Littlejohn, Cowen, Quarton, Carlyle, Riverside, Huron, Frontier, Star Mountain, Monroe, GTCR, Audax


Middle-market private equity firm Littlejohn & Co. has raised its sixth fund at $2.84 billion. The PE firm typically invests between $50 and $150 million in businesses that have up to $800 million in revenue. Littlejohn recently acquired door frame maker Cook & Boardman Group. “We are grateful to both our existing and new investors for the trust they place in Littlejohn to invest their capital,” says Littlejohn CEO Michael Klein. “We plan to continue to execute on Littlejohn’s strategy of partnering with management to transform businesses via investments in equity and special situations in a broad range of middle market companies. Our operational focus and distressed investment skills are strong differentiators for us in the marketplace.” Kirkland & Ellis represented Littlejohn. Other PE firms that have recently raised new funds include: the Carlyle Group LP (Nasdaq: CG) raising a $18.5 billion; Hellman & Friedman raising $16 billion; and MidOcean Partners closing its 5th fund at at $1.2 billion. See our list of some notable PE firms that raised new funds, 10 PE firms armed with fresh capital.

Private equity firms are giving back – from mentoring students in schools to organizing groceries at food pantries and from running races for cancer cures to cleaning pens at animal shelters. In our special report, The Big Give, Mergers & Acquisitions focuses on the philanthropy and volunteering initiatives of 5 PE firms: the Carlyle Group LP (Nasdaq: CG), Frontier Capital, Huron Capital, the Riverside Co. and Star Mountain Capital. “We do a lot of charity. The founders and other people at the firm give hundreds of millions a year to charities of their choice,” says managing director Christopher Ullman. Carlyle CEO David Rubenstein has signed The Giving Pledge, a commitment by the world’s wealthiest individuals and families to dedicate the majority of their wealth to philanthropy, and the firm has a long tradition of programs supporting employee giving and volunteering. Philanthropic initiatives are more important than ever to today’s work force. Millennials, defined as people born between 1981 and 1996 by the Pew Research Center, are “for sustainability, diversity, inclusion and giving back to the community,” says Ullman. “We are finding this more and more. Yes, we are here to make money, secure retirement for pensioners, but the firm wants to support people’s efforts to make the world a better place.” Frontier Capital supports several causes, including The Miracle League, a baseball organization for people who are mentally and physically challenged. “There’s more to life than work and material things, and our people understand that,” says Frontier managing partner Andrew Lindner. At Detroit-based Huron Capital, the firm’s philanthropic efforts are focused on local groups. “We want to leave our footprint in this community where we live and work while being as helpful as possible,” says partner Gretchen Perkins. “The charitable activities we do as a group, the ability for each employee to influence where Huron’s donations go, and the ability to perform community service during work hours, or receive matching funds for an employee’s personal non-profit passion, all contribute to a portion of an employee’s sense of purpose and contributing to the greater good.”

Deal news
Cowen Inc. (Nasdaq: COWN) is buying investment bank Quarton International for up to $115 million. Quarton was formed out of the 2015 merger of Blue Corporate Finance and Quarton Partners. “The combination of Cowen and Quarton International creates a tremendous opportunity for our firms, our teams and especially our clients,” says Cowen CEO Jeffrey Solomon. “Quarton International’s significant advisory business to the middle market in Europe and the U.S. complements Cowen’s existing merger advisory platform, as well as our breadth and strength in capital markets activities.” In another recent investment banking deal, SVB Financial Group is paying $280 million for healthcare-focused Leerink Partners. Freeman & Co. and Debevoise & Plimpton are advising Quarton. Willkie Farr & Gallagher is advising Cowen.

Monroe Capital has a raised a new collateralized loan obligation fund called Monroe Capital MML CLO VII Ltd. at around $476 million. The fund is the third CLO that Monroe has raised in the last 13 months. BNP Paribas served as Monroe’s lead manager, structuring agent and bookrunner.

GTCR is acquiring Ultimus Fund Solutions and the Gemini Cos. The combined company offers fund administation, accounting and investor services to traditional and alternative fund managers. Broadhaven Capital Partners is advising GTCR and Raymond James & Associates is advising Gemini.

Audax Private Equity has bought toy maker PlayMonster LLC from Topspin Partners. Robert W. Baird & Co. is advising PlayMonster. Ropes & Gray is representing Audax.

Golden Gate Capital has purchased Active Minerals International Inc., a producer of industrial minerals, from Merit Capital Partners. Grace Matthews advised Merit. The Valence Group advised Golden Gate.

SpartanNash Co. (Nasdaq: SPTN) is buying supermarket chain Martin’s Super Markets Inc. The Food Partners and Warner Norcross & Judd LLP are advising SpartanNash. PJ Solomon and Simpson Thacher & Bartlett are advising Martin’s.

Frozen food company Appetais SpA has merged with AR Srl. The combined company is backed by Mandarin Capital Partners.

M&A trends
Valuations continued to plateau in the third quarter, according to GF Data. Valuations for transactions in the $10 million to $250 million range averaged 7.3x, essentially unchanged from the second quarter. “There is still forward momentum in some niche sectors, but more broadly, we see froth coming out of the market,” says CEO Andrew Greenberg. “Valuations may be achieving a bit of a soft landing that will enable this long-lived but fundamentally sound M&A environment to endure a bit longer.” Total debt/Ebitda ratio has edged downward from a peak of 4.4x in 3Q 2017 to 3.8x in 3Q 2018. “The issue is not debt availability,” says co-founder Graeme Frazier. “Buyers are making more
conservative capitalization decisions.”

2018 global fundraising for insurtech startups has reached an all-time with 204 deals valued at $2.6 billion, according to Hampleton Partners’ Insurtech M&A market Report. Since 2016, the sector has seen 151 deals, with 87 percent coming from strategic buyers such as Sapiens International Corp. NV (Nasdaq: SPNS). “Since organic growth and investing in R&D is a long-term game, M&A has been the natural solution to the incumbents’ problem of accelerating technological transformation and evolving their traditional business models for the 21st century,” says Hampleton Partners founder Miro Parizek.

Featured content
The private equity industry will focus on educating lawmakers newly elected in the mid-terms. “As an industry, we will work to educate the nearly 100 new members of Congress about private equity’s positive impact in their communities and their constituents’ lives,” Pam Hendrickson, the chief operating officer of middle-market private equity firm the Riverside Co., tells Mergers & Acquisitions in a Q&A. “We will be talking with them about jobs, investment, and retirement security. We need to make the personal case to each of the new members as well as top leadership in both the House and the Senate. As an example, the incoming chair of the Ways and Means committee Richie Neal is from the State of Massachusetts which had a 15.4 percent annualized return from its PE portfolio over 10 years.” Hendrickson is currently a member of the board of the American Investment Council and a member of the advisory board of the Kenan Institute for Ethics at Duke University. In the past, she has testified before Congress on behalf of the private equity industry. Read the full interview: Post-election priority for private equity: educating 100 new members of Congress. For more on how the mid-term election results are playing out in the middle market, including how former PE professionals Mitt Romney, Bruce Rauner and J.B. Pritzker fared Tuesday night, see Dealmaker’s post-election guide: Mitt Romney, J.B. Pritzker, Dodd-Frank, Pam Hendrickson, Gretchen Perkins.

U.S. middle-market dealmaking in the first three quarters of 2018 surpassed the same period in 2017, according to PitchBook. If the pace continues in the fourth quarter, middle-market deal value may surpass $400 billion for the first time ever. One important question: Will the momentum continue now that the power has shifted in Congress? Mergers & Acquisitions asked Matthew O’Loughlin, partner and co-chair of the mergers and acquisitions practice with Manatt, Phelps & Phillips LLP, to share his thoughts on how the mid-term elections will affect M&A. Read the full story: It’s been a good year for M&A. Will momentum continue post election?

Mergers & Acquisitions asked Dan Shea, a managing director at BDO Capital Advisors, to share his thoughts on the election results. Read the full story: Infrastructure investment is an area of potential agreement in Washington.

Mergers & Acquisitions identifies 15 cities as fertile communities for dealmaking. We look at metropolitan areas from Austin (where Michael Dell launched a PC business out of his dorm room back in the day and where thousands gather every year for SXSW) to St. Louis (home of private equity firm Thompson Street Capital Partners). Be sure to check out Milwaukee (with private equity firm Robert W. Baird & Co. and investment bank Clearly Gull) and Minneapolis (home of strategic buyers 3M, Best Buy, General Mills, Hormel and Target). And don’t forget Boston, Chicago, New York, San Franciscoand Los Angeles and more. See our list, Dealmaker’s guide to 15 cities where M&A thrives.

The Los Angeles Rams defeated the Kansas City Chiefs 54-51 on Monday night to wrap up NFL Week 11. Off the field, New England Patriots quarterback Tom Brady recently teamed with former Giants defensive end Michael Strahan, who is the co-host of ABC’s Good Morning America, to launch a sports media startup called Religion of Sports Media, which has raised $3 million in venture capital funding from CourtsideVCand Advancit Capital. Many NFL players invest in companies. Muhsin Muhammad, who played wide receiver for the Carolina Panthers and the Chicago Bears, is a managing director of private equity firm Axum Capital Partners. Steve Young, former San Francisco 49ersquarterback, is a co-founder of private equity firm HGGC. Mergers & Acquisitions takes a look at star players who invest in companies through private equity, venture capital and other investment vehicles.

Events
Middle Market Week, hosted by ACG New York and held Nov. 26-30 at various locations throughout New York, brings together leading global middle-market dealmaking professionals to develop and enhance their dealmaking activities, strengthen their long-term relationships, and provide numerous opportunities for networking all week long. Mark your calendar for the Private Equity Annual Wine Tasting Gala on Nov. 28 at Gotham Hall. The building was constructed in the 1920s as the headquarters of the Greenwich Savings Bank. The gala brings together the leading middle market private equity firms for an evening of fine wines and networking.


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 deamaking, with a focus on strategic buyers and the consumer and retail sectors, and writes The Buyside column.


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.