M&A wrap: BlackBerry, Cylance, Blackstone, Rock Holdings, Dan Gilbert, American Industrial Partners


BlackBerry Ltd. (NYSE: BB) is buying cybersecurity company Cylance for $1.4 billion. Cylance’s software is designed to protect mobile and connected devices from cyber attacks. More than 3,500 businesses use Cylance’s technology, including 20 percent of the Fortune 500. The deal will expand BlackBerry’s software services while growing Cylance’s global presence. “We are eager to leverage BlackBerry’s mobility and security strengths to adapt our advanced AI technology to deliver a single platform,” says Cylance co-founder Stuart McClure. Cylance is backed by Kholsa Ventures, Insight Venture Partners and Blackstone Tactical Opportunities Fund. In recent years, BlackBerry has been diversifying to focus on more technology and software, including cybersecurity, and less on mobile devices. In 2016, the company bought cybersecurity firm Encription. Demand for new and improved cybersecurity offerings, in some cases spurred by well-publicized data breaches and ransomware attacks, has created a healthy appetite for M&A with cybersecurity-related companies. LLR Partners invested in PhishLabs and Thoma Bravo-backed Centrify. Perella Weinberg Partners and Morrison Foerster are advising BlackBerry. Morgan Stanley and Jones Day are advising Cylance..

As the holiday shopping season gets underway, the pressure on retailers is more intense than ever, with Sears’ recent bankruptcy filing serving as a cautionary tale. It’s been a year since Amazon bought Whole Foods, a game-changer in the retail industry. Technology is driving many of the transactions in the retail industry. Best Buy Co. (NYSE: BBY) recently agreed to spend $800 million to buy GreatCall, a provider of emergency response services for seniors, from Chicago private equity firm GTCR. Meanwhile, GreatCall announced a partnership with on-demand transportation provider Lyft to make it easier for seniors to get car service. “Many of the challenges that retailers are currently facing are due more to a lack of innovation and investment in technology, and that they are not able to compete with Amazon,” said Alex Monahan, a consumer products senior analyst at tax and consulting firm RSM US LLP. “Investors want to see that retailers are adjusting to consumer’s changing preferences and striving to provide seamless multi-channel experiences, while also investing in technology to address the tight labor markets.” Amazon, Walmart, Ikea, Bed, Bath & Beyond and Farm Boy are among the retailers turning to M&A. For full coverage, see 5 trends driving retail M&A deals.

Deal news
Rock Holdings, founded by Cleveland Cavaliers owner and Quicken Loans founder Dan Gilbert, has acquired Dictionary.com and Thesaurus.com. Gilbert’s Jack Entertainment recently reached a deal to sell the Greektown Casino-Hotel to Penn National Gaming Inc. (Nasdaq: Penn).

American Industrial Partners is acquiring Armstrong Flooring Inc.’s (NYSE: AFI) wood flooring division for $100 million. Baker Botts is representing American Industrial.

Goldmans Sachs Asset Management is buying investment advisory firm Rocation Investment Advisors. Berkshire Global Advisors and Goodwin are advising Rocation. Fried, Frank, Harris, Shriver & Jacobson LLP is advising Goldman Sachs.

Clearlake Capital is merging portfolio companies Knight Oil Tools and IronGate Energy Services, to form a new rental tool company for the oil and gas industry.

For more deal announcements see: The weekly wrap: Bristow, Penn National, SAP.

For more on fundraising opportunities see: PE fundraising scorecard: Centre Lane and P4G Capital.

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.

Across the spectrum of middle-market mergers and acquisitions, there’s a great big middle ground that specialist investment banking firms handle very well. The investment banking business model works when the market itself is working. In this context, a working market means that there are multiple sellers of relatively similar “goods” — professionally run middle-market companies with continuing management teams being traded by professional investors — as well as multiple viable buyers interested in competing with each other to complete a deal. Read the full guest article written by Oaklyn Consulting’s Frank Williamson: How mid-market companies can manage crossroads situations.

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 asked Michael Gruber, managing partner at Salveo Capital, to share his thoughts on how the mid-term elections will affect M&A and the cannabis sector. Read the full story: Cannabis investments will likely benefit from new House leadership, Jeff Sessions’ departure.

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 Seattle Seahawks defeated the Green Bay Packers 27-24 on Thursday night to kick off NFL Week 11. 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.