M&A wrap: Chevron, Noble Energy, Exponent Women, eBay, Thoma Bravo, Clearlake, Aquiline


Chevron Corp. (NYSE: CVX) agreed to buy Noble Energy Inc. for about $5 billion in shares as the oil giant looks to beef up amid the wreckage of the worst-ever crude crash. The takeover is the industry’s first major deal since the coronavirus triggered a severe slump and the largest since Occidental Petroleum Corp. outbid Chevron to acquire Anadarko Petroleum Corp. for $37 billion last year. The deal will grow Chevron’s shale presence in both the Permian Basin, once the main driver of the U.S. shale boom but now experiencing a sharp reduction in drilling, and the Denver-Julesburg Basin in Colorado. It will increase the company’s proved reserves by about 18% compared with what it reported at the end of 2019. Buying Noble also enlarges Chevron’s footprint in the Eastern Mediterranean by adding the Leviathan gas field off the coast of Israel. Consolidation in the shale patch has been largely non-existent this year as the combination of a severe oil-price slump and pressure on companies from investors to return cash leaves explorers with little remaining firepower to make deals. Read the full story by Bloomberg News: Chevron buys Noble for $5 billion in rare oil-bust deal.

Exponent Women is holding a virtual event on July 21: The LP Lens on the New Normal for Private Equity. Featured speakers include: Kristi Craig, Andrea Kramer, Sheryl Schwartz and Marilyn Adler. Both Schwartz and Adler have been previously named to our Most Influential Women in Mid-Market M&A annual lists.

Guiding portfolio companies through the Covid-19 pandemic is the biggest challenge facing private equity firms and service providers today. Firms throughout the middle market are focused now on helping portfolio companies make decisions about reopening their businesses, assessing the impact of the coronavirus on their businesses and forging a strategy on moving forward. For example, Boston-based Watermill worked with portfolio company Enbi to reimagine its business to make face shields. “They are a high-tech company with deep market knowhow that make rollers for printers,” says Julia Karol, president and COO of Watermill. “The company realized people who have to wear the face shields for long periods of time were getting deep welts on their foreheads. Enbi was able to make a high-grade compound that used foam across the front of the shields, so they are comfortable. Enbi will continue to make masks and explore other innovations. It’s awesome to see the whole manufacturing community using their skills and expertise to help.” For more insights from Watermill, New Heritage, Monroe, Cushman & Wakefield and EisnerAmper, see the story Switching gears: 5 ways private equity firms and service providers are helping portfolio companies adapt in the Covid-19 pandemic.

DEAL NEWS
eBay Inc. is nearing an agreement to sell its classified advertising unit to Norwegian online marketplace Adevinta ASA for about $9 billion, according to Bloomberg News. eBay is selling the business in response to activist investors that want it to focus on its main online auction platform. The classifieds portfolio includes brands like Kijiji, commonly used in Canada and Italy, and Gumtree, a classifieds site popular in the U.K., Australia and South Africa. It also owns Bilbasen, a Danish online vehicle marketplace, and British car search website Motors.co.uk. Read the full story by Bloomberg: Adevinta near $9 billion deal for eBay’s classifieds arm.

Thoma Bravo is buying insurance software company Majesco (Nasdaq: MJCO) for $594 million. “We see Majesco as a leader in helping its insurance customers get to the cloud faster, and modernize their internal and external facing systems,” says Thoma Bravo partner A.J. Rohde. Nomura Securities International, Sheppard, Mullin, Richter & Hampton LLP and Khaitan & Co. are advising Majesco. Kirkland & Ellis LLP is advising Thoma Bravo.

GHK Capital Partners LP has bought Hasa, a produce of water treatment products, from Peak Rock Capital. Baird and McDermott Will & Emery LLP advised the sellers.

Clearlake Capital and Francisco Partners-backed Perforce Software has acquired Methodics Inc., a provider of lifecycle management and traceability services for businesses.

Aquiline Capital Partners has closed its investment in Quintes Holding, one of the largest independent insurance brokers in the Netherlands.

Hunter Street Partners has invested in Ark Behavioral Health, an owner and operator of substance use disorder treatment facilities in the Northeastern U.S.

PEOPLE MOVES
Ronak Patel has been promoted to partner at advisory firm Campbell Luytens.

Taylor Wilson has been promoted to managing partner at investment firm Haynes and Boone.

EQUALITY AND INCLUSION
A 2019 report from the Institute for Policy Studies shows that the median wealth for Black families in 2016 was $3,557—about 2% of the median wealth owned by white families, which owned nearly $147,000 in the same year. For banks to play a major role in closing the income gap between whites and Blacks, they’ll need to diversify their top leadership and middle-management ranks. New hiring and promotional policies could reshape banks’ understanding of local communities’ needs and expand who gets mortgages or small-business loans and which families build lasting wealth. Including more people of color in bank management would diversify the flow of capital, says Malia Lazu, the chief experience and culture officer at Berkshire Hills Bancorp in Boston. See the full story: How banks aim to close racial wealth gap: More minorities in leadership.

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

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

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

CORONAVIRUS IMPACT
Economic activity has gained, but it hasn’t come close to pre-pandemic levels, according to the Federal Reserve’s Beige Book, released Wednesday. “Contacts in nearly every district noted difficulty in bringing back workers because of health and safety concerns, childcare needs, and generous unemployment insurance benefits,” the report said. Employment improved in nearly all districts as states allowed businesses to reopen and consumer spending also rebounded with the reopening. For more, see the story: Beige Book: Outlook ‘highly uncertain’ with no timeline or gauge of effects.

Under normal circumstances, M&A demands a robust set of tools and services to be successful. In today’s environment in which the stakes have been raised by the coronavirus crisis, professional help from service providers is more important than ever. Private equity firms and their portfolio companies want to know what actions they can or should take, and what their peers are considering, to make the best decisions possible in response to the Covid-19 pandemic. Through talking with many different affected parties, service providers have streams of data and information that can help investors make informed decisions and minimize negative economic impacts on their investments. Mergers & Acquisitions examines offerings from EHE Health, Norgay Partners, Cepres, Valuation Research Corp. and Axial. “The stakes are high today,” says Greg Mansur, chief client officer at EHE Health, which provides a playbook on getting companies back to work safely. “We want to be part of the solution for our clients. We want to help them through this and help America get back to work.” Read our full coverage: 5 service providers guide dealmakers through the next phase of the pandemic.

As transactions previously delayed due to the pandemic begin to pick up, acquirors and investors in the middle market should evaluate the target’s performance during the unprecedented disruption presented by the pandemic, and adjust expectations for the immediate and medium term. Supplemental due diligence is not only prudent — it is likely to be required as a condition to the placement of any representations and warranties insurance. Essential considerations include whether the target has been able to innovate and whether the valuation agreed to in a letter of intent should be revisited. Buyers should also review any termination provisions to determine whether any breakup fee would be payable. See our full coverage: 11 factors for dealmakers to consider before buying a company during the pandemic.

Many companies are unprepared to face the tremendous economic challenges brought on by the pandemic. For buyers, navigating this new world of distressed M&A may be the hardest obstacle to overcome in transactions with insolvent organizations. Read the full article: Coronavirus puts spotlight on distressed M&A.

Digital technologies like artificial intelligence and advanced analytics can help organizations to accelerate their pace and expand their insights quickly—advantages that are especially crucial in times of rapid change. See the full story: How analytics can rebalance M&A in the wake of the coronavirus.

What do you do when you’re a dealmaker under quarantine, and face-to-face meetings are out of the question? For Work from Home (WFH) strategies, Mergers & Acquisitions turns to eight prominent dealmakers from private equity firms, investment banks, lenders and law firms. “I miss the excitement of a great conference; wearing my nice clothes, early morning breakfasts, the one-on-ones, drinks with my women ‘tribe,’ and dinner at a steakhouse, even though I am a vegan,” says Amy Weisman, managing director, business development, Sterling Investment Partners. In some respects, it is easier to build relationships now, explains Nanette Heide, partner, co-chair, private equity group, Duane Morris. “Meeting folks over a video conference from their home is immediately humanizing.” M&A pros also point out that human factors play a role. “Emotional Quotient (EQ) is more important than ever during trying times,” says Jeremy Holland, managing partner, origination, The Riverside Co. “It’s critical to remember that the dealmaker on other side of the (now figurative) deal table is a person, too. They have good and bad days and presumably know many people in high-risk categories, potentially even themselves. Being extra thoughtful about each interaction is important.” Read our full coverage: Dealmaking under quarantine: 8 private equity and M&A pros share strategies while social distancing.

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

  • 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