M&A wrap: New York Common Food Pantry, Miracle League, Carlyle, Riverside, Huron, Bain Capital, KKR, Toys R Us


Photo credit: The Riverside Co.

Private equity firms are giving back – organizing groceries at food pantries, mentoring students in schools, running races for cancer cures and pitching in at animal shelters. Just in time for Thanksgiving, Mergers & Acquisitions highlights the philanthropic and volunteering initiatives of 5 PE firms: the Carlyle Group LP (Nasdaq: CG), Frontier Capital, Huron Capital, the Riverside Co. and Star Mountain Capital. Riverside COO Pam Hendrickson helps out at the New York Common Pantry, which provided Thanksgiving food for hundreds of families and will host a Thanksgiving meal to many more. At Carlyle, charity starts at the top, with CEO David Rubenstein’s signing of The Giving Pledge, a commitment by the world’s wealthiest individuals and families to dedicate the majority of their wealth to philanthropy. Community involvement is 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 Carlyle managing director Christopher 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.” Read the full story, The Big Give.

Jonathan Moyer, a partner at law firm Reed Smith, talks about why dealmakers do volunteer work, in this video interview shot by Mergers & Acquisitions at ACG Philadelphia’s M&A East. Watch the full video: For millennial dealmakers, giving back is part of who they are.

Deal news
In a rare move for the private equity industry, Bain Capital and KKR & Co. Inc. (NYSE: KKR) have each committed $10 million to a fund for former Toys R Us workers. The $20 million fund falls significantly below the $75 million a workers rights group, including the Center for Popular Democracy, says the 30,000 employees who lost their jobs are owed, Bloomberg points out. Victim compensation experts Kenneth Feinberg and Camille Biros will administer the program. They have overseen high-profile distributions of funds from disasters such as the 9/11 terror attacks and the Deepwater Horizon oil spill. The firms and a third investor, Vornado Realty Trust, bought the beloved retailer under 2005 and liquidated it in June. Critics blame the PE firms for loading the company with billions of dollars in debt, sealing the fate of the popular retailer, which already faced significant challenges competing with online purveyors, especially Amazon.com Inc. (Nasdaq: AMZN). Read the full story: KKR, Bain create $20 million fund for Toys `R’ Us Workers.

Boston Scientific (NYSE: BSX) is buying BTG plc, a developer of treatment products that are used in minimally invasive medical procedures. The deal is valued at around $4.2 billion. Barclays and Shearman & Sterling are advising Boston Scientific.

Autodesk Inc. (Nasdaq: ADSK) is buying PlanGrid, a provider of construction productivity software, for $875 million. PlanGrid’s software allows contractors to access in real-time project plans, punch lists, project tasks, progress photos and daily field reports. “There is a huge opportunity to streamline all aspects of construction through digitization and automation,” says Autodesk CEO Andrew Anagnost. Hogan Lovells is advising Autodesk.

M&A trends
Recruiting women has become a priority at private equity firms. Within the past decade, 83 percent of private equity managers based in North America, Asia and Europe said they focused on increasing gender diversity in their front-office roles, according to new research from EY. Sixty-three percent of the firms say they want more women in middle- and back-office roles as well. Check back next month when Mergers & Acquisitions will announce the 2019 Most Influential Women in Mid-Market M&A. For last year’s list, click here. And read the full story on EY’s data from Bloomberg: Private equity firms say recruiting women is a top priority.

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 Q3 2017 to 3.8x in Q3 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
Are you ready for some football? Tune in on Thanksgiving Day to watch NFL teams compete, including: Dallas Cowboys vs Washington Redskins. 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 49ers quarterback, 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.

Black Friday shines a spotlight on the retail industry, and the the pressure on purveyors 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-changing deal for the sector. Technology is driving many of the transactions. 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 more, see 5 trends driving retail M&A.

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.” Hendrickson is 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.

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 Francisco and Los Angeles and more. See our list, Dealmaker’s guide to 15 cities where M&A thrives.

People moves: Gregg Byers joins Baird. Former DOJ attorney Katherine Forrest moves to Cravath. Jennifer Zhao joins Genstar Capital. Check out our slideshow: 12 top dealmakers take on new jobs.

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.


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.


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.