Wall Street bankers are a lot less busy these days, what with the pandemic-induced drop-off in mergers and acquisitions and initial public offerings. But there’s a gritty, less glamorous dealmaking realm that has held up, and it’s helping banks offset some of that lost M&A and IPO revenue. A variety of companies, looking for liquidity in the weak economy, are selling off big stakes they’ve long held in public corporations. The latest came when French pharmaceutical giant Sanofi launched a $13 billion sale of its 16-year-old, 21percent stake in Regeneron Pharmaceuticals Inc. Regeneron, a New York-based biopharmaceutical firm, agreed to buy back about $5 billion of stock while the remaining $7 billion was sold to public investors in the largest public equity offering in the heathcare industry on record, according to data compiled by Bloomberg. Sanofi’s move came a few weeks after the pandemic’s first big deal of this kind, PNC Financial Services Group Inc.’s sale of its quarter-century-old stake of more than $13 billion in BlackRock Inc. The sale was the second-largest equity offering in the U.S. since Alibaba Group Holding Ltd.’s $25 billion IPO in 2014, according to Blomberg data. Jim Cooney, head of equity capital markets for the Americas at Bank of America Corp., tells Bloomberg News that the strategies make sense in the current economy. “The market prefers that companies stick to their core mission and monetize non-strategic assets before selling their own equity,” he says. Read the full story by Bloomberg: With M&A dead, Wall Street bankers keep busy with stock sales.
The U.S. arm of bakery chain Le Pain Quotidien filed for bankruptcy in Delaware with plans to sell itself for $3 million to avoid shutting down for good, court papers show. The Chapter 11 petition allows Le Pain Quotidien to rework its debts and carry out a sale to Aurify Brands LLC, which requires court approval. The chain’s sales were slipping amid heavy competition and lack of investment in its stores even before the Covid-19 pandemic forced the shuttering of all its U.S. location. Read the full story by Bloomberg News: Bakery chain Le Pain Quotidien’s U.S. arm files bankruptcy.
Novavax is buying Czech Republic-based Praha Vaccines for $167 million. The two companies will work with vaccine manufacturer Serum Institute of India to develop a potential coronavirus vaccine.
NordStar Capital is acquiring Torstar, the parent company of the Toronto Star newspaper in a deal that values the target at around about $38 million.
Accel-KKR-backed Partnerize has acquired BrandVerity. The target offers Software-as-a-Service products for paid search monitoring and web compliance for brands.
Coinbase is buying crypto currency brokerage firm Tagomi. Latham & Watkins is advising the target.
Joseph Pollock has joined Cain Brothers as a managing director where he is focusing on hospitals and other healthcare systems. He was most recently with Bank of America Merrill Lynch. Cain Brothers is a subsidiary of KeyBanc Capital Markets.
Katie Marchetti was hired by BlueWave, a private equity-focused advisory firm, as a managing director. She was most recently with Gerson Lehrman Group.
Yoni Pfeiffer has joined middle-market investment bank the Dak Group as an associate. He was previously with Raymond James.
Omar Pringle was hired by law firm Morrison & Foerster as a partner where he is focusing on private equity and M&A.
Since March 14, when the Centers for Disease Control and Prevention issued a no-sail order, cruise ships have been sitting idle with no passengers. The order is set to expire on July 24. The coronavirus has impacted the hospitality and tourism sectors, including cruises, greatly. Operators are raising capital so they can stay above water, and others even reportedly held talks with investors. Carnival Corp. (NYSE: CCL), which raised $6 billion through a combination of debt, stocks and convertible notes, was in talks with Blackstone for financing before settling on the public deal, according to Bloomberg News. See the full story: Why cruise lines are raising capital to stay afloat during pandemic.
Arizent, the parent company of Mergers & Acquisitions, released a new survey May 15 to understand how executives across industries were dealing with the impacts of the Covid-19 crisis after operating in a “new normal” environment for two months. As the coronavirus pandemic continues to extend its grip on the globe — infecting more than 1.41 million Americans (over 4.44 million globally) by the middle of May — executives must navigate their organizations through uncharted territory, with the possibility that the virus may not disappear any time soon. This is forcing C-suites to make big, lasting decisions with few guideposts to aid them. The April survey found that there was a surprisingly smooth, albeit hurried transition to remote, with most companies, including private equity firms and investment banks, feeling that they performed on par or above their own expectations. However, technology gaps did arise, as some companies found that customers either didn’t have the equipment to access their accounts digitally or needed training from staff working remotely. In the middle market, dealmakers report that “opportunities have thinned somewhat but have not disappeared,” as one private equity investor put it. “Investor base still has liquidity to invest.” Said one investment banker focused on real estate: “Pending deals were either put on hold, cancelled or delayed. Asset prices for listings are being re-evaluated or renegotiated with the sellers and buyers expecting discounts.” For more, see: Exclusive survey: How private equity firms, investment banks and other companies are surviving the pandemic.
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.
The Covid-19 pandemic turned America—a nation long committed to easy mobility—upside down. Driving has dramatically declined and new vehicle production has ground to a halt, leaving no doubt that the impact on M&A within this space will go well beyond this black swan event. Read the full story: Auto parts sellers turn to e-commerce, as coronavirus quarantine keep drivers off the roads.
Volkswagen, Ford Motor Co. (NYSE: F), Toyota Motor Corp. (NYSE: TM), General Motors Co. (NYSE: GM) and Daimler have recently shut down plants due to the coronavirus pandemic. The impact is also hurting pending auto deals. And car dealerships are feeling the brunt from the slowdown in production and sales too. Read the full story: Automakers struggle with quarantine forcing people to work from home.
The coronavirus pandemic will change the world and how we live in it profoundly, with dramatic shifts in how we gather and meet, work and learn, make products and distribute them. But exactly how the transformations will play out in the middle market is difficult to discern. Several recent reports and surveys aim to provide a sense of direction. Read the full story: Coronavirus crisis is changing everything, including private equity and M&A.
To explore how the coronavirus is affecting the middle market, Mergers & Acquisitions interviews dealmakers from Alvarez & Marsal, Merrill Corp., M33 Growth, M-III Partners, Paul Hastings and the Riverside Co. Read our full coverage: “Brace for impact,” say private equity firms to portfolio companies about the coronavirus.
The coronavirus pandemic has already quashed a number of previously announced deals, including Xerox’s hostile takeover bid for HP. More deals are expected to fail, as companies focus on preserving cash and ensuring debt access just to make it through the challenging economic cycle. The auto, retail, restaurant, travel and manufacturing sectors have been particularly hit hard, as they face declining sales and location closures. Automotive manufacturers are restructuring their businesses, and car dealerships are seeing fewer people walk in the door. For more, read our full coverage: 5 derailed deals: HP, TGI Fridays among those losing buyers during coronavirus crisis.
Deal structures are changing, especially in terms of what happens after a deal is completed. Read our story: How to manage post-closing disputes in M&A as a result of the coronavirus.
Covid-19 is forcing M&A practitioners to assess appropriate risk allocation mechanisms to address the impact of the virus on global business operations, including Representations and Warranties Insurance (RWI). Read the guest article: How the coronavirus forces dealmakers to assess effectiveness of RWI policies.
As consumer spending and business investment is declining, we expect a slowdown in private equity transaction volume. Read the story: Private equity deals will slow down, as global economy stalls amid coronavirus pandemic.
For more on how to cope with these challenging times, see: Coronavirus contingency planning checklist for the middle market.
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.
Houlihan Lokey, Lincoln International, Jefferies Financial Group, William Blair and Piper Sandler Cos. rank as the top five most active M&A investment banks in 2019, based on the volume of completed private equity-backed deals in the U.S., according to PitchBook. Besides advising on M&A deals, the investment banks on the top 10 list also had a busy year with acquisitions of their own in 2019, including two acquisitions by Houlihan Lokey and three by Stifel Financial. Piper Sandler Cos., was created when Minneapolis-based Piper Jaffray Cos. acquired New York-based Sandler O’Neill & Partners in a deal representing more than half of Piper Jaffray’s $930 million market capitalization. The firm also had another acquisition in 2019 and sold a company to exit the traditional asset management business. See our full coverage: Top investment banks for PE-backed deals in 2019: Houlihan Lokey led the pack.
Audax, HarbourVest and Genstar ranked as the top three most active private equity firms in 2019, based on the volume of completed deals in the U.S., according to PitchBook. Three companies tied for fourth place: Abry, Carlyle and Shore Capital. Where were these PE firms looking for deals? Eight of the firms on our list name the software and technology sector among their top investment targets, and seven put healthcare companies on their priority list. Financial services and consumer services are each named by five of the firms as industries they focus on, with four naming business services companies. Fundraising from investors in 2019 led to two notable fund launches earlier in 2020: KKR’s Global Impact Fund and HarbourVest’s $2.6 billion HarbourVest Fund XI. See our full coverage: Top private equity firms in U.S. deals in 2019: Audax Private Equity ranked No. 1.
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.