M&A wrap: Blackstone, Takeda, Johnson & Johnson, Sanofi, AstraZeneca, Luminar, Peter Thiel, Gores Metropoulos, Kohlberg


Blackstone Group Inc. (NYSE: BX) is buying Takeda Pharmaceutical Co.’s Japanese consumer healthcare business for 242 billion yen ($2.3 billion). The PE firm plans to take the over-the-counter medication unit public in about five years, reports Bloomberg News. For the drugmaker, the sale represents another piece of its plan to dispose $10 billion in assets after its $62 billion mega-acquisition of Shire Plc last year. Blackstone aims to invest 50 billion yen into the business, with a goal of exiting the investment in about five years by taking the company public, says Atsuhiko Sakamoto, a senior managing director at Blackstone, in an interview with Bloomberg. Blackstone is flush with cash as investors continue to bet big on the firm amid the uncertainty caused by the Covid-19 pandemic. Many of the firm’s recent investments have been in growth companies and businesses likely to benefit from shifts in consumer behavior. It has spent more than $1 billion this year investing in drugs that target high cholesterol, kidney disease in children and devices for diabetes patients. Read the full story by Bloomberg: Blackstone buys Takeda’s consumer healthcare unit for $2.3 billion.

Private equity investors aren’t the only ones announcing healthcare deals. Strategic buyers are rapidly snatching up targets focused on developers targeting a wide range of diseases, including the coronavirus, but not limited to it. Johnson & Johnson agreed to buy Momenta Pharmaceuticals Inc. for about $6.5 billion to expand in treatments for autoimmune diseases. Sanofi recently announced it is buying biotech company Principia Biopharma Inc., which develops treatments for multiple sclerosis and a range of autoimmune disorders, for $3.4 billion, as the French drugmaker pivots toward innovative therapies to spur growth. And AstraZeneca plc is forging ahead to become a global oncology powerhouse, even as it works on a vaccine for the coronavirus pandemic. The U.K. drugmaker paying as much as $6 billion to buy into Daiichi Sankyo Co.’s promising medicine for lung and breast cancer, the drugmakers’ second potential blockbuster oncology deal in two years. Read the full story: Covid pandemic fuels healthcare M&A, with recent deals from Johnson & Johnson, Sanofi, AstraZeneca and former KKR exec Jim Montazee.

DEAL NEWS
Driverless car startup Luminar Technologies Inc., backed by technology billionaire Peter Thiel, is going public via a $3.4 billion merger with blank-check company Gores Metropoulos Inc., bolstering efforts to get its laser sensors onto the production lines of global automakers. The deal will be paid for with $400 million in cash from the blank-check company, as well as $170 million from other investors including Thiel, a unit of Volvo Car AB and GoPro Inc. founder Nick Woodman, according to a statement. Luminar is the latest entity to merge with a special purpose acquisition company, or SPAC. The investment vehicles have gone mainstream this year, offering a faster route for startups seeking to go public without the scrutiny or risks of an initial public offering. Read the full story by Bloomberg: Peter Thiel-backed startup Luminar goes public in $3.4 billion merger.

American Securities LLC is acquiring NN Inc.’s (Nasdaq: NNBR) life sciences division, which manufactures medical devices, for $825 million. NN will use the sale proceeds to pay down debt and strengthen its balance sheet during the pandemic. J.P. Morgan and Simpson Thacher & Bartlett LLP are advising NN.

Kohlberg & Co. and Mubadala Investment Co. are buying a majority stake in Partners Group-backed PCI Pharma Services. The target offers pharmaceutical supply chain services ranging from drug development to commercial launch. “The Covid-19 pandemic has demonstrated the essential nature of the services that PCI provides to the pharmaceutical and biotech industry,” says Partners Group managing director Remy Hauser.

Clearlake Capital-backed Wheel Pros acquired the assets of the Borbet manufacturing facility in Auburn, Alabama.

O2 Investment Partners has bought roof consulting firm Crenshaw Consulting Group.

CORONAVIRUS IMPACT
Covid-19 and quarantines may lead to an increase in carve-out deals. The Covid quarantines across the globe led to economic disruption. All sectors of the economy are impacted. Many corporations looking to improve their financial situation will likely look to sell non-core units. Read the full article: More carve-out deals ahead, driven by pandemic.

The construction software industry is fragmented, and there is a growing demand for technology that will help contractors, drawing deal activity particularly from strategic buyers. One company that is active in the sector is Autodesk Inc. (Nasdaq: ADSK), which recently aquired Pype. Pype’s software helps automate construction projects. Mergers & Acquisitions spoke with Sidharth Haksar, Autodesk’s director of corporate development about the Pype deal. Read the full story: Autodesk seeks construction software deals during pandemic.

Deal activity in the cybersecurity sector is being driven by a combination of rising cyber threats and more people working from home. Earlier in 2020, Francisco Partners and Vector Capital-backed cybersecurity company WatchGuard Technologies acquired network security provider Panda Security. Mergers & Acquisitions spoke with WatchGuard CEO Prakash Panjwani about the Panda deal and M&A trends in the sector.The security market will continue to experience significant consolidation throughout 2020 and beyond,” says Panjwani. “This has been and will continue to be driven by customer needs. As the volume and sophistication of security threats continue to grow, vendors will answer with innovative new solutions. At the same time, the security expertise and resources required to deploy and manage those solutions will continue to be scarce.” Read our full coverage: Work from home and increasing cyber threats will drive cybersecurity M&A.

Judging by recent M&A trends during the Covid-19 pandemic, it’s increasingly clear that private equity investors have continued to focus on add-on acquisitions as a growth strategy even more so than they did pre-outbreak. Add-on acquisitions, or transactions that occur when a company acquires another company that complements the acquiring company’s business model, accounted for a record 72.5% of all U.S. private equity buyouts in the first quarter of 2020, up from 2019’s record of 68.1%. The trend continued in Q2 as add-ons made up the highest percentage of leveraged buyouts (LBOs) on record, and median deal size ticked down for the first time in five years. But while the private equity industry is enjoying the benefits of add-ons, many operating companies may be missing out on potential opportunities. Read the full story: 5 Tips for private equity firms eyeing add-on deals in the pandemic.

While the novel coronavirus has reshaped the U.S. economy and the healthcare industry, pharmaceutical manufacturing has proven resilient—both in terms of business durability and its increasingly critical role in the global response to the virus. Covid-19 crystalized the U.S. dependence on overseas manufacturing for finished dose products as well as the active pharmaceutical ingredients necessary to produce life-saving medications. Read the full article: Why investors need to consider pharmaceutical manufacturing services.

The negative impacts of the Covid-19 pandemic cannot be overstated and have touched nearly every industry and person in the world. In sports, these negative impacts have been most readily observed through the temporary shutdown of both professional sports, and more locally, recreational team sports. However, Covid-19 has had an unexpectedly beneficial impact on one sector of the sports industry – individual outdoor sports. With many gyms still closed or operating at reduced capacities and many fitness classes on pause, sports enthusiasts are rediscovering the appeal of outdoor activities such as golf, cycling, hiking, fishing and more, all of which can be enjoyed while maintaining appropriate social distancing. Read the full story: Coronavirus has produced an outdoor sports boom that will spur M&A.

EQUALITY AND INCLUSION
Ten private equity firms have pledged to each create and post five board seats to make them available to minority and women candidates, participating in an initiative to increase diversity on company boards of directors. Aurora Capital Partners, Clearlake Capital, Genstar Capital, Grain Management, Hellman & Friedman, Hg, Insight Partners, K1 Investment Management, TA Associates and Vista Equity Partners have committed to the board initiative announced by Diligent Corp., provider of company governance software and a portfolio company of Clearlake and Insight. Read our full coverage: Clearlake, Insight, Vista and other private equity firms create 50 new board roles for diverse candidates.

Portfolia Rising America Fund “invests directly in early and growth-stage companies in the U.S. led by people of color and/or LGBTQ founders, or products and services that cater to these markets,” says investment partner Lorine Pendleton in a Q&A with Mergers & Acquisitions. “These are founders, ecosystems, products and services historically overlooked by traditional venture capitalists but positioned for significant growth and profitability.” The firm is led by five women of color. In addition to Pendleton, the firm’s leaders are: Noramay Cadena, co-founder and managing partner of MiLA Capital; Daphne Dufresne, a managing partner of GenNx 360 Capital Partners; Juliana Garaizar, an angel investor; and Karen Kerr, executive managing director at GE Ventures. “We believe that strength lies in differences and seek out entrepreneurs and startups who are using shifting demographics and their own diversity of experience and thought to create innovation that offers outsized opportunities for returns and impact.” The fund had its first close earlier in 2020 and has made two investments to date: The first investment is in MoCaFi, a fintech startup founded by Wole Coaxum, a former JPMorgan Chase commercial banking executive and entrepreneur, who is African American. “MoCaFi offers a mobile-first banking platform that brings digital banking products to underbanked or unbanked communities (an 88 million U.S. market), allowing them to build credit and financial mobility,” Pendleton explains. The second investment is in a women’s tele-medicine network. For more, read the full interview: Led by 5 women of color, Portfolia Rising America Fund backs mobile banking and women’s telemedicine startups.

“As stewards of capital we have an outsized role in determining which businesses to support,” says Mina Pacheco Nazemi of Barings Alternative Investments. “As asset allocators, we need to hold ourselves accountable. I can do more. Will you join me?” Dealmakers begin to weigh in, as Gerge Floyd’s death sparked two weeks of Black Lives Matter protests against police brutality and racial injustice. Read the story: “Justice doesn’t just happen. It requires action, dedication and accountability,” says one private equity investor.

MORE FEATURED CONTENT
Mergers & Acquisitions, the oldest trade publication serving the dealmaker community, has been acquired by Middle Market Information LLC from Arizent. Started in 1965 as Mergers & Acquisitions: a Dealmakers Journal, M&A’s print and digital magazine, news website, daily email newsletters and social media channels inform private equity firms, strategic acquirers, investment banks and other deal intermediaries on breaking news, emerging trends, and rising stars in the industry. Middle Market Information, a B2B data and information company, says M&A will retain its core values of providing quality intelligence to discerning professionals in the dealmaking community. “We are delighted to have an opportunity to invest in and grow Mergers & Acquisitions, a brand that’s been trusted by dealmakers for over 55 years,” said Middle Market Information CEO Jim Beecher. “This industry needs an independent voice that can deliver thoughtful analysis and deep coverage of both private equity and corporate deal activity. Through our website, www.themiddlemarket.com, and our publication, we will build upon the foundation of the brand and deliver an even better experience for the community in the coming months and years.” Editor-in-Chief Mary Kathleen Flynn adds: “The new challenges M&A and private equity professionals are facing in 2020 underscore the need for the trusted, insightful editorial content we produce at Mergers & Acquisitions and themiddlemarket.com. We’ve built a great foundation under Arizent, and we’re looking forward to growing and extending our brand further with Jim and Middle Market Information.” See full coverage: Middle Market Information LLC buys Mergers & Acquisitions publishing brand.

Mergers & Acquisitions is recognizing nine dealmakers as the 2020 Rising Stars of Private Equity:

  • David Farsai, Principal, Mainsail Partners, who is the first at the firm to rise from associate to principal
  • Andrea McGuirt, Senior Associate, Palladium Equity Partners, who established a strategy for sourcing and executing opportunities in the current deal environment
  • Molly Fitzpatrick, Vice President, Rallyday Partners, who led three investments and a divestment for the new PE firm
  • Jenny Zhang, Vice President, Investments, Grain Management (pictured), who helps portfolio companies in the telecom infrastructure sector find organic growth opportunities
  • Ross Stern, Principal, Summit Partners, who played a role in nearly $1.3 billion worth of healthcare company investments
  • Arjun Mehta, Vice President, Bregal Sagemount, who has made eight platform investments and seven add-on acquisitions
  • Miguel Tejeda, Vice President, Motive Partners, who stands out for his investment acumen and ability to distill complicated concepts and processes
  • Clara Jackson, Principal, TA Associates, who has become a trusted supporter during the pandemic to help portfolio companies remain sustainable
  • KJ McConnell, Principal, GTCR, who played a leading role in about 10 of the group’s last dozen deals

These outstanding up-and-coming investment professionals have been excelling during a period of profound change in the U.S. and in the world. The publication of this list comes at a pivotal moment in time. The country is beginning to open up after three months of quarantine from the coronavirus, while a second wave picks up steam in the Sun Belt from South Carolina to California and including Texas. Dealmaking under quarantine while working from home has proved challenging, to say the least.Social justice issues have taken on fresh urgency. There is heightened awareness of systemic racial injustice and police brutality against Blacks after the deaths of George Floyd and many others. Meanwhile, the U.S. Supreme Court ruled recently that, “An employer who fires an individual merely for being gay or transgender defies the law.” On immigration policy, the Court recently put the brakes on dismantling the Deferred Action for Childhood Arrivals, or DACA. Meanwhile, the President is asking the Court to overturn the Affordable Care Act, also known as Obamacare.

Click here for full coverage of Mergers & Acquisitions’ 2020 Rising Stars of Private Equity.

In the challenging times we face now, it’s more important than ever to come together as a community and recognize the people and companies that excel and lead. We invite you to join us in honoring the 2019 winners of Mergers & Acquisitions’ M&A Mid-Market Awards. In contrast with the volatile coronavirus-driven conditions unfolding in 2020, the dealmaking environment of 2019 was remarkably stable. Among the PE firms benefitting from the auspicious fundraising climate was Vista Private Equity, which raised a $16 billion fund – the largest technology-focused PE fund ever raised. Mergers & Acquisitions is honoring Vista founder and CEO Robert F. Smith with our 2019 Dealmaker of the Year award. In addition to leading his firm’s unprecedented fundraising, Smith excelled in philanthropy. When he spoke at the commencement of Morehouse College, he announced he would pay off all the student loans of the HBCU’s 2019 graduates, providing a helping hand in the student debt crisis facing many U.S. families. The financial services sector saw a lot of consolidation in 2019. Piper Jaffray wins our 2019 Deal of the Year for buying Sandler O’Neill to form Piper Sandler, which instantly became a leading investment bank in the financial services sector. And Stifel wins our 2019 Investment Bank of the Year for growing dramatically and making several acquisitions. Read our full awards coverage: Meet the winners of Mergers & Acquisitions’ M&A Mid-Market Awards.

To celebrate deals, dealmakers and dealmaking firms, Mergers & Acquisitions produces three special reports every year: the M&A Mid-Market Awards; the Rising Stars of Private Equity; and the Most Influenital Women in Mid-Market M&A. For an overview of what we’re looking for in each project, including timelines, see Special reports overview: M&A Mid-Market Awards, Rising Stars, Most Influential Women.

Editor’s Note: M&A wrap is a bi-weekly column, published on Mondays and Thursdays