M&A wrap: Devon, WPX, Cleveland-Cliffs, Clearlake, TA, Ivanti, Bain Capital


Devon Energy Corp. (NYSE: DVN) is buying WPX Energy Inc. for $2.56 billion, creating one of the largest independent U.S. shale producers and answering investor calls for consolidation at a time of crisis for the sector. The plunge in oil prices this year, which has left much of the shale industry unprofitable, has added to the impetus for M&A, particularly in the Permian, where scores of producers operate in close physical proximity, reports Bloomberg News. U.S. shale investors are frustrated after years of poor returns and missed targets. Many have called for the sector to consolidate in order to slash costs, and some have advocated for low- to no-premium deals to get those deals across the finish line. A Devon-WPX deal is the most significant transaction between two independent U.S. producers since WPX bought private equity-backed Felix Energy in March. The combination of Devon and WPX will tie together two companies with sizable operations in the hottest part of the prolific Permian Basin, which straddles West Texas and southeastern New Mexico. The combined company will produce 60 percent of its output in the Delaware sub-basin of the Permian, which is home to some of the lowest breakeven costs in the country. Read the full story by Bloomberg News: Devon acquires WPX, as Permian investors push for M&A.

DEAL NEWS
Cleveland-Cliffs Inc. (NYSE: CLF) is buying the U.S. operations of ArcelorMittal SA for $1.4 billion to become the biggest flat-rolled steel producer in North America. Cleveland-Cliffs expects its second major deal in less than a year to boost sales in th automotive market and help reduce costs. The global steel industry saw its biggest slump in production in a decade as demand from key consumers was hit hard by coronavirus lockdowns. Even before the pandemic, the sector had struggled for years with excess production capacity. Read the full story by Bloomberg News: Cleveland-Cliffs buys ArcelorMittal USA for $1.4 billion.

Clearlake Capital and TA Associates-backed Ivanti Inc. is acquiring cloud security company MobileIron Inc. for $872 million. In addition, the two PE firms are buying Pulse Secure from Siris Capital Group. “We now have the most comprehensive set of software solutions that address the growing market demand for the future of work, where working from anywhere on any device type is the new normal,” says Ivanti CEO Jim Schaper. UBS Investment Bank, BofA Securities, Morgan Stanley & Co. and BMO Capital Markets are advising Ivanti. Sidley Austin LLP and Kirkland & Ellis LLP are legal counsel. Barclays is advising MobileIron. Goldman Sachs is advising Pulse Secure and Siris. Morgan Stanley Senior Funding, Inc., BofA Securities, UBS Investment Bank, and BMO Capital Markets are providing financing.

Patricia Industries is acquiring Advanced Instruments from Windjammer Capital for $780 million. Advanced Instruments offers scientific and analytical instruments for the clinical, biotechnology and food and beverage industries.

Industrial manufacturer Patrick Industries Inc. (Nasdaq: PATK) has acquired Front Range Stone Inc. The target is a fabricator and installer of natural stone, quartz, solid surface and laminate countertops for home improvement retailers, home builders and contractors.

IPOs
GoodRx, an online pharmacy platform that helps consumers compare medication prices and discounts, raised $1.1 billion in an initial public offering. The company sold 34.6 million shares of its stock at $33 per share.

PHILANTHROPY
Bain Capital donated $150,000 to Cradles to Crayons, a Boston-based non-profit that provides children from birth through age 12 living in homeless or low-income situations with the essential items they need to thrive—at home, at school, and at play.

PEOPLE MOVES
ACG Boston on Octocber 8 is hosting for a Family Office & Founders virtual event to hear Dale Tremblay, CEO of C.H. Guenther & Son, as he shares the company’s remarkable story started in 1851, across generational ownership and through the partnership with Pritzker Private Capital. He will be joined by David Gau, partner – head of operations at PPC and will share what the family was looking for in a legacy transition, how the business has navigated the C-19 environment, growing commitment to ESG and the changes happening in the consumer food space.

Tim Scallen was hired by healthcare-focused investment bank Bailey Southwell & Co. to lead BSC Capital Partners, the firm’s investment fund that makes minority investments in growth and late-stage healthcare and tech-enabled services companies. He was most recently with TT Capital Partners.

Colin Tenwick has joined investment bank Drake Star Partners as a senior advisor focusing on the software and security sectors. He previously held leadership roles at Sybase and Red Hat.

CORONAVIRUS IMPACT
Teladoc’s $18.5 billion acquisition of Livongo results from the combination of two of the largest publicly-traded virtual care companies; and is the third-largest acquisition of a U.S. company this year. Among other deals, direct-to-consumer telehealth company Thirty Madisonraised $47 million from partners including Johnson & Johnson,Humana invested $100 million into Heal, and telehealth startup Ro raised $200 million in a new round of funding; all strong signals to investors that digital health is beginning to disrupt the market. See full coverage: Soaring demand for virtual healthcare services in the pandemic fuels M&A.

Aligning the expectations of buyers and sellers is difficult during periods of economic uncertainty, and especially during the Covid-19 pandemic when business operations are being disrupted by social distancing and government-mandated closures. Due to this broader market turmoil, earnouts, which involve tying some portion of deal consideration to post-closing performance, are taking on a new level of importance in constructing M&A transactions. See the full story: How to use earnouts to adjust to the Covid-19 M&A landscape.

Today’s private equity firms face greater risk and uncertainty when evaluating potential portfolio acquisitions, in light of the Covid-19 pandemic. While things like market size and product quality are still important factors, private equity firms must also gauge a portfolio company’s character and ability to withstand economic turbulence. Read the full article: Agility matters: 4 signs PE firms should examine when considering acquisitions.

Car dealerships saw a drop in sales during the height of the pandemic from the slowdown in production with less people driving, and that impacted some deals. For example, Asbury Automotive Group Inc. (NYSE: ABG) originally backed away from its $1 billion acquisition of Park Place Dealerships. However, citing a pickup in business, Asbury revived the deal for $735 million. Now some dealmakers are predicting robust sector dealflow in the second half of 2020. Mergers & Acquisitions spoke with Erin Kerrigan, managing director of auto dealership-focused investment bank Kerrigan Advisors about deal trends in the industry. Read the full story: M&A among car dealers expected to reach record levels in the second half of the year.

With everything from Broadway to indoor dining closed, people are starved for entertainment. Enter mobile gaming. Despite restrictions slowly easing, mobile games are expected to see strong interest in the long-term and game makers are looking for acquisitions to keep their portfolios fresh. “There’s a lot of supply of great companies out there, big, small and different categories in different regions of the world,” Zynga CEO Frank Gibeau recently told investors. He pointed out that Zynga has the cash to make more deals and will continue to look for them. “So, consolidation is obviously underway in the interactive category. We’re actively participating in growth through finding partnerships with companies out there. Scale is going to be increasingly important in mobile.” Read the full story: Quarantine drives M&A in mobile gaming.

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.

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.

EQUALITY AND INCLUSION
Bank of America Corp. invested $50 million in three Black-owned banks as part of its $1 billion pledge over four years to advance racial equality. The second-largest U.S. lender took equity stakes of about 5% in three minority depository institutions: First Independence Corp. in Detroit, Liberty Financial Services Inc. in New Orleans and SCCB Financial Corp. in Columbia, South Carolina. The bank also laid out plans for other initiatives aimed at promoting racial and economic equality, including $200 million allocated to direct equity investments in Black- and Hispanic-owned businesses. Read the full story by Bloomberg News: BofA invests $50 Million in black-owned banks in equality drive.

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, 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.

Mergers & Acquisitions will soon open up the nomination process for the 2021 Most Influential Women in Mid-Market M&A. It will mark the sixth year we have produced the list, which recognizes female leaders with significant influence inside their companies and in the wider dealmaking world. It’s been gratifying to watch the project evolve over the years – and become more influential itself. Last year, we received more nominations than ever before. As a result, we expanded the number honored to 42 in 2020, up from 36 in 2019. Many dealmakers were new to our 2020 list, including Rockwood Equity Partners’ Kate Faust, William Blair’s Shay Brokemond and Avante Capital Partners’ Ivelisse Simon. Read our full coverage of all the champions of change on our list, including Q&As with each individual. We will open up the 2021 nomination process in October and will publish the list in the February issue of Mergers & Acquisitions.

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