a major U.S. bank.

How will it be used? The new tokens, each of which represents a U.S. dollar, will help settle some payments between the bank’s clients. CNBC reports that the new digital coin will enter testing “in a few months.” It will facilitate a “tiny fraction” of its wholesale payments business.

What’s the point? “Money sloshes back and forth all over the world in a large enterprise,” Umar Farooq, the head of JPMorgan’s blockchain projects, told CNBC. “Is there a way to ensure that a subsidiary can represent cash on the balance sheet without having to actually wire it to the unit? That way, they can consolidate their money and probably get better rates for it.”

It also gives JPMorgan first-mover advantage. This will be one of the world’s first real-world crypto applications for banking, and the biggest move into the sector yet by an American lender. It also sets the bank up for a future in which crypto could be an integral part of the financial sector.

The bank has come a long way on crypto. Its C.E.O., Jamie Dimon, famously declared Bitcoin a “fraud” in 2017 and said he would fire any employee caught trading it. (He later regretted his comments and added that he believed in the value of blockchain, the technology behind cryptocurrencies.)

Congress is expected to vote on a bipartisan border deal this evening that would ward off another government shutdown.

President Trump may be resigned to signing it.I don’t want to see a shutdown,” he told reporters yesterday. “A shutdown would be a terrible thing.”

A lot of people need to be persuaded. Congressional leaders acknowledged that the bill doesn’t allow for the wall that Mr. Trump and his allies want. (White House aides spent yesterday pitching the legislation to the likes of Lou Dobbs and Sean Hannity.) But it assigns more money to border fencing and immigration detention than left-wing Democrats would like.

Still, no one sees a better option. “As with all compromises, I say to people, ‘Support the bill for what is in it,’ ” Speaker Nancy Pelosi told reporters yesterday. The Senate majority leader, Mitch McConnell, warned his colleagues against letting “unrelated cynical partisan plays get in the way of finishing this important process.”

It’s not done until Mr. Trump puts pen to paper. CNN reminds us that he backed out of a previous compromise at the last minute, triggering the longest-ever government shutdown. This time, he could try to find further border funding from elsewhere in the government to claim some sort of victory.

After three days of what Reuters calls “deputy-level meetings” in China, Treasury Secretary Steven Mnuchin and the U.S. trade representative, Robert Lighthizer, will embark on high-level trade negotiations in Beijing today.

China is stepping up. The U.S. officials will meet today with Vice Premier Liu He, President Xi Jinping’s top economic adviser. According to the South China Morning Post, Mr. Xi himself may attend tomorrow.

So far, it’s unclear what progress is being made. President Trump has said only that discussions are “going well,” adding that Chinese negotiators were “showing us tremendous respect.” Beijing has offered few details.

But a deadline extension could help. America is scheduled to increase tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent if a deal isn’t reached by March 1. Mr. Trump has said he might let that slide; Bloomberg puts the possible deadline extension at 60 days.

Relations between Washington and Brussels soured yesterday after the E.U. added four American territories to a blacklist of money-laundering regions, Jack Ewing and Alan Rappeport of the NYT write.

On the list: Puerto Rico, American Samoa, Guam and the U.S. Virgin Islands joined an ignominious group that includes North Korea, Libya, Yemen and Saudi Arabia. European banks must apply greater scrutiny to any transactions in those areas.

The E.U.’s rationale: “Dirty money is the lifeblood of organized crime and terrorism,” Vera Jourova, the European commissioner for justice, said yesterday. “It was high time for Europe to act.”

The Trump administration’s response: The Treasury Department condemned the list as flawed and unnecessary, and complained that it “was not provided any meaningful opportunity to discuss with the European Commission its basis for including the listed U.S. territories.”

Where things get tricky: “The deteriorating relationship between the longtime allies will complicate a resolution on trade,” the NYT notes. “Talks between the European Commission and the White House are on the back burner while the Trump administration focuses on resolving its trade war with China. But trade talks are expected to intensify in the coming months.”

Airbus will cease production of its A380 passenger jet, Amie Tsang of the NYT reports:

• “Citing reduced orders from Emirates Airline, a major customer, and an inability to find other buyers, the company said it would halt deliveries of the jumbo jetliner in 2021, although it said it would continue to support existing A380s.”

• “The decision will lead to job cuts at Airbus, possibly as many as 3,500 over the next three years, and Airbus said it would start discussions in the next weeks about the consequences for its work force.”

• “The A380 “was built for a time when crowded airports would demand that planes carry more people to reduce congestion. But flight traffic instead shifted to smaller planes, which are cheaper to maintain, flying to regional airports, a move that reduced demand for larger aircraft.”

Federal authorities yesterday charged Gene Levoff, a former senior director of corporate law at Apple, with illegally trading on inside information, according to Dai Wakabayashi of the NYT:

• “The S.E.C. said Mr. Levoff violated insider trading laws three times from 2015 to 2016. On one occasion, Mr. Levoff sold roughly $10 million of Apple stock — nearly his entire holdings — from his personal brokerage account four days before Apple announced quarterly earnings on July 21, 2015.”

• “The company’s stock price fell 4 percent after the earnings report, in which Apple revealed it had fallen short of analysts’ estimates for iPhone sales. Mr. Levoff had already seen a draft of the announcement and avoided about $345,000 in losses by dumping his Apple shares before the official announcement, the S.E.C. said.”

• The S.E.C. said Apple cooperated with its investigation, and that Mr. Levoff was placed on leave in July and fired in September.

• A lawyer for Mr. Levoff said in a statement, “Gene Levoff was a trusted Apple executive for many years, and has never before been accused of wrongdoing of any kind.”

The state of negotiations on Britain’s withdrawal from the E.U. is still divided and confused, and Brussels doesn’t like what it sees.

British lawmakers still don’t like Theresa May’s plan. They will debate and vote today on a series of amendments to her proposal. The main focus: a bid to rule out leaving without a deal. (Mrs. May insists that remain an option.)

Britain’s opposition party, Labour, is divided. “Moderate Labour MPs are plotting to form a breakaway political party within weeks,” the FT reports, if their leader, Jeremy Corbyn, doesn’t back an amendment calling for a second referendum on Brexit.

Surprise! Europe remains unimpressed. “E.U. leaders are still waiting for a signal from British Prime Minister Theresa May on the next steps in negotiating a critical divorce deal,” the WSJ reports. “In the meantime, they are losing confidence in her capacity to deliver a majority in her own parliament for any agreement.”

More Brexit news: Britain so far has rollover arrangements for only about £16 billion, or $21 billion, of the £117 billion in E.U. trade deals it benefits from. Potential chaos could cause a surge in market abuse, according to a British financial watchdog. Switzerland will set quotas on British immigration in the event of a no-deal Brexit.

Analysts and investors think that BB&T’s proposed $28 billion takeover of SunTrust will spur a wave of bank consolidation. Such mergers would probably be completed more quickly than in the past, thanks to recent changes at the Fed and the Office of the Comptroller of Currency, Lalita Clozel of the WSJ writes.

How much faster? “The median time the Fed takes to approve or reject a bank merger receiving opposition from community groups — common in large deals — dropped to 3.8 months in the first half of 2018, from 5.6 months in the first half of 2017 and 7.0 months for all of 2015, according to a Fed report,” Ms. Clozel writes “At the O.C.C., the average time for handling all mergers dropped to 1.9 months in 2018, from 2.6 months in 2016, the agency said.”

What changed? The Fed and the O.C.C. now review deals differently. One example: The O.C.C. says previous enforcement actions aren’t necessarily red flags that could kill a transaction.

Banking deal makers are happy. “We were very pleased with the efficiency of the regulatory approval process,” said Kessel Stelling, the C.E.O. of Synovus, whose deal to buy FCB Financial Holdings won Fed approval in just four months.

Others are not. Community groups, who usually press merging banks to increase lending in underserved areas, think they’re being sidelined. And Democratic lawmakers like Senator Elizabeth Warren worry that the new review regime may lead to “a wave of bank consolidation to the detriment of consumers and the financial system.”

BlackRock has hired Stanley Fischer, the former vice chairman of the Fed, as a senior adviser.

Deals

• Levi Strauss plans to go public again, potentially giving its founding family a multibillion-dollar windfall. (FT)

• Goldman Sachs reportedly considered buying the boutique investment banks William Blair and Harris Williams to gain mid-market corporate clients. (Bloomberg)

• Johnson & Johnson agreed to buy Auris, which builds robotic tools to aid surgery, for $3.4 billion. (Bloomberg)

• Four of Deutsche Bank’s biggest shareholders want deeper cuts to its investment bank. (FT)

Politics and policy

• Michael Bloomberg is reportedly willing to spend more than $500 million, on his own campaign or the Democratic nominee’s, to defeat President Trump in 2020. (Politico)

• Fighting climate change and creating jobs are great goals. The Green New Deal may not be the best way to do either. (WSJ)

• Republican senators threatened to vote against Andrew Wheeler, Mr. Trump’s pick to lead the Environmental Protection Agency, unless he promises to relax biofuel requirements. (Bloomberg)

• Europe’s top antitrust cop, Margrethe Vestager, may have endangered her chances of leading the European Commission by vetoing a big rail merger. (FT)

Trade

• President Trump reportedly won’t rush to place tariffs on car imports. (FT)

• His struggles in border wall negotiations may be a bad sign for the new North American trade agreement. (Bloomberg Opinion)

Tech

• It’s “an appropriate time for Congress to consider comprehensive internet privacy legislation,” a report by the Government Accountability Office says. (Axios)

• Why hasn’t A.I. eaten your job yet? (MIT Technology Review)

• Here’s a report card on America’s autonomous cars. Spoiler: Waymo’s still the team to beat. (WSJ)

• Quadriga has “inadvertently” moved more Bitcoin into a wallet that only its deceased founder could open. (Bloomberg)

• How Silicon Valley may be using trade secrets to hide race problems. (Bloomberg)

Best of the rest

• Wall Street’s move into residential real estate has come at a cost to tenants. (Atlantic)

• Confidence in the economy has faded. Can it rebound? (DealBook)

• Renault will cancel tens of millions of euros in scheduled compensation for Carlos Ghosn. Also: What if the auto executive had been charged in the U.S.? (NYT)

• Why Santander ruffled feathers by delaying the repayment of a €1.5 billion, or $1.7 billion, capital bond. (FT)

• Edward Lampert’s plan to resuscitate Sears? Small stores and fewer clothes. (WSJ)

• The inside track on the struggle to control PG&E. (NYT)

Happy Valentine’s Day!

• Three months’ salary for an engagement ring? More like two weeks, actually. (NYT)

• Online dating scams cost Americans $143 million last year. (NYT)

Thanks for reading! We’ll see you tomorrow.

We’d love your feedback. Please email thoughts and suggestions to business@nytimes.com.

February 14th, 2019

UPDATE 1-Aker Energy eyes IPO after submitting Ghana oilfield plan in March

(Adds quotes, share price, detail)

OSLO, Feb 14 (Reuters) – Norwegian oil company Aker said on Thursday that its exploration start-up in Ghana will submit development plans to Ghanaian authorities in March and the parent will then decide whether to sell stakes via an initial public offering or other means.

The subsidiary, Aker Energy, plans to develop the deepwater Pecan field off Ghana.

“Depending on the approval process in Ghana, we believe the first oil is achievable in late 2020 or early 2021,” Aker’s Chief Executive Oeyvind Eriksen told Reuters during an earnings presentation.

A recent appraisal had confirmed contingent resources of 450 million-550 million barrels of oil equivalent (mmboe) at the field, Aker said.

Aker Energy plans to drill another two wells in February, expected to prove between 150 and 450 mmboe of additional resources, with preliminary results expected before the development plan is submitted, Eriksen told the presentation.

Aker controls oil company Aker BP, 30 percent owned by BP , which has announced plans to triple its oil production by 2025 from 155,700 boepd in 2018.

Expected production from Ghana, and potential acquisitions in Norway, support the plan of Aker’s main shareholder, Norwegian billionaire Kjell Inge Roekke, to increase total oil output to over 1 million boepd by 2025, Eriksen said.

Aker Energy operates and holds a 50 percent stake in the DWT/CTP block off Ghana, which contains several discoveries.

Its partners are Russia’s Lukoil (38 percent), the Ghana National Petroleum Corporation (10 percent) and Fueltrade (2 percent).

Eriksen also told Reuters that Aker was still interested in mergers and acquisitions involving its oil service firms, including Aker Solutions.

“We still see opportunities (for M&A)… but the downturn has been more rough for our competitors, which have been more preoccupied with managing price volatility instead of focusing on strategic decisions,” he said.

He declined to say whether he expected any deals to be made this year as oil prices have recovered from a slump in the last quarter of 2018.

As a result of the price fall and capital market volatility, Aker’s net asset value (NAV), its core performance indicator, dropped to 41.7 billion crowns ($4.8 billion) in the fourth quarter from 63.2 billion crowns in the third quarter.

However, the company proposed to increase its dividend to 22.5 crowns per share for 2018, up from 18 crowns for 2017, as it has received a record 2.2 billion crowns in cash from its portfolio companies for the full year, and expected this figure to grow to over 3 billion crowns in 2019.

Aker shares were trading down 0.7 percent by 1150 GMT, underperforming a wider European oil and gas index which was down 0.2 percent. ($1 = 8.6545 Norwegian crowns) (Editing by Susan Fenton)

February 14th, 2019

India Proposes Chinese-Style Internet Censorship

Google and Facebook declined to comment beyond filings made by the industry groups to which they belong. Twitter, which is jousting with India’s parliament over claims that it suppresses right-wing content, said in a statement that it hoped that any changes to the rules would “strike a careful balance that protects important values such as freedom of expression.”

India began signaling last year that it planned to impose tough rules on the tech industry, ending the free rein that American tech giants have long enjoyed in this country of 1.3 billion people, which has been the world’s fastest-growing market for new internet users. Among other things, officials discussed European-style limits on what big internet companies can do with users’ personal data.

The newest proposals on internet content were introduced at a private meeting with tech companies in December. They were on track for quick passage until the details leaked to The Indian Express, a local newspaper, which prompted the government to invite broader feedback.

Officials have offered little public explanation for the proposals, beyond a desire to curb the kind of false rumors about child kidnappers that spread on WhatsApp a year ago and that incited angry mobs to kill two dozen innocent people. That wave of violence has since subsided.

The coming national election has added urgency to the proposals. India’s Election Commission, which administers national and state elections, is considering a ban on all social media content and ads aimed at influencing voters for the 48 hours before voting begins, according to an internal report obtained by the news media. To buttress its legal authority to order such a ban, the commission wrote to the I.T. ministry last week asking it to amend the new rules to specifically prohibit online content that violates election laws or commission orders.

One of the biggest cheerleaders for the new rules was Reliance Jio, a fast-growing mobile phone company controlled by Mukesh Ambani, India’s richest industrialist. Mr. Ambani, an ally of Mr. Modi, has made no secret of his plans to turn Reliance Jio into an all-purpose information service that offers streaming video and music, messaging, money transfer, online shopping, and home broadband services.

In a filing last week, Reliance Jio said the new rules were necessary to combat “miscreants” and urged the government to ignore free-speech protests. The company also said that encrypted messaging services like WhatsApp, “although perceivably beneficial to users, are detrimental to national interest and hence should not be allowed.”

February 13th, 2019 February 13th, 2019 February 13th, 2019 February 13th, 2019

5 pros and cons of Ellie Mae going private

The $99 per-share price shocked analysts. “The fact that someone would pay 20 times 2020 EBITDA or higher for a business that is going to grow revenue 3% to 5% a year was surprising,” said Henry Coffey, a managing director with Wedbush Securities.

But even though there is a go-shop period, a higher offer is unlikely, he said.

“You got everybody in the mortgage industry saying that mortgage tech need to evolve for the next generation, that’s an expensive process. And someone just paid 20 times EBITDA for this company.”

But the price may indicate Thoma Bravo is taking a long-term approach with Ellie Mae.

“The valuation was big in my view, but if you have a four- or five-year view, and you view some of these industry trends on the health of the channel as temporary cyclical, you come out at a better end,” Campbell said.

However, analysts at William Blair were not taken aback by the offer. “We believe the multiple paid is either fair or attractive. We note that the average 2019 adjusted EBITDA multiple for other real estate technology/information services firms we cover is about 22 times, so this multiple seems relatively in line with the broader group,” it said in a report.

February 13th, 2019

Confidence in the Economy Has Faded. Will It Rebound?

The government shutdown and the late 2018 stock market tumult eroded confidence in the economy among business owners and consumers alike last month.

Now that the stock market has rallied and the government has reopened, will optimism about the economy rebound, or is the recent slide an indication of a more lasting shift?

In January, both the National Federation of Independent Business’s optimism index for small businesses and the University of Michigan’s consumer sentiment index fell to their lowest levels since at least November 2016. And the Conference Board’s index of consumer confidence posted its steepest decline over the past few months since 2011.

Those three indexes had jumped in the months after Donald J. Trump was elected president on optimism that his pro-business agenda of reduced taxes and regulation would ignite economic growth. The indexes peaked last year as the stock market marched to record highs, and despite the recent pullback, they remain at historically elevated levels.

Businesses, policymakers and investors often use sentiment surveys to evaluate the direction of the economy. If confidence is high, the thinking goes, business owners and consumers are more likely to open their wallets to make purchases, hire employees and expand their operations. If those same groups are worried about the future, they are more likely to curtail their spending.

But upward swings in sentiment do not necessarily translate into increased spending and economic growth. The economy, for instance, remained sluggish for more than a year after consumer and business confidence jumped in the months after the 2016 election.

Such indexes are also sensitive to short-term moves in the stock market and political developments that have little effect on spending.

Indications that sentiment is set to rebound are beginning to appear. Economic confidence recovered in a poll conducted in early February for The New York Times by the online research firm SurveyMonkey.

The University of Michigan releases a preliminary version of its survey roughly halfway through each month and then its final report at the end. Last month, the final figure, although the lowest since October 2016, showed a slight uptick from the preliminary version, which was released during the shutdown. Also, the survey’s personal financial expectations index, considered a better indicator of household spending than the overall index, held up during the period.

The university will release its preliminary consumer sentiment index for February on Friday.

The report on small-business sentiment also offered reasons to think the slide in confidence may be temporary. Within the index, expectations among business owners about their sales and the overall economy had the biggest declines. But those segments typically have been the most sensitive to gyrations in the stock markets.

Meanwhile, expectations for business spending, which had slid sharply since August, stopped declining.

February 13th, 2019

M&A wrap: Johnson & Johnson, Auris Health, Alphabet, Verily, Bain Capital, U.S. Renal Care


Auris Health

Johnson & Johnson (NYSE: JNJ) subsidiary Ethicon Inc. has agreed to acquire robotic surgery developer Auris Health Inc. for approximately $3.4 billion in cash, plus contingent payments up to $2.35 billion based on achieving milestones. Auris Health is a privately held developer of robotic technologies, initially focused on lung cancer, with an FDA-cleared platform currently used in bronchoscopic diagnostic and therapeutic procedures. The acquisition accelerates Johnson & Johnson’s entry into robotics with potential for growth and expansion into other interventional applications. “In this new era of healthcare, we’re aiming to simplify surgery, drive efficiency, reduce complications and improve outcomes for patients, ultimately making surgery safer,” said Ashley McEvoy, executive vice president, worldwide chairman, medical devices, Johnson & Johnson. “We believe the combination of best-in-class robotics, advanced instrumentation and unparalleled end-to-end connectivity will make a meaningful difference in patient outcomes.” Auris Health’s technology is designed to support Johnson & Johnson’s vision of being a world leader across the continuum of surgical approaches, including open, laparoscopic, robotic and endoluminal. The move is also complementary to the acquisition of Orthotaxy’s robotic technology for orthopaedics and the continued development of the Verb Surgical Platform, through a strategic partnership with Verily, a life sciences and healthcare subsidiary of Google parent Alphabet Inc. (Nasdaq: GOOGL). “We are very committed to our partnership with Verily on the development of the Verb Surgical Platform,” said McEvoy. “Collectively, these technologies, together with our market-leading medical implants and solutions, create the foundation of a comprehensive digital ecosystem to help support the surgeon and patient before, during and after surgery.” With the acquisition, Frederic Moll, M.D., CEO and founder of Auris Health and a visionary in the field of surgical robotics, will be joining Johnson & Johnson upon completion of this transaction. Cravath, Swaine & Moore LLP is representing Johnson & Johnson in the transaction.

Deal news
U.S. Renal Care Inc., a provider of dialysis services for patients suffering from end stage renal disease (also known as kidney failure), has agreed to be acquired by a group of investors led by founder and CEO Chris Brengard and including the company’s management team, Bain Capital Private Equity, Summit Partners, Revelstoke Capital Partners, and Mark Caputo, the founder and CEO of Liberty Health Partners. U.S. Renal Care will continue to operate under its current management team, who will remain significant investors in the company. Financial terms of the private transaction were not disclosed. Goldman Sachs and Barclays are serving as financial advisors, and Latham & Watkins is serving as legal counsel to U.S. Renal Care. Ropes & Gray is serving as legal counsel, and PwC is acting as accounting advisor, to the investor group. Weil, Gotshal & Manges LLP is serving as legal counsel to the management team.

Featured content
Mergers & Acquisitions has closed the nomination process and is now looking forward to announcing the 2018 winners of the M&A Mid-Market Awards 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.

Related: For a look at the three special reports, including timelines and criteria for nominations, see Special reports overview: M&A Mid-Market Awards, Rising Stars, Most Influential Women.

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.

Related: 10 private equity firms share strategies for tech M&A.

Mergers & Acquisitions asked leading dealmakers about their outlook for the middle market in 2019. Watch the video conversations, shot at ACG Philadelphia’s M&A East: It is a seller’s market, and deal activity is expected to remain steady, says Ramsey Goodrich of Carter Morse & Goodrich: Outlook 2019: Great time to sell. Private equity firms and strategic buyers will use their excess cash and capital to look for deals, says Bharat Ramprasad of Stifel Nicolaus: Outlook 2019: Excess capital to fuel M&A. Rising interest rates and regulatory changes may increase volatility, cautions Mark Emrich of Murray Devine: Outlook 2019: Keep an eye on rising interest rates.

Bank volume was steady, but deal values would have been the lowest in years if not for one big, and very intriguing, transaction. For more, see: Bank M&A: What January data hints about 2019.

Not only do carve-outs account for 10 percent of all M&A activity, the percentage of carve-outs conducted by buyout firms (as opposed to strategic buyers) is on the rise, and sharply at that. And that’s important, because, at the risk of overextending the curveball analogy, the carve-out is ‘filthy stuff.’ The inherent complexities of the deal can puzzle even serial acquirers. Write Accordion’s Gary Appelbaum and Eric Salit in this guest article: Carve-out curveball: How to hit a home run.

Consumerization of healthcare, high-deductible health plans, and more self-payment by patients are contributing to the overall increased demand for PT services, write Battery Ventures general partner Chelsea Stoner in this guest article: Rising demand for physical therapy drives deals.

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.

Related: Meet the 2019 Most Influential Women in Mid-Market M&A.

Events
The SBIA and the AM&AA are hosting a Deal Summit at The Doral in Miami from Feb. 20-22. The gathering offers networking opportunities with senior-level M&A advisors and lower middle-market private equity investors.

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 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.


Mary Kathleen Flynn

Mary Kathleen Flynn

Mary Kathleen Flynn joined SourceMedia in 2011, serving as the Editor-in-Chief of Mergers & Acquisitions. MK oversees the brand’s content on all media platforms, including website, e-newsletters, video, slideshows, podcasts and print.


Demitri Diakantonis

Demitri Diakantonis

Demitri Diakantonis joined SourceMedia in 2015 and serves as Managing Editor of Mergers & Acquisitions. He covers all aspects of middle-market dealmaking, with a focus on strategic buyers and the consumer and retail sectors, and writes The Buyside column.

February 13th, 2019

Light Street's Glen Kacher on the 2019 IPO market

Light Street's Glen Kacher sits down with CNBC's Leslie Picker at the Goldman Sachs Tech Conference in San Francisco to discuss the investment opportunities in tech and his thoughts on the 2019 IPO market.

February 13th, 2019

What if Carlos Ghosn Were Charged in the U.S.?

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Carlos Ghosn, the former leader of the car-making alliance that included Nissan, Mitsubishi and Renault, has been detained in Tokyo since Nov. 19 on suspicion of understating his salary for eight years. He would be in a very different situation if he were in the United States.

Indeed, the arrest and continued detention of Mr. Ghosn highlights how differently criminal justice systems treat defendants. It is unlikely that he would be accused of a crime for what he did if he were in the United States — and even if he were, he would have been released from custody long ago.

Let’s take a close look at how different things would be for Mr. Ghosn if he were in the United States.

Japanese prosecutors have accused Mr. Ghosn of an abuse of corporate trust, a crime that does not exist in federal law in the United States. He is also charged with underreporting $80 million in income and temporarily transferring a personal debt to Nissan.

[Carlos Ghosn taps a lawyer nicknamed ‘the Razor’ to defend him]

Prosecutors in the United States often use mail and wire fraud laws to accuse individuals of deception when they make personal gains. But there is a question of whether Mr. Ghosn actually misled Nissan, Mitsubishi or Renault, the three companies for which he served as chairman. In an interview with The Nikkei Asian Review, he maintained his innocence and accused senior executives at Nissan of an exercise in “plot and treason” carried out to have him removed from his position at the company.

The Securities and Exchange Commission has requested information from Nissan and Mr. Ghosn about any financial improprieties and possible misstatements in their financial reports. If there were to be a case filed against either party in the United States, it is much more likely to be a civil action, rather than a criminal prosecution, for violating the accounting requirements for companies whose shares are publicly traded. (Although violation of the federal securities laws can be charged as a crime, the Justice Department usually leaves accounting and corporate governance issues of the type involving Mr. Ghosn to civil regulators because proving the required intent can be difficult.)

Mr. Ghosn could also be accused of a crime in the United States for any underreporting of taxes owed on his pay, if he sought to avoid paying them on corporate benefits. Under tax laws, attempts to evade or defeat a tax or make false statement on any document filed with the Internal Revenue Service can result in criminal charges. Those crimes require showing that a defendant knew about the tax reporting law and purposefully defied it, so most cases involving a failure to pay the requisite taxes are handled through a civil audit in which the overdue taxes and a penalty are assessed. Criminal charges for this type of violation are uncommon when there is no evidence of active hiding of funds, such as creation of a secret offshore account.

The Japanese Constitution states that “no person shall be compelled to testify against himself” and that a “confession made under compulsion, torture or threat, or after prolonged arrest or detention shall not be admitted in evidence.” But Mr. Ghosn continues to be interrogated about the alleged crimes. The protections afforded to a defendant do not preclude repeated questioning about the charges, even if the person refuses to cooperate.

In the United States, defendants cannot be questioned without their lawyer present after prosecutors have filed charges. The right to counsel begins once the prosecutor initiates the case, and every defense lawyer will tell the client the same thing: “Shut up.”

In Japan, prosecutors can extend the time for which a defendant can be held by filing new charges, and during that period, prosecutors and investigators can question the defendant without the person’s lawyer present.

Even if federal prosecutors in the United States were to pursue a criminal case, there is little chance that Mr. Ghosn would be detained awaiting his trial. The Constitution requires that a person be brought before a court within 48 hours of an arrest without a warrant, and that they be held before trial only if the government provides evidence that the person poses a risk of flight or a threat to the community.

The Japanese court has not released Mr. Ghosn on bail because it found probable cause that he might flee or destroy evidence. That could be a basis for detaining a defendant in the United States, but in a white-collar crime case, the potential for evidence destruction is often minimal because corporations can be expected to maintain records and provide them voluntarily.

In most white-collar cases, the defendant is released on a “personal recognizance” bond that does not require posting any money to the court, but instead making a promise to pay if the defendant does not appear at a subsequent proceeding. These defendants rarely pose any threat of violence to others.

Judges often impose conditions on a defendant to ensure that the person will appear. For example, family members may be required to post security, such as property or other assets. A foreign defendant will usually be required to give up a passport and agree to some form of regular monitoring.

The Eighth Amendment also states that “excessive bail shall not be required.” Although the Supreme Court has held that the Constitution does not require a court to grant bail, in the federal system, there is a presumption in favor of releasing a defendant unless the person is charged with a major drug offense, a crime of violence or child pornography. So even if Mr. Ghosn were accused of a crime, there is a strong likelihood that he would have been released within days of an arrest.

The criminal justice system in the United States has its share of flaws, and there are persistent concerns about defendants being jailed because they cannot afford to pay their bail. But in white-collar cases, that is rarely a concern — so even a notorious swindler like Bernard L. Madoff has been released until there was a finding of guilt on the charges made against him.

It appears unlikely that Mr. Ghosn will be released before his trial in Japan. A group of French lawyers sent a letter to the Japanese government protesting the harsh treatment he has received, but to no effect. What the arrest and prosecution show is the peril that foreign executives face if they are the subject of a criminal accusation in some other jurisdictions. What we take for granted in the United States does not necessarily translate when another government’s prosecutors pursue criminal charges.

February 13th, 2019

UPDATE 2-Jeans maker Levi Strauss files for stock market comeback

(Adds details on competition, possible offer size)

Feb 13 (Reuters) – Levi Strauss & Co filed documents on Wednesday to list itself on the New York Stock Exchange, seeking to return to public markets after more than three decades.

Levi’s, one of the world’s biggest denim brands and the inventor of blue jeans, faces rapid changes in consumer tastes as people shop for cheaper store brands and look for more comfortable clothing like jogging pants.

Last year, rival VF Corp said it would spin off its less profitable Wrangler and Lee jeans business into a publicly traded company, allowing it to focus on Vans and its outdoor wear businesses to help improve profit margins.

The 145-year-old company, which intends to list as “LEVI”, set a placeholder amount of $100 million to indicate the size of the IPO. The final size of the IPO could be different.

The company could be valued at around $5 billion when it debuts, a CNBC report said in November.

The privately held company is controlled by the descendents of founder Levi Strauss. It is required to post quarterly earnings with U.S. regulators as it its Japanese arm, Levi Strauss K.K, is publicly traded in Tokyo.

In its latest report, the company said sales rose nearly 9 percent to $1.59 billion. Its filings also show that it has halved its debt load over the last two years.

Levi Strauss sells in products in over 50,000 retail locations, including about 3,000 standalone stores and shops-in-shops across 110 countries. It sells apparel under the Levi’s, Dockers and Denizen brands.

With the IPO filing, the company joins a list of high-profile companies seeking to go public this year including Uber Technologies, Lyft, Pinterest and Airbnb.

Goldman Sachs, JPMorgan, BofA Merrill Lynch and Morgan Stanley are part of a 12-member underwriting team handling the IPO. (Reporting by Aparajita Saxena, Bharath Manjesh in Bengaluru Editing by Saumyadeb Chakrabarty)

February 13th, 2019

UPDATE 1-Jeans maker Levi Strauss files for IPO to return to public markets

(Adds background on company)

Feb 13 (Reuters) – Jeans maker Levi Strauss & Co on Wednesday filed documents to list itself on the New York Stock Exchange, as the 145-year old company seeks to return to the public markets after more than three decades.

The company said it intends to raise $100 million in net proceeds and list under the “LEVI” symbol. The size of the IPO stated in preliminary IPO filings is a placeholder used to calculate registration fees. The final size of the IPO could be different.

The company first went public in 1971, but descendants of founder Levi Strauss took the company private in 1984.

In its latest quarterly report, the company said sales rose nearly 9 percent to $1.59 billion.

Levi Strauss sells in products in over 50,000 retail locations, including about 3,000 standalone stores and shops-in-shops.

The company’s biggest shareholder is Mimi Haas and Margaret Haas, descendants of Levi Strauss.

Goldman Sachs, JPMorgan, BofA Merrill Lynch and Morgan Stanley are part of a 12-member underwriting team handling the IPO. (Reporting by Aparajita Saxena, Bharath Manjesh in Bengaluru Editing by Saumyadeb Chakrabarty)

February 13th, 2019

Jeans maker Levi Strauss files for IPO

Feb 13 (Reuters) – Jeans maker Levi Strauss on Wednesday filed for an initial public offering of up to $100 million.

The company intends to list on the New York Stock Exchange under the symbol “LEVI”, it said in a preliminary filing with U.S. regulators.

The size of the IPO stated in preliminary filings is a placeholder used to calculate registration fees. The final size of the IPO could be different. (Reporting by Bharath Manjesh in Bengaluru Editing by Saumyadeb Chakrabarty)

February 13th, 2019

One Investment Firm Found a Silver Lining in the Mortgage Industry: Software

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No, this isn’t about Fannie Mae. And don’t get confused with Jed Clampett’s hayseed daughter Elly May on “The Beverly Hillbillies,” either. It’s Ellie Mae, the publicly traded provider of mortgage-processing software-as-a-service to American home lenders.

The investment firm Thoma Bravo is paying $3.7 billion to acquire the Pleasanton, Calif.-based Ellie Mae. That’s more than 25 times the software company’s projected earnings before interest, taxes, depreciation and amortization for this year, according to estimates collated by Refinitiv, and a nearly 50 percent premium to its stock’s latest 30-day closing average.

It’s a pretty price to pay for exposure to a market that is being buffeted by rising interest rates, slipping home-price gains and worries about affordability. The Mortgage Bankers Association believes that United States home-loan originations declined by a little over 5 percent last year to $1.6 trillion.

But such headwinds make the cost benefits of outsourced automation all the more attractive to lenders. Mortgage loan processing has always been tedious, and new regulations imposed in the wake of the subprime-mortgage crisis only added to the burden.

Ellie Mae estimates that the cost of making a new mortgage loan more than doubled between 2007 and 2017, to just over $8,000. It claims to be able to reduce those costs by about a third. More than 2,300 lenders have adopted the company’s software and used it to close more than 2.5 million loans. The goal of the 22-year-old business is to “automate everything automatable.” It assessed its own market share at 35 percent in 2017, and its target is for more than half.

The company, led by Jonathan Corr, isn’t immune to broader trends, of course. Full-year profit for 2018 is projected to fall by about half from 2017, while revenue growth is expected to slow to 6 percent this year from 15 percent last year, according to data from Refinitiv. But it has no debt on its balance sheet, giving a private-equity buyer room to leverage its returns, even if not to the stretched levels possible in some industries.

And investors seem to believe the sky is the limit for cloud-based software services. That may explain why Ellie Mae’s stock traded slightly above the offer price for much of the day on Thursday, suggesting that Thoma Bravo’s $99-a-share offer may not be the final word.

February 13th, 2019

DealBook Briefing: Trump’s Shifting Trade Talk Deadline

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President Trump said he may let his March 2 deadline for reaching a trade agreement with China “slide for a little while” if the two countries are near a deal by then.

Washington and Beijing are deep in negotiations. “In the talks this week, Chinese and U.S. negotiators are focusing on producing a broad outline of a trade agreement for their presidents to clinch at a possible summit,” the WSJ reports. “Officials holding trade and economic portfolios are seeking to narrow the still-substantial gap between the concessions China is willing to offer and what Mr. Trump’s administration will accept.”

Mr. Trump wants to maintain momentum. The president characterized those discussions as “going well,” according to Deborah B. Solomon of the NYT, and said he thought the U.S. had a chance “to make a real deal.” He added that he wanted “a real deal, not just a deal that looks cosmetically good for a year.”

But any pact will face a big obstacle: Chinese commitment. A history of broken policy promises between China and the rest of the world hangs over U.S. negotiators, Keith Bradsher of the NYT writes. So they want to ensure that “any deal they strike has teeth if Beijing does not live up to its obligations.” One proposed solution: “a mechanism that would automatically raise tariffs on Chinese goods if its exports to the United States keep rising.”

The British prime minister reportedly plans to leave a parliamentary vote on her Brexit deal to the last moment, then force politicians to pick between it or a long delay for Britain’s exit from the E.U.

That revelation was overheard in a Brussels bar. According to the British broadcaster ITV News, one of its reporters heard Oliver Robbins, one of Mrs. May’s top aides, discussing the plans in a hotel bar. “The issue is whether Brussels is clear on the terms of extension,” Mr. Robbins reportedly said. “In the end they will probably just give us an extension.”

Mrs. May previously opposed a delay. She has insisted that lawmakers have a choice between her deal or no deal. “An option to extend for a longer period would just continue the uncertainty,” she told business leaders in a conference call yesterday.

The comments could spell trouble for her. They may undermine her efforts to muster enough support in Parliament for her deal. Mrs. May’s office had no comment on the remarks attributed to Mr. Robbins.

The carriers’ C.E.O.s are scheduled to appear on Capitol Hill this week to defend T-Mobile’s proposed $26 billion acquisition of Sprint. Their first stop is the House Committee on Energy and Commerce today, where they’ll face Democrats who are increasingly skeptical about letting the nation’s third- and fourth-biggest carriers combine.

What to expect: John Legere of T-Mobile will repeat his claim that merging the two companies would create a stronger rival to Verizon and AT&T. “I want to reiterate unequivocally that prices will go down and customers will get more for less,” he told Bloomberg in an interview. And he’ll emphasize the combined company’s ability to roll out 5G wireless service, playing off fears that the U.S. may fall behind China in that area.

But lawmakers have issues with the deal. Democrats think a merger would actually increase prices for consumers, as well as bring job cuts. Some lawmakers also contend that promises to increase rural wireless broadband are empty. And some critics say that dozens of stays by Mr. Legere at President Trump’s Washington hotel since the deal was announced may have been improper.

A political caveat: Though Democratic opposition to the deal appears to be growing — nine senators called for the deal to be blocked — Congress doesn’t get a say. It can only apply pressure to the Justice Department and the F.C.C. to block it.

Still, the telecoms aren’t resting easy. Bloomberg notes that the spread between T-Mobile’s offer price and Sprint’s stock price has grown since December, suggesting that investors think the deal’s chances of winning approval are getting worse.

The Trump administration is moving closer to barring telecom companies in the U.S. from using Chinese equipment while building next-generation wireless networks, Julian E. Barnes of the NYT writes.

• “The executive order, which has been under discussion for months, is aimed largely at preventing Chinese telecom firms like Huawei from gaining access to the fifth-generation — or 5G — wireless networks that companies are beginning to build in the United States.”

• “President Trump has been briefed on the proposed ban, which would prevent the use of equipment from ‘adversarial powers,’ and the order could be issued in the coming days, American government and industry officials said.”

The case against a ban: Robert Hannigan, a former director of the British intelligence agency G.C.H.Q., argues in the FT that blanket bans on Chinese tech “make no sense.” Lawmakers, he says, should “base decisions on Chinese involvement in future telecoms on technical expertise and rational assessment of risk, rather than political fashion or trade wars.”

The former Nissan chairman, who’s still detained in Japan, has replaced his legal team — perhaps in a bid to try a more aggressive strategy.

Who’s out: Motonari Otsuru, a former prosecutor familiar with the tactics employed in Japanese courtrooms.

Who’s in: Junichiro Hironaka, whose nickname in Japan is “the innocence contractor.” He has successfully defended government officials against corruption charges and a prominent businessman against accusations of insider dealing.

Potentially behind the change: The FT notes that “Mr. Otsuru at times appeared to defend the practices of Japanese prosecutors and the way that suspects are interrogated without the presence of their lawyers.”

More Nissan news: The French government reportedly pressed the Japanese carmaker about merging with its corporate sibling, Renault, but was rebuffed. And the company reported a 45 percent drop in third-quarter earnings yesterday.

The Chronicle of Philanthropy’s list of the 50 most generous donors to charitable causes shows that they jointly gave $7.8 billion in 2018. That’s impressive — until you compare it to 2017, when donors gave $14.7 billion.

Topping the list were Jeff and MacKenzie Bezos, who gave $2 billion. Michael Bloomberg was a distant second, having given $767 million. Other notable donors included Blackstone’s Steve Schwarzman, Mark and Priscilla Zuckerberg, and Bill and Melinda Gates.

The drop-off in giving was stark. Theodore Schleifer of Recode points out that the Gates Foundation gave $150 million last year, compared with $4.8 billion in 2017. The Zuckerbergs donated $200 million last year, down from $2 billion in 2017.

The big picture: As Mr. Schleifer notes, this shows “how a few decisions by the country’s wealthiest Americans can totally change the portrait of big-dollar philanthropy.” The drop in charitable giving, he adds, comes at a bad time, “given the louder conversation in the U.S. about the responsibilities of billionaires.”

Some of America’s largest news publishers are unhappy with the financial terms of a news subscription service that Apple plans to unveil later this year, according to the WSJ, citing unnamed sources.

• “The service, described by industry executives as a ‘Netflix for news,’ would allow users to read an unlimited amount of content from participating publishers for a monthly fee.”

BuzzFeed reports, citing anonymous sources, that it is expected to be unveiled on March 25.

• But “in its pitch to some news organizations, the Cupertino, Calif., company has said it would keep about half of the subscription revenue from the service,” according to the WSJ.

• “Another concern for some publishers is that they likely wouldn’t get access to subscriber data, including credit-card information and email addresses.”

• “The New York Times and the Washington Post are among the major outlets that so far haven’t agreed to license their content to the service, in part because of concerns over the proposed terms.”

The former N.J. governor weighed in on the presidential race at a party for his new book last night. (It was hosted by the hedge fund magnate Steve Cohen at his Midtown Manhattan penthouse, which is up for sale for $45 million.) Here were some of Mr. Christie’s observations:

• He called the Democratic senators Kamala Harris and Cory Booker, both of whom are black, “articulate.” Of Ms. Harris, he said, “She presents herself pretty well.” Of potential supporters of Mr. Booker, he said, “Will they love him for the second speech, third speech and fourth speech?”

• He wondered of Joe Biden: “Is he going to be the adult in the room or is he going to be crazy Uncle Joe?”

• Of Senator Amy Klobuchar, he said, “Her entire rollout gets stepped on by a whole bunch of her former staff saying that she’s a monster, and screams and yells and throws stuff at people and is a lunatic to work for,” adding, “I don’t see her being in the right spot.”

At the party: Gary Cohn, the former Trump economic adviser and Goldman Sachs president; John Flannery, who was ousted as G.E.’s chief executive last fall; and Douglas Haynes, who resigned as president of Mr. Cohen’s Point72 hedge fund.

Activision Blizzard plans to lay off 8 percent of its workers, or 775 employees, as traditional video game companies struggle to compete with hits like “Fortnite.”

Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, is opening an office in San Francisco to help strike more tech deals.

Deals

• Amazon and GM are reportedly in talks to invest in Rivian, a start-up that plans to build electric pickup trucks, at a valuation of up to $2 billion. (Reuters)

• Lyft’s founders are planning to keep control of the ride-hailing company after it goes public, despite owning just 10 percent of its shares. (WSJ)

• Ellie Mae, a mortgage software company, agreed to sell itself to the investment firm Thoma Bravo for about $3.7 billion. (Reuters)

• France is calling for an overhaul of E.U. merger rules. (FT)

Politics and policy

• President Trump says he’s “not happy” with Congress’s deal to fund border security, but declined to say whether he would veto it. Allies predict the president will ultimately approve it. (NYT, Politico)

• A new Prudential survey shows how the 35-day government shutdown hurt federal workers. One example: 62 percent depleted most of their emergency savings. (Axios)

• Senator Marco Rubio, Republican of Florida, proposed raising taxes on capital gains to discourage companies from stock buybacks. (CNBC)

Trade

• How President Trump’s trade war has hurt American whiskey. (NYT)

• China has held talks with Venezuela to protect its investments there. (WSJ)

• Tesla has been importing Model 3s into China ahead of the March 2 deadline for U.S.-China trade talks. (SCMP)

Tech

• In an awkward Twitter-based interview, the social network’s C.E.O., Jack Dorsey, said that his company and its peers haven’t done enough to fight abuse. (Wired, Reuters)

• Why Amazon is caught in an unexpected brawl in New York about its new campus. Also: The company is now raising prices at Whole Foods, having slashed them when it first took over. (NYT, WSJ)

• The Pentagon’s new A.I. strategy document, released the day after the White House unveiled a poorly received directive on the topic, reads in part like a pitch deck to Silicon Valley. (Fortune, Axios)

• Governor Gavin Newsom of California has proposed a “digital dividend” that would allow consumers to take a slice of Big Tech’s profits. (Bloomberg)

Best of the rest

• The Fed’s chairman, Jerome Powell, says that U.S. economic expansion has been uneven. (WSJ)

• A lawsuit by CBS shareholders accuses current and former executives of insider trading because they sold stock ahead of disclosures about sexual harassment allegations against Les Moonves. (WSJ)

• The Mexican crime lord known as El Chapo was convicted yesterday after a three-month trial in New York. (NYT)

• The national debt has risen above $22 trillion for the first time. (AP)

• Americans are highly optimistic about their finances right now. Perhaps they shouldn’t be. (Barron’s)

Thanks for reading! We’ll see you tomorrow.

We’d love your feedback. Please email thoughts and suggestions to business@nytimes.com.

February 13th, 2019

Special reports overview: M&A Mid-Market Awards, Rising Stars, Most Influential Women


Photo credit: Adobe Stock

To celebrate deals, dealmakers and dealmaking firms, Mergers & Acquisitions produces three special reports every year. Here’s the timeline.

For the M&A Mid-Market Awards, we open up the nominations in January, and the deadline is in early February. As with all our special reports, nominations are helpful but not required. There are no fees, and there is no limit on the number of nominations, for any award category or categories, submitted by a firm or individual. The awards honor leading dealmakers and deals that set the standard for transactions in the middle market in the previous year. We look for companies and individuals who overcame the challenges the year brought, embodied the trends of the period and took their businesses to the next level. We bestow awards in eight categories: Deal of the Year, Dealmaker of the Year, Private Equity Firm of the Year, Investment Bank of the Year, Private Equity Seller of the Year, Strategic Buyer of the Year, Law Firm of the Year, and Lender of the Year. We announce the winners on TheMiddleMarket.com in late March and in the April issue of the magazine. The 2018 winners will mark the 12th edition of the awards.

For the Rising Stars of Private Equity, we open up the nominations in May, and the deadline is in early June. We look for individuals who are full-time private equity investors and whose best days are yet to come. These are the folks you predict will one day play a key leadership role at your PE firm – or will head up their own. There is no age cutoff. We publish the list online in late June and in the July/August issue of the magazine. In 2018, we named 11 Rising Stars of Private Equity. The 2019 list will be the second edition of the list.

For the Most Influential Women in Mid-Market M&A, we open up nominations in September, and the deadline is in mid-October. We look for women who are outstanding dealmakers both inside and outside of their firms. Evidence of influence in the broader M&A industry is essential. We publish the list online in December and in the January issue of the magazine. We named 36 dealmakers to the 2019 Most Influential Women in Mid-Market M&A. The 2020 list will be the fifth edition.


Mary Kathleen Flynn

Mary Kathleen Flynn

Mary Kathleen Flynn joined SourceMedia in 2011, serving as the Editor-in-Chief of Mergers & Acquisitions. MK oversees the brand’s content on all media platforms, including website, e-newsletters, video, slideshows, podcasts and print.

February 12th, 2019

UPDATE 1-Virgin Trains USA delays IPO plans

(Adds comments from investment firm)

Feb 12 (Reuters) – Virgin Trains USA has delayed its plans to raise more than $500 million in an initial public offering, a company spokeswoman said on Tuesday.

The railroad had planned to sell 28.3 million shares in its IPO, which was expected to be priced at $17 to $19 per share, according to its filing with the U.S. Securities and Exchange Commission.

At the top end of the range, the company would have been valued at $3.15 billion in what would have been one of the biggest U.S. IPOs so far this year.

“The price they were expecting was too high and it would have led the listing to go off the tracks, said Eric Schiffer, chief executive officer at investment firm Patriarch Partners LLC.

“Had they come lower on pricing, it would have hurt the investors, so they decided to hold it for a while, grow and then come back again. But it will come back for sure,” Schiffer added.

The company declined to comment on Schiffer’s remarks.

“As we explored a public offering, a number of alternative financing sources became available that allow us to keep the company private and meet our growth strategies,” Ben Porritt, senior vice president of corporate affairs for Virgin Trains USA told Reuters.

Virgin Trains, backed by Fortress Investment Group, operates a recently built passenger rail line from Miami to West Palm Beach.

The company, previously known as Brightline, rebranded itself after entering into a licensing agreement with British billionaire Richard Branson’s Virgin Group to use its brand, name and logo.

The company had reported a net loss of $87.13 million in 2018, compared with a loss of $35.96 million in 2017, mostly due to higher expenses, its filing showed.

Barclays, J.P. Morgan, Morgan Stanley were among its lead underwriters, with BofA Merrill Lynch and Allen & Co LLC serving as joint bookrunners. (Reporting by Diptendu Lahiri in Bengaluru)

February 12th, 2019

M&A wrap: M&A wrap: Thoma Bravo, Ellie Mae, Constitution, Summit, Patriot, Turner, LLR


Adobe Stock

Tech-focused private equity firm Thoma Bravo is buying mortgage loan origination system developer Ellie Mae Inc. (NYSE: ELLI) in a take-private all-cash transaction valued at $3.7 billion. “Ellie Mae delivers powerful and innovative mortgage technology solutions across every channel of the residential mortgage sector, enabling lenders to originate more loans while reducing costs and driving efficiency, quality and compliance throughout the mortgage process,” said Holden Spaht, a managing partner at Thoma Bravo. “Ellie Mae is leading the digital transformation of the residential mortgage industry, and we look forward to building on the company’s successes and to our partnership through this next chapter of growth.” As Mergers & Acquisitions‘ sister publication National Mortgage News reports, Thoma Bravo’s current investments in mortgage-related companies include: MerdianLink, whose technology includes the LendingQB loan origination system; Kofax, which offers document capture software; and Hyland Software, which does electronic document management technology. Based in Chicago and San Francisco, Thoma Bravo is one of the most active PE investors in technology. The firm recently completed the acquisition of Veracode Software, a provider of application security testing technology, from Broadcom Inc., in an all-cash transaction valued at $950 million.

Related: Mortgage fintech Ellie Mae to go private in $3.7B deal with Thoma Bravo.

Deal news
Constitution Capital Partners, multi-asset alternative investment firm, has announced the formation of Constitution Capital Real Estate Partners, comprised of professionals previously employed by Lone Star Funds and its affiliates. With offices in New York and Chicago, the group will be led by Hugh J. Ward III, an industry veteran and most recently senior managing director and co-head of real estate investments at Lone Star North America. The team will focus on identifying undermanaged and undercapitalized assets and seek to create value by improving management, performing incremental leasing and increasing rents via strategic capital improvements. Primary target asset classes include Class B apartments/workforce housing, Class B/A- office buildings, e-commerce oriented industrial properties and full and select service hotels located across the U.S. “As a firm that is constantly seeking ways to improve and enhance performance for both our portfolio and our investors, we believe the addition of the Real Estate team will be another method to create further value,” said Daniel Cahill, a managing partner at Constitution Capital Partners.

Celero Commerce, an LLR Partners-backed provider of payment processing services, business management software and data intelligence to small and medium-sized businesses, has acquired RazorSync LLC, a developer of Software-as-a-Service applications that aims to streamline operations for companies in the field service industry. LLR Partners formed Celero in December alongside CEO Kevin Jones, a payments industry executive and the current president of the Electronic Transactions Association. The acquisition of RazorSync follows Celero’s recent strategic investment in payments processor UMS Banking.

Summit Partners-backed Patriot Growth Insurance Services has acquired Turner Insurance & Bonding Co. The partnership comes just weeks after Patriot launched its growth-focused national insurance platform in collaboration with 17 independent insurance agencies and True Network Advisors. The addition of Turner is designed to deepen Patriot’s property and casualty insurance capabilities and to fuel growth.

Investcorp has acquired a controlling stake in Revature, a technology talent development company, for undisclosed terms. “Through Revature’s mission of empowering the next generation of technology professionals, it has completely redefined the way companies find, train and retain technology talent,” said Investcorp managing director Maud Brown. “With the race for computer science talent continuing to gather pace, we are excited to help Revature accelerate its remarkable growth and further expand its Fortune 500 client base.” Investcorp has a history of investing in the education and information technology staffing industries, through past investments such as Nobel Learning Communities and Pro Unlimited. More broadly, Investcorp’s past and present portfolio includes more than 150 investments totaling over $36 billion in transaction value. Jefferies LLC served as exclusive financial advisor to Revature.

Darby Private Equity, a private equity arm of Franklin Templeton, has announced that Darby Latin American Private Debt Fund III LP has completed an investment in Pharma Consulting Group S.A., known as Biopas, a specialty pharmaceutical distribution company focused on in-licensing, selling and marketing innovative prescription pharmaceutical products, cosmetics and medical devices.

People moves
Mark Mikullitz has joined Investment bank Houlihan Lokey (NYSE:HLI) as a managing director in the M&A group, to lead the firm’s shareholder activism defense practice and to strengthen its public company M&A focus. Based in New York, Mikullitz joins from Deutsche Bank, where he was head of activism and contested situations in the M&A group. Prior to Deutsche Bank, he spent seven years in J.P. Morgan’s M&A group and was previously an M&A attorney with the law firm of Skadden, Arps, Slate, Meagher & Flom.

Featured content
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.

Related: 10 private equity firms share strategies for tech M&A.

Mergers & Acquisitions asked leading dealmakers about their outlook for the middle market in 2019. Watch the video conversations, shot at ACG Philadelphia’s M&A East: It is a seller’s market, and deal activity is expected to remain steady, says Ramsey Goodrich of Carter Morse & Goodrich: Outlook 2019: Great time to sell. Private equity firms and strategic buyers will use their excess cash and capital to look for deals, says Bharat Ramprasad of Stifel Nicolaus: Outlook 2019: Excess capital to fuel M&A. Rising interest rates and regulatory changes may increase volatility, cautions Mark Emrich of Murray Devine: Outlook 2019: Keep an eye on rising interest rates.

Bank volume was steady, but deal values would have been the lowest in years if not for one big, and very intriguing, transaction. For more, see: Bank M&A: What January data hints about 2019.

Not only do carve-outs account for 10 percent of all M&A activity, the percentage of carve-outs conducted by buyout firms (as opposed to strategic buyers) is on the rise, and sharply at that. And that’s important, because, at the risk of overextending the curveball analogy, the carve-out is ‘filthy stuff.’ The inherent complexities of the deal can puzzle even serial acquirers. Write Accordion’s Gary Appelbaum and Eric Salit in this guest article: Carve-out curveball: How to hit a home run.

Consumerization of healthcare, high-deductible health plans, and more self-payment by patients are contributing to the overall increased demand for PT services, write Battery Ventures general partner Chelsea Stoner in this guest article: Rising demand for physical therapy drives deals.

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.

Related: Meet the 2019 Most Influential Women in Mid-Market M&A.

Events
The SBIA and the AM&AA are hosting a Deal Summit at The Doral in Miami from Feb. 20-22. The gathering offers networking opportunities with senior-level M&A advisors and lower middle-market private equity investors.

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 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.


Mary Kathleen Flynn

Mary Kathleen Flynn

Mary Kathleen Flynn joined SourceMedia in 2011, serving as the Editor-in-Chief of Mergers & Acquisitions. MK oversees the brand’s content on all media platforms, including website, e-newsletters, video, slideshows, podcasts and print.


Demitri Diakantonis

Demitri Diakantonis

Demitri Diakantonis joined SourceMedia in 2015 and serves as Managing Editor of Mergers & Acquisitions. He covers all aspects of middle-market dealmaking, with a focus on strategic buyers and the consumer and retail sectors, and writes The Buyside column.