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001_MAJ060118_001 1 5/1/2018 3:43:47 PM 0C2_MAJ0618 2 4/30/2018 11:27:19 AM Contents June 2018 | VOL. 53 | NO. 6

Cover Story 16 Buyer’s Guide The M&A industry is going strong, with no signs of slowing down. In today’s fast-paced market, M&A pros are looking for a leg up on the competition and seeking ways to maximize investment returns.

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Watercooler Columns Q&As 6 13 28 Why PE fims like physician practices Private equity perspective New kid on the block Welsh, Carson, Anderson, & Stowe form radi- LLR Partners has pioneered a digital strategy, “Greatest generational transder of wealth ology company through new venture. including website content and social media ever seen” benefits Brightstar’s debut fund. channels, to amplify its brand. 7 32 Dyal takes minority stake in Vector 14 Smaller stakes For mid-market PE firms, selling stakes in their The buyside Huron Capital’s Flex Fund courts owners who firms allows them to raise capital for growth. Nike and other specialty apparel makers are want growth while keeping control. embracing new technology trends. 8 Americans love snacks 30 People Moves Consumers are eating on-the-go snacks more Demad for specialization than ever and that is driving deals. Business services drive robust interest from 38 PE buyers. Norwest expands consumer group; Brogam taps Shell M&A exec. 34 Branding tips for PE Running paid campaigns and having a social media presence can help raise awareness.

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TheMiddleMarket.com 1 STATE STREET PLAZA, 27TH FLOOR NEW YORK, NY 100041505 212 8038200 EDITORINCHIEF Mary Kathleen Flynn ASSISTANT MANAGING EDITOR Demitri Diakantonis CONTRIBUTING EDITORS Enjoy our new look and Keith Button, Danielle Fugazy GROUP EDITORIAL DIRECTOR, BANKING AND CAPITAL MARKETS meet the team Richard Melville VP, RESEARCH Dana Jackson

Check out the M&A daily wrap, video interviews with VP, CONTENT OPERATIONS AND CREATIVE SERVICES top dealmakers and vivid slideshows, plus updated Paul Vogel DIRECTOR OF CREATIVE OPERATIONS designs in the magazine and on the website. Michael Chu ART DIRECTOR Nikhil Mali DIRECTOR OF CONTENT OPERATIONS Mergers & Acquisitions attracts more than 50,000 Theresa Hambel M&A community members across our print and VICE PRESIDENT, CAPITAL MARKETS Harry Nikpour (212) 803-8638 digital platforms. To serve your informational needs SENIOR SALES MANAGER better, we have refreshed the look of the magazine Richard Grant (212) 803-8634 ASSOCIATE MARKETING MANAGER and website and expanded our content offerings. Leatha Jones Recently, we launched an online column, called “M&A daily wrap,” in which we share a wide array of middle-market news and developments, including deal announcements, fundraises, Q&As with leading CHIEF EXECUTIVE OFFICER ...... Gemma Postlethwaite dealmakers, reports, new hires and promotions. Think of it as your daily one- CHIEF FINANCIAL OFFICER...... Robert Dennen EVP & CHIEF CONTENT OFFICER ...... David Longobardi stop-shop for all things middle-market related. CHIEF MARKETING OFFICER ...... Matthew Yorke Slideshows have proved very popular, and we’ve been producing them CHIEF SUBSCRIPTION OFFICER...... Allison Adams SVP, CONFERENCES & EVENTS ...... John DelMauro frequently. Recent slideshows have featured golf deals, timed to the Mas- SVP, HUMAN RESOURCES ...... Ying Wong ters Tournament; middle-market companies based in the hometowns of the March Madness Final Four college basketball teams; and car deals, just in REPRINTS AND LICENSING CONTENT time for summer road trips. For more information about reprints and licensing content from Mergers & Acquisitions, please visit sourcemediareprints. Video is a key component of our content. Earlier in my career, I served as a com or contact pars international at (212) 221-9595.

broadcast TV reporter. Since I joined CUSTOMER SERVICE the brand in 2011, we have produced [email protected] or (212) 803-8500

hundreds of video interviews with top Mergers & Acquisitions Vol. 53/No. 6 (ISSN 0026-0010) is published monthly with combined issues in July/August dealmakers. Look for our team at and November/December by SourceMedia, One State Street Plaza, 27th Floor, New York, NY 10004-1505. Yearly events throughout the middle market. subscription is $1,995; $2035 for one year in all other And visit TheMiddleMarket.com and countries. Periodical postage paid at New York, NY and U.S. additional mailing offices. POSTMASTER: Send address follow us on LinkedIn, Facebook and changes to Mergers & Acquisitions / Source Media, One State Street Plaza, New York, NY 10004. For subscriptions, Twitter @themiddlemarket. renewals, address changes and delivery service issues contact our Customer Service department at (212) 803- —Mary Kathleen Flynn 8500 or email: [email protected]. This publication is

WENWYST JEANMARY WENWYST designed to provide accurate and authoritative information The M&A team: Leatha Jones, Nikhil Mali, Demitri Diakantonis, regarding the subject matter covered. It is sold with Mary Kathleen Flynn, Harry Nikpour, Richard Grant the understanding that the publisher is not engaged in rendering financial, legal, accounting, tax, or other professional service. Mergers & Acquisitions is a registered trademark used herein under license. © 2018 Mergers & Acquisitions and SourceMedia, Inc. All rights reserved.

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002_MAJ060118 2 5/1/2018 5:39:37 PM WILMINGTON TRUST RENOWNED EXPERIENCE | MERGERS AND ACQUISITIONS

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If you’re involved in an M&A deal, you need an experienced M&A escrow and paying agent to expedite your transaction. Look to the professionals at Wilmington Trust, N.A., and take advantage of our strong operational platform, global presence, and complete range of solutions. When serving as your escrow and paying agent, we are focused on understanding your transaction and administering its e cient execution.

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003_MAJ0618CS15774B MA GCM 3 FT 2018 Ad_7.875x10.5_MA FINAL.indd 1 5/1/20181/29/2018 2:05:4811:01:42 PM AM What’s going on @ TheMiddleMarket.com

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Slideshow M&A daily wrap BlackRock snags TCP The rise of private debt Private debt funds raised a record-breaking $115.4 billion in 2017 Capital raised $120B

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$0 2014 2015 2016 2017 2018 YTD Source: Preqin 6 specialties driving deals Auto parts attract PE buyers Private debt appeals to buyers The healthcare industry remains a Stellex Capital has acquired Fenix BlackRock is acquiring Tennenbaum hot place for investment. According Parts, a recycler and reseller of OEM Capital Partners, a firm focused on to Morgan Stanley, the sector began parts that were recovered from dam- direct lending and special situations 2018 with the strongest start in over a aged or low-valued cars. As Ameri- for mid-market companies. BlackRock decade. Many of the companies that cans begin to plan road trips and says its clients are increasingly drawn are garnering attention from strategic other summer vacations, car deals are to private credit as a higher-yielding acquirers and private equity firms. thriving. alternative to traditional fixed income.

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venture with Atrium Health, formerly Carolinas HealthCare System, operating five outpatient imaging centers and two mobile MRI units. Charlotte Radiology interprets or performs more than 1.5 million imagings and imaging- guided procedures each year. New York-based Welsh, Carson, Anderson & Stowe, or WCAS, invests in technology and healthcare industries. WCAS describes its investment strategy as buying growth businesses, partnering with management teams and build- ing value through operational improvements, internal growth and strategic acquisitions. The firm was founded in 1979 and has since organized 16 limited partnerships with total capital of more than $22 billion. WCAS is currently investing capital ADOBE STOCK from a $3.3 billion PE fund and has a current portfolio of approximately 20 companies. WCAS’s strategy is to Why PE firms like physician practices partner with outstanding management teams and build value for its investors Welsh, Carson, Anderson & Stowe forms radiology company through new venture, through a combination of operational partnering with a healthcare practice improvements, internal growth initiatives and strategic acquisitions. “Charlotte Radiology is the perfect Charlotte Radiology, a physician- Talecris Biotherapeutics. Perkins also Charlotte Radiology, based in founding partner for US Radiology owned practice in the Southeast, has has private equity experience as an Charlotte, North Carolina, describes Specialists,” says Brian Regan, WCAS formed a new venture with healthcare operating partner for Bain Capital, Am- itself as one of the nation’s largest general partner. “Combining their investment firm Welsh, Carson, Ander- persand Capital and Cerberus Capital, radiology groups, with 126 physicians commitment to clinical quality with our son & Stowe to expand the practice and held operating and M&A roles at and advanced care practitioners in the resources, business support and capital across the U.S. General Electric. Southeast U.S., including specialists in investment, US Radiology Specialists The new venture, US Radiology Spe- “US Radiology Specialists is a body imaging, emergency radiology, in- will be able to rapidly expand, enabling cialists, also appointed John Perkins physician-owned and quality-focused terventional radiology, mammography, us to reach more patients across the as its CEO and member of its board of group set up to support our mission of musculoskeletal, neuroradiology, nucle- country.” directors. Perkins comes to the job with providing exceptional patient care,” ar medicine, pediatrics and teleradiol- The US Radiology deal is just the experience in operating and scaling up says Bob Mittl, chairman of Charlotte ogy, or transmitting images between latest example of a burgeoning area of healthcare companies: he was formerly Radiology’s governance board and a sites. The practice serves 18 hospitals, middle-market M&A: physician and den- the chief executive of Bio Products US Radiology board member. “We are and owns and operates 14 breast cen- tal practices. Sweeping up smaller prac- Laboratory, a plasma protein thera- excited to form US Radiology Special- ters, three mobile mammography units, tices into consolidated businesses can peutics company, and before that he ists in a joint partnership with highly two vein centers, and several other make operations more efficient through served as the executive vice president experienced and like-minded partners vascular and interventional care sites. economies of scale, reduce the cost of of global commercial operations for such as WCAS.” Charlotte Radiology also has a joint care and improve patient outcomes,

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venture with Atrium Health, formerly beating out hospitals and other tradi- Stellex formed a partnership with auto Carolinas HealthCare System, operat- tional care providers in the competition industry veteran Bruce Swift to seek ing five outpatient imaging centers for the healthcare consumer. Recent acquisitions in the sector. and two mobile MRI units. Charlotte deals in this area have included PE firm As Americans begin to plan road Radiology interprets or performs more LLR Partners forming a Southeast U.S. trips and other summer vacations, car than 1.5 million imagings and imaging- eye care practices company, Eye Health deals are thriving, especially in the guided procedures each year. America, starting with the acquisition of nascent self-driving tech sector. Intel New York-based Welsh, Carson, Eye Associates, Clemson Eye and Pied- bought Israel’s Mobileye for about $15 Anderson & Stowe, or WCAS, invests in mont Surgery Center practices, with the billion. Meanwhile, in a much smaller technology and healthcare industries. goal of growing through more acquisi- deal, Delphi bought NuTonomy. WCAS describes its investment strategy tions and organically. As the industry readies for autono- as buying growth businesses, partner- —Keith Button mous driving, there’s a big wave of ing with management teams and build- consolidation going on among makers ing value through operational improve- of traditional car parts, with several ments, internal growth and strategic High demand new deals announced this week. In- acquisitions. The firm was founded in vestcorp acquired KSI Trading Corp., a 1979 and has since organized 16 limited for auto parts supplier of aftermarket auto body parts partnerships with total capital of more Stellex joins recent PE buyers that services 10,000 collision repair than $22 billion. CenterOak and Clearlake shop customers across 25 locations in WCAS is currently investing capital Stellex Capital Management has 14 states. Woodward Inc. bought diesel ADOBE STOCK from a $3.3 billion PE fund and has acquired auto parts distributor Fenix parts maker L’Orange from Rolls-Royce. a current portfolio of approximately Parts. The PE firm partnered with And Canadian automotive retailer Au- 20 companies. WCAS’s strategy is to industry veterans Bill Stevens and toCanada has acquired 15 stores from Why PE firms like physician practices partner with outstanding management Paul Delaney on the deal. Fenix is a the Grossinger Auto Group. Akerman teams and build value for its investors recycler and reseller of orginal equip- represented the seller. Other car part Welsh, Carson, Anderson & Stowe forms radiology company through new venture, through a combination of operational ment manufacturer (OEM) parts that buyers include CenterOak Partners, partnering with a healthcare practice improvements, internal growth initia- were recovered from damaged or low- Clearlake Capital Group and Wabash tives and strategic acquisitions. valued cars. National. Meanwhile, Carl Icahn is “Charlotte Radiology is the perfect among the sellers. Charlotte Radiology, based in founding partner for US Radiology —Demitri Diakantonis Charlotte, North Carolina, describes Specialists,” says Brian Regan, WCAS itself as one of the nation’s largest general partner. “Combining their radiology groups, with 126 physicians commitment to clinical quality with our PE firms seek and advanced care practitioners in the resources, business support and capital Southeast U.S., including specialists in investment, US Radiology Specialists capital body imaging, emergency radiology, in- will be able to rapidly expand, enabling Dyal takes minority stake in terventional radiology, mammography, us to reach more patients across the Vector Capital VECTOR CAPITAL musculoskeletal, neuroradiology, nucle- country.” Technology-focused private equity ar medicine, pediatrics and teleradiol- The US Radiology deal is just the “This is a great fit for us given our firm Vector Capital has taken on Dyal ogy, or transmitting images between latest example of a burgeoning area of extensive experience investing across Capital Partners, a division of Neuber- sites. The practice serves 18 hospitals, middle-market M&A: physician and den- the automotive supply chain,” says Stel- ger Berman, as a minority partner. In and owns and operates 14 breast cen- tal practices. Sweeping up smaller prac- lex managing partner Michael Stewart. recent years, Dyal has made invest- ters, three mobile mammography units, tices into consolidated businesses can Stellex is a New York-based middle- ments in minority, non-voting owner- two vein centers, and several other make operations more efficient through market private equity firm that invests ship interests in other PE firms includ- vascular and interventional care sites. economies of scale, reduce the cost of between $25 million to $100 million in ing: Vista Equity Partners, KPS Capital Charlotte Radiology also has a joint care and improve patient outcomes, deals valued up to $500 million. In 2017, Partners, Silver Lake, H.I.G., along with

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lender Cerberus. Bettingon the cloud in institutional alternative asset man- path as its business model is supported Vector, based in San Francisco, Vector Capital backs a range of software companies agement businesses worldwide, with 27 by global transformative trends, such will use the capital to expand its • Corel, packaged software such investments currently. Neuberger as increased outsourcing, which show businesses, but the firm will not Berman, an employee-owned invest- no signs of flagging,” says Partners • CloudSense, cloud software change its strategy, investment ment manager, has $295 billion under Group managing director Chris Russell. process or day-to-day opera- • IPValue Management, intellectual property management in equity, fixed-income, Americans are eating small, conve- tions. Dyal’s ownership interest in • Saba Software, cloud technology quantitative and multi-asset class, pri- nient on-the-go snacks like protein the firm is a passive, non-voting, vate equity and hedge fund investments. bars, more than ever before and that • Triton Digital, SaaS provider minority stake. On the Vector-Dyal deal, Kirkland & Ellis is driving deals among healthy snack Source: Vector Capital “This investment, which builds was Vector’s legal counsel and Fried, companies. For example, Hershey on our 20-year relationship with the capital on its debt lending business, Frank, Harris, Shriver & Jacobson serving Co. (NYSE: HSY) acquired SkinnyPop Neuberger Berman, provides Vector deal businesses in Europe and Asia, as Dyal’s legal counsel. popcorn maker Amplify and Brands for with permanent capital to strengthen and possibly acquiring other private —Keith Button $921 million, and Campbell Soup Co. our private equity business and further equity firms. (NYSE: CPB) paid almost $5 billion for accelerate the growth of our credit busi- Littlejohn & Co. sold a minority Snyder’s-Lance, the owner of Cape Cod ness,” says Vector founder Alex Slusky. stake—passive, non-voting and less Americans potato chips. Ropes & Gray, Goodwin “Through our capital and our than 10 percent-- to Goldman Sachs business platform resources, we look Alternative Investments & Manager love snacks forward to further enhancing Vector’s Selection Group with plans to use the Charlesbank and Partners capabilities,” says Dyal Capital head capital to grow. That investment was Group back Hearthside Michael Rees. through the AIMS Petershill fund, which Charlesbank Capital Partners and For middle-market private equity is set up to invest in minority stakes in Partners Group have agreed to acquire MEASURING SUCCESS ONE DEAL AT A TIME 22 firms, selling minority stakes is a path to PE firms, hedge fund managers and Hearthside Food Solutions from Gold- FOR OVER 20 YEARS YEARS IN BUSINESS raise capital for expansion of business other alternatives management firms. man Sachs (NYSE: GS) and Vestar lines and for some general partners Goldman’s Petershill fund also invested Capital Partners. Based in Downers 6 to gain liquidity. As acquisitions have in a minority stake—also non-voting Grove, Illinois, Hearthside is an inde- INVESTMENT FUNDS RAISED become so pricey, return margins are and less than 10 percent—in Accel- pendent bakery and contract manufac- thinner and capital infusions from sell- KKR, a private equity firm focused on turer for grain-based food and snacks ing minority stakes can help private tech companies. for brands. 1.6 BILLION OF COMMITTED CAPITAL equity firms grow more quickly. Private Vector Capital manages $3.8 billion equity firms can also use the capital to in tech company investments. The firm + broaden their ownership base and bring formed in 1997 as a spinoff of Ziff Broth- 120 PLATFORM INVESTMENTS in new, younger partners as the older ers Investments, a family investment partners look to retire or step back. firm. Its investments have included + Kohlberg & Co. recently sold a mi- taking public companies private, buying 60 nority stake to Stephen Schwarzman’s founder-owned companies, growth eq- INDEPENDENT SPONSOR PLATFORMS Blackstone Group LP (NYSE: BX), which uity investments, recapitalizations, spi- invested with capital from its strategic noffs and public company investments. Peninsula Capital Partners provides capital holds fund under Blackstone The firm recently raised $1.4 billion HEARTHSIDE FOOD customized debt and equity solutions to middle-market companies as either Alternative Asset Management. Black- for its fifth private equity fund, Vector The company produces nutrition a control or non-control investor. stone also bought a less than a 15 per- Capital V. Among its recent deals, Vec- bars, cookies and cereals made at 25 We specialize in working with independent sponsors and directly with companies cent stake in Leonard Green & Partners. tor agreed to sell 2020 Technologies, a manufacturing facilities across the on buyouts, recapitalizations, growth and other leveraged capital transactions. Another middle-market PE firm, the software developer for interior space U.S. and Europe. Goldman and Vestar Please allow us to share our unique Riverside Co., sold a minority stake to planning, to Golden Gate Capital. bought Hearthside in 2014 from Wind depth of experience with you on your next transaction. Parkwood LLC, a private trust com- Dyal Capital, which started in 2011, Point. “We see strong potential for the 313.237.5100 | PENINSULAFUNDS.COM pany, with Riverside intending to spend seeks to acquire minority equity interests company to continue on its growth

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008_MAJ060118 8 5/1/2018 5:07:26 PM in institutional alternative asset man- path as its business model is supported Procter, Latham & Watkins, KPMG, PwC Fund II. The fund was raised in four agement businesses worldwide, with 27 by global transformative trends, such and Jefferies are advising the buyers. months, and it is three times bigger such investments currently. Neuberger as increased outsourcing, which show Davis Polk, Barclays and Goldman than Ardian’s first growth fund, which Berman, an employee-owned invest- no signs of flagging,” says Partners Sachs are advising Hearthside. Finan- was raised back in 2014. The firm has ment manager, has $295 billion under Group managing director Chris Russell. cial terms were not disclosed. attracted institutional investors,such management in equity, fixed-income, Americans are eating small, conve- —Demitri Diakantonis as the European Investment Fund (FEI) quantitative and multi-asset class, pri- nient on-the-go snacks like protein and Bpifrance. vate equity and hedge fund investments. bars, more than ever before and that “With the substantial size of the On the Vector-Dyal deal, Kirkland & Ellis is driving deals among healthy snack Ardian raises fund, the fundraise strengthens Ard- was Vector’s legal counsel and Fried, companies. For example, Hershey ian growth’s positioning as a leading Frank, Harris, Shriver & Jacobson serving Co. (NYSE: HSY) acquired SkinnyPop new fund growth catalyst for ambitious entre- as Dyal’s legal counsel. popcorn maker Amplify and Brands for AGF II is three time bigger than preneurs across Europe,” says Laurent —Keith Button $921 million, and Campbell Soup Co. the firm’s first in 2014 Foata, head of Ardian Growth. Ardian (NYSE: CPB) paid almost $5 billion for Paris private equity firm Ardian has has backed more than 100 companies Snyder’s-Lance, the owner of Cape Cod raised €230 ($283 million) for its new in the software and Internet sec- Americans potato chips. Ropes & Gray, Goodwin growth equity fund, Ardian Growth tors since 1998 including: Bricoprivé love snacks Charlesbank and Partners Group back Hearthside Charlesbank Capital Partners and Partners Group have agreed to acquire MEASURING SUCCESS ONE DEAL AT A TIME 22 Hearthside Food Solutions from Gold- FOR OVER 20 YEARS YEARS IN BUSINESS man Sachs (NYSE: GS) and Vestar Capital Partners. Based in Downers 6 Grove, Illinois, Hearthside is an inde- INVESTMENT FUNDS RAISED pendent bakery and contract manufacturer for grain-based food and snacks for brands. 1.6 BILLION OF COMMITTED CAPITAL 120+ PLATFORM INVESTMENTS 60+ INDEPENDENT SPONSOR PLATFORMS

Peninsula Capital Partners provides HEARTHSIDE FOOD customized debt and equity solutions to middle-market companies as either The company produces nutrition a control or non-control investor. bars, cookies and cereals made at 25 We specialize in working with independent sponsors and directly with companies manufacturing facilities across the on buyouts, recapitalizations, growth and other leveraged capital transactions. U.S. and Europe. Goldman and Vestar Please allow us to share our unique bought Hearthside in 2014 from Wind depth of experience with you on your next transaction. Point. “We see strong potential for the 313.237.5100 | PENINSULAFUNDS.COM company to continue on its growth

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and Ivalua in France, Lastminute. which will retain the CultureIQ name. com in Italy and T2O in Spain. Ardian “This is an exciting combination of started as AXA Private Equity under two great companies,” says CultureIQ French insurer AXA and was formed CEO Greg Besner, who will be the CEO by Dominique Senequier in 1996. The of the combined business. “One with group was spun off in 2013 and named strong, modern technology and one Ardian, and Senequier is the company’s with decades of expertise and intellec- president. The firm is actively looking tual property. WS&A is the recognized to expand its U.S. presence. Ardian is industry leader working with some of partnering with Transatlantic Power the largest companies in the world and Holdings to create a renewable energy we are excited to join forces.” platform called Skyline Renewables. In Besner started CultureIQ in 2013 2017, the firm acquired Revere Plastics as a software-as-a-service business Systems LLC, a manufacturer of plastic in the employee culture and engage- DASEKE injection molded materials. ment survey industry. CultureIQ helps —Demitri Diakantonis erpillar Inc. (NYSE: CAT) and General analysis firm. companies use employee feedback Electric Co. (NYSE: GE). Daseke has ParkerGale has used CultureIQ’s been an active acquirer, wielding M&A software across its portfolio for several Daseke buys to expand geographically and to diver- years to conduct employee engage- sify services. In 2017, Daseke acquired ment and culture surveys, so the again Tennessee Steel Haulers & Co., the Chicago PE firm has a “strong con- The company purchases Roadmaster Group and Moore Freight viction about the products and the energy logistics provider Service. In that same year, Daseke market,” says ParkerGale partner Devin Truck operator Daseke Inc. (Nasdaq: purchased R&R Trucking, competitors Mathews. DSKE) has agreed to acquire energy the Schilli Cos., Big Freight Systems and “We think this is exactly what the transportation company Aveda for the Steelman Cos. Transportation and market is looking for – a high-tech about $102 million in enterprise value. logistics has seen a lot of deal activity, and high-touch approach to employee The target provides services and with Quad-C investing in transportation engagement,” Mathews says. “From equipment required for the exploration, management provider AIT Worldwide our industry research, we know there is development and production of Logsitics. a huge market without a clear leader. petroleum resources in North America. —Demitri Diakantonis Companies are updating the old ways Calgary, Alberta-based Aveda has of surveying employees for feedback 430 tractors, 660 trailers and 200 light and are now listening deeply to their duty trucks, and generated about $158 Gartner sells employees using technology and million in revenue in 2017. fostering engagement through action “This transaction is a strong fit for division plans built on decades of benchmark- our company and shareholders as ParkerGale acquires CEG ing and best practices. The combina- Aveda has demonstrated the ability to from Gartner tion of New York-based CultureIQ and outpace their market’s growth rate, and ParkerGale has acquired CultureIQ, WS&A creates the clear leader the we expect joining Daseke will enable whose software surveys employee industry has been seeking.” them to fuel their continued outperfor- engagement and culture, and backed The transaction to acquire Cultu- mance,” says Daseke CEO Don Daseke. CultureIQ’s acquisition of the work- reIQ-- and a carve-out from a large Addison, Texas-based Daseke operates force surveys and analytics division of public company-Gartner—on the same more than 5,200 tractors and 11,000 Corporate Executive Board. Corporate day was complicated but interesting, flatbed trucks and trailers. Customers Executive Board is owned by Gartner Mathews says. ParkerGale will own include Boeing Co. (NYSE: BA), Cat- (NYSE: IT), the IT industry research and a majority of the combined business, Untitled-2 1 4/25/2018 11:06:32 PM 10 Mergers & Acquisitions June 2018 TheMiddleMarket.com

010_MAJ060118 10 5/1/2018 5:07:30 PM which will retain the CultureIQ name. data gathered through surveys and “deepest best practices database in the “This is an exciting combination of analytics to try to measure, understand industry.” The division is also staffed two great companies,” says CultureIQ and strengthen company cultures. It with a team of psychologists to design CEO Greg Besner, who will be the CEO also has a strategy team that provides the workforce surveys to generate of the combined business. “One with advice on how to improve and align insights and actionable intelligence. strong, modern technology and one corporate cultures. —Keith Button with decades of expertise and intellec- Corporate Executive Board estab- tual property. WS&A is the recognized lished its workforce surveys and analyt- industry leader working with some of ics division through acquiring Valtera Ready to go the largest companies in the world and and Genesee Surveys. The division we are excited to join forces.” provides insights and analytics for cor- camping Besner started CultureIQ in 2013 porate strategic planning and business Outdoor deals are picking up as a software-as-a-service business outcomes based on a workforce survey just in time for summer in the employee culture and engage- and analytics platform. The business’s Camping World Holdings Inc. (NYSE: DASEKE ment survey industry. CultureIQ helps intellectual property includes bench- CWH) has agreed to acquire Cullum & analysis firm. companies use employee feedback marks and what it describes as the Maxey Camping Center in Nashville. ParkerGale has used CultureIQ’s software across its portfolio for several years to conduct employee engagement and culture surveys, so the Chicago PE firm has a “strong con- viction about the products and the market,” says ParkerGale partner Devin Mathews. “We think this is exactly what the market is looking for – a high-tech and high-touch approach to employee engagement,” Mathews says. “From our industry research, we know there is a huge market without a clear leader. Companies are updating the old ways of surveying employees for feedback and are now listening deeply to their employees using technology and fostering engagement through action plans built on decades of benchmark- ing and best practices. The combination of New York-based CultureIQ and WS&A creates the clear leader the industry has been seeking.” The transaction to acquire Cultu- reIQ-- and a carve-out from a large public company-Gartner—on the same day was complicated but interesting, Mathews says. ParkerGale will own a majority of the combined business, Untitled-2 1 4/25/2018 11:06:32 PM TheMiddleMarket.com June 2018 Mergers & Acquisitions 11

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The deal is part of Camping World’s strategy to grow geographically through M&A. “We are well-positioned to remain a leader in the RV industry as it continues to evolve,” says Camping World chief operating officer Brenty Moody. Camp- ing World recently agreed to buy Dixie RV Superstore. Outdoor-related deals, including makers of camping equipment, are picking up as consumers gear up for CAMPING WORLD the Spring and Summer seasons. For example, lower middle-market private a platform to focus on the camping sight 2 Design and Elevate LLC. equity firm L2 Capital Partners formed sector through the investments of In- —Demitri Diakantonis

ACG New York | www.acgnyc.org | 212.489.8700

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012_MAJ060118 12 5/1/2018 5:07:32 PM Private Equity Perspective

Social media, including The medium is the message an active Twitter account (@LLRPartners), plays a key LLR Partners has pioneered a digital strategy, including website role. “We look at social me- content and social media channels, to amplify its brand. dia as a channel in which to amplify our message, to get our brand out there.” By Mary Kathleen Flynn LLR won Mergers & Ac- quisitions’ M&A Mid-Market Award for 2017 Private Equity Firm of the Year. It Competition in the point of GrowthBits is so that when CEOs is one of the most active private equity industry who are looking for an investor research the private equity firms in the is more intense than firm and visit its website, “they’ll start to see middle market, having ever, making it hard the value that LLR can bring around 5 main racked up 28 transactions for PE firms to dif- drivers: sales, marketing, technology, finance in 2017, including 4 new ferentiate themselves and leadership,” says Sala. The potential for platform investments, 18 from others. Embrac- expansion in those areas is what LLR looks add-on acquisitions and ing content creation, for in portfolio companies when considering 6 exits. social media and whether or not to invest in them. Watch our pair of video video helps LLR Partners maintain a interviews with Sala at high profile. Amplifier TheMiddleMarket.com, “Business owners and CEOs of companies “We’re not just trying to bring people to our and follow Mergers and have a lot of choices as to who their inves- site, we’re trying to convey why LLR can be Acquisitions on social tors are,” explains LLR managing director a good partner that can add value over the media. We’re on Twitter Michael Sala. “They’re constantly being con- long term.” @themiddlemarket. M&A tacted for discussions and dialogues about how a private equity fund or growth investor could invest in them and bring value.” To stand out from the crowd, LLR has pioneered a digital strategy that involves embracing social media and devising new ways of connecting with prospective and existing portfolio companies. One aspect of the approach is a content series called GrowthBits. As an example of the type of content the firm is producing and how the series helps to share best practices throughout the firm’s portfolio, a recent GrowthBits article outlined “must-have technologies for growth-focused companies,” written by Bill Sweeney, the chief YOUL AH KIM technology officer of Kemberton Healthcare LLR Partners’ Michael Sala shares the firm’s strategy and how it uses social media to amplify its Services, a company LLR backed in 2017. The message in a video interview with Mergers & Acquisitions.

Mary Kathleen Flynn is 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. Follow her on Twitter at @MKFlynn

TheMiddleMarket.com June 2018 Mergers & Acquisitions 13

013_MAJ060118 13 5/1/2018 5:08:21 PM The Buyside

are going after analytic firms Retail’s new world to monitor consumer behavior and help with their digi- Nike and other specialty apparel manufacturers are embracing tal strategies. For example, new technology to keep pace with evolving consumer demands. in 2017, the Carlyle Group LP (Nasdaq: CG) acquired consumer data provider By Demitri Diakantonis Claritas from Nielsen (NYSE: NLSN). New York-based Claritas, founded in 1961, provides consumer data Consumers are more our consumer data and analytics capabili- and demographics, includ- demanding and spe- ties to help us serve consumers globally,” says ing where people work, live cific with the products Nike chief digital officer Adam Sussman. and shop, to help businesses they buy. Retailers better directly market to along with specialty Buyer trends those clients. apparel manufactur- Based in Philadelphia and New York, Zodiac On the strategic side, in ers are under pressure uses “proven data models, customer ana- 2016, security company Tyco to get a better grasp lytics, and behavioral analysis to predict International plc (NYSE: of shopper behavior the future behaviors of individuals.” “What TYC) purchased Shopper- so they can tailor their marketing strategies really powers all these immersive consumer Trak for $175 million. The and inventories to evolving consumer needs. experiences is great data and the ability to Chicago-based target mea- In order to do this, companies are investing maximize. And while we’re constantly build- sures customer traffic as in technology, including data and analytics ing these skills in-house we’re also acquiring well as other consumer be- providers, snatching targets in those fields capabilities to accelerate our strategy,” Nike havior for retailers, including through M&A. CEO Mark Parker told investors. Crate and Barrel and Harry One prime example is Nike Inc. (NYSE: Both strategic and private equity buyers & David. M&A NKE), which has bolstered its digital capabilities with the acquisition of Invertex Ltd. of Tel Aviv. Invertex uses 3-D technology and mobile applications to analyze consumer buying behavior, aiming to provide retailers with information to customize products to meet specific customer needs. Invertex’s imaging technology can be used to analyze people’s feet in stores to suggest models and sizes that would fit them best. Invertex is not NIke’s only technology acquisition. The Beaverton, Oregon-based company bought consumer data analytics firm Zodiac Inc. “The acquisition of Zodiac demonstrates our commitment to further accelerating

Nike’s digital transformation and enhancing BLOOMBERG NEWS

Demitri Diakantonis is the assistant managing editor of Mergers & Acquisitions and writes The Buyside column about corporate dealmaking, and also covers the consumer sector. Follow him on Twitter at @ddiakantonis

14 Mergers & Acquisitions June 2018

014_MAJ060118 14 5/1/2018 5:09:54 PM 89% $5.6 Billion 181 Deals Lead/Co-Lead Commitments Issued to Date Closed Transactions

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015_MAJ0618 15 4/30/2018 11:22:41 AM BUYER’SPRODUCTS AND SERVICES THAT GIVE DEALMAKERS THE UPPER HAND GUIDE

Referrals Fund administration Recruiting Online services Valuation services Virtual data rooms Non-traditional due diligence Back ofﬁ ce technology Networking groups Data providers

016_MAJ060118 16 5/1/2018 5:09:34 PM BUYER’SPRODUCTS AND SERVICES THAT GIVE DEALMAKERS THE UPPER HAND GUIDE

Referrals Fund administration Recruiting Online services By Danielle Fugazy Valuation services Virtual data rooms he M&A industry is going strong, with no Non-traditional due diligence signs of slowing down. In today’s fast- Back ofﬁ ce technology paced market, M&A pros are looking for Networking groups T a leg up on the competition and seeking ways Data providers to maximize investment returns. Products and services that give dealmakers the upper hand are highly sought after. Here’s our updated annual look at the tools transaction professionals count on to help them source and close deals.

017_MAJ060118 17 5/1/2018 5:09:39 PM Buyer’s Guide

are choosing the right provider. That’s Today, FD Fund Administration pro- Referrals where we come in.” In the past, private vides back-office fund administration equity firms may have tried to forego for many well-known firms, including Think Gartner Inc. meets Angie’s List do more and more for returns.” Mooney the expense of outside help, but today, Hamilton Lane and real estate firm and there lies BluWave. The idea for founded BluWave to help private equity the industry has matured, and PE firms BluWave grew over a 20-year span, firms and their portfolio companies are more accepting of assistance. while Sean Mooney was working in a select the best service providers. BluWave can help connect private equity firms and their portfolio companies with everything from finding due diligence experts and executives to value creation initiatives, with the idea ADOBE that being able to quickly pinpoint the right help will ultimately save compa- Lubert Adler. To give clients a seamless nies time and money while producing interaction, FD and Frazier & Deeter’s better outcomes. tax division work together. “We have “The challenge is that as service sophisticated tax strategies in house providers grow, the folks in the middle that really sets us apart from the or lower middle market can’t afford competition,” Woosley says. “You don’t them anymore,” Mooney says. “Also, want a fund administrator that doesn’t things have become so specialized that you want to make sure you are turning to the right companies for help. Instead of doing these searches, management ADOBE can focus more on strategic activities private equity firm and started to see “When used correctly, service provid- while we handle this work. We have a Recruiting a void in the market as the industry ers can meaningfully improve the pre-vetted network and understand became increasingly competitive. “After efficiency and productivity of your busi- how to get strong results for PE firms.” Having the best team possible will 2008, the competition in private equity ness and increase value,” he says. “To- Private Equity firms such as Fron- undoubtedly lead to enterprise value. became fierce,” Mooney says. “Every deal day, there are so many service provid- tenac, Comvest Partners, GI Partners, Corey Roberts, CEO of Talent Equity wasn’t a slam dunk and as time went ers and private equity firms don’t have Bunker Hill Capital and Blue Mountain Group, says there is an untapped op- on, private equity firms were required to the time or resources to make sure they Capital have used BluWave’s services. portunity to increase portfolio company enterprise value by improving the quality of talent below the C-suite level. “While the correlation between quality of talent and enterprise value is an eco- fund administration,” Woosley says. nomic fact, many private equity firms Fund administration Woosley says fund administration don’t have enough visibility into the was a natural extension of Frazier & performance of talent that sits below No private equity firm sets out to build Woosley, national practice leader at Deeter’s certified public accountant the C-suite level,” says Roberts. a giant back office, but over time, as Frazier & Deeter. The accounting firm’s capabilities. The firm had a strong Unlike a recruiting firm or headhunter funds and firms grow, back-office fund subsidiary, FD Fund Administration, relationship with a multi-billion-dollar who will fill a position, Talent Equity administration processes can take on a offers fund administration services to private equity firm that had its own Group allows companies to outsource life of their own. “A lot of firms start off private equity firms and real estate back office handling investor services, their entire talent acquisition process, small, and they have a small back of- firms. accounting, audits and valuations. In enabling a portfolio company to focus on fice, but the next thing you know, they “There are so many compliance 2013, FD Fund Administration hired a key business priorities as well as retaining have a big operation. They never raised requirements now and pressure from few of those employees from the firm and measuring their core talent base. a fund with the intention of becoming the limited partners for reporting, it’s and worked with them side by side. “Most small to mid-cap companies experts in fund administration, that’s driving the whole industry to move The test was successful, and the new lack the resources and bandwidth to not what they want to do,” says Robert forward and think more serious about practice line was born. efficiently compete for high quality

18 Mergers & Acquisitions June 2018 TheMiddleMarket.com

018_MAJ060118 18 5/1/2018 5:09:42 PM are choosing the right provider. That’s Today, FD Fund Administration pro- understand all the issues that private required more frequently.” where we come in.” In the past, private vides back-office fund administration equity firms are dealing with. We are a Using a third-party fund administra- equity firms may have tried to forego for many well-known firms, including one-stop shop, instead of having five tor is becoming more acceptable to the expense of outside help, but today, Hamilton Lane and real estate firm vendors who don’t communicate with limited partners who are looking for the industry has matured, and PE firms each other.” a higher level of transparency. Hedge are more accepting of assistance. Since FD Fund Administration funds are required to have third-party BluWave can help connect private started operations in January administrators. While it’s not a require- equity firms and their portfolio com- 2013, the firm has tripled its pri- ment for private equity firms, each year panies with everything from finding vate equity assets under adminis- more PE firms shift to a third-party due diligence experts and executives to tration to more than $25 billion. model. value creation initiatives, with the idea “We knew there was a need Working with a third-party fund ad- ADOBE that being able to quickly pinpoint the for this. A lot of firms start off ministrator is a more logical choice, not right help will ultimately save compa- Lubert Adler. To give clients a seamless small, build strong reputations and only because of transparency demands nies time and money while producing interaction, FD and Frazier & Deeter’s grow. They create their own back office, from limited partners, but because of better outcomes. tax division work together. “We have but that’s not their sweet spot. Their the complexity of regulations and to- “The challenge is that as service sophisticated tax strategies in house sweet spot is finding deals, creating day’s ever-emerging investment strate- providers grow, the folks in the middle that really sets us apart from the value and putting investors’ capital to gies, Woosley says. “Private equity firms or lower middle market can’t afford competition,” Woosley says. “You don’t work,” says Woosley. “We understand realize they should focus on what they them anymore,” Mooney says. “Also, want a fund administrator that doesn’t administration is not their core, but do best and leave this to the experts.” things have become so specialized that you want to make sure you are turning to the right companies for help. Instead of doing these searches, management can focus more on strategic activities solution that will enable a portfolio while we handle this work. We have a Recruiting company to consistently exceed per- pre-vetted network and understand formance by having the right talent in how to get strong results for PE firms.” Having the best team possible will talent,” Roberts says. “This is espe- place and in queue. Private Equity firms such as Fron- undoubtedly lead to enterprise value. cially true for highly skilled talent that Talent Equity Group typically works tenac, Comvest Partners, GI Partners, Corey Roberts, CEO of Talent Equity is in short supply such as physicians with small to mid-cap companies with Bunker Hill Capital and Blue Mountain Group, says there is an untapped op- and other clinical professionals. The $50 million to $400 million in annual Capital have used BluWave’s services. portunity to increase portfolio com- effective unemployment rate for high- revenue. Each client is assigned an ac- pany enterprise value by improving the quality and specialty talent is zero, count director and a dedicated team quality of talent below the C-suite level. and therefore up-to-date systems and that manages the entire talent process. “While the correlation between quality processes need to be deployed in order The company also provides advisory of talent and enterprise value is an eco- to compete.” He says his firm has a services, which can assess the overall fund administration,” Woosley says. nomic fact, many private equity firms Woosley says fund administration don’t have enough visibility into the was a natural extension of Frazier & performance of talent that sits below Deeter’s certified public accountant the C-suite level,” says Roberts. capabilities. The firm had a strong Unlike a recruiting firm or headhunter relationship with a multi-billion-dollar who will fill a position, Talent Equity private equity firm that had its own Group allows companies to outsource back office handling investor services, their entire talent acquisition process, accounting, audits and valuations. In enabling a portfolio company to focus on 2013, FD Fund Administration hired a key business priorities as well as retaining few of those employees from the firm and measuring their core talent base. and worked with them side by side. “Most small to mid-cap companies The test was successful, and the new lack the resources and bandwidth to

practice line was born. efficiently compete for high quality ADOBE

TheMiddleMarket.com June 2018 Mergers & Acquisitions 19

019_MAJ060118 19 5/1/2018 5:09:43 PM Buyer’s Guide

talent requirements of a portfolio to double in size this year. Additionally, capital as a key to growth and success. company business, both pre-and post- TalentEquity Group covers most busi- “We provide a turn-key platform that acquisition. The company has more ness sectors, but has particular success brings best practices to hiring, retaining than 30 professionals and is expected with companies that value human and promoting high quality talent.”

services platform Trinity Consultants, Online services Ontario Teachers’ Pension healthcare platform PhyMed Healthcare Group, A slew of services don’t fit neatly that made private transactions via the and TPG’s healthcare services platform into well-defined categories, but they Axial deal network ranged from $2.9 Precision for Medicine. shouldn’t be dismissed because they million to $610 million, with Ebitda Sutton Place Strategies, known as can be very important for dealmakers. ranging from negative $19 million to SPS, is another company that helps Axial Networks Inc. is one company $223 million. Top sectors of deal flow transaction professionals improve deal that didn’t fit squarely in a category, activity include business services, flow. The New York-based information so it created its own category: online Software as a Service, healthcare services firm, which helps investors op- deal networks. Axial is one of timize their business development and the more successful online deal deal sourcing effectiveness, was found- networks that investment bank- ed on the understanding that better ers, strategic buyers and private fund performance can be achieved equity investors have adopted through better deal sourcing. Firms for business development, deal such as HighRoad Capital Partners, management and deal sourc- Huron Capital Partners, Little John & ing. Although the company has Co., Kolhberg Co., Monroe Capital and found early success, it’s always NexPhase Capital use SPS’ services. looking to fine-tune things. “Given the complexities and com-

ADOBE To best serve the middle petitiveness of sourcing quality deals at market’s investment bankers reasonable valuations in this mar- and their clients, the company ket, we offer an intelligent platform made a significant decision in 2017 to information technoogy, distribution and for investors looking to alleviate the make every deal on Axial 100 percent logistics, and manufacturing. stresses of origination while enhancing confidential and private. “There is no Axial has brought more than 1,300 their sourcing techniques to improve spammy or deal-blasting activity al- investment bankers into the fold includ- fund performance,” says SPS founder lowed,” says Peter Lehrman founder ing boutique investment banks like 41 Nadim Malik. “Through unique tools and CEO of the New York-based North Partners, Allegiance Capital, and reports, SPS provides clients with company. “This decision has led many Copper Run Capital, Capstone Head- real-time, actionable data and analysis investment bankers to take a hard sec- waters, Hilliard Lyons, Progress Partners to streamline business development,” ond look at our tools, and that’s result- and Seven Mile Advisors. The company recently released its ed in much higher-quality member deal Axial members include investment SPS Fusion software, which includes activity over the last 12 months. To be professionals at Alpine Investors, De- its customer relationship management a widely adopted dealmaking platform cathlon Capital Partners, SFW Capi- integration strategy, and has rolled for the middle market’s investment tal, Oaktree, Huron Capital Partners, out many new features to its Portal bankers and their clients, it required Tregaron Capital and Sterling Commer- software.“Getting real-time alerts to that we walk away from some of the cial Credit. Its strategic buyer members new deals closing and active profes- original decisions we’d made for how to include High Road Capital Partners’ sionals in your investment criteria can get the platform up and running.” marketing services platform BlueSpire, give you an edge in today’s hyper-com- In 2017, the revenues of businesses Levine Lichtman’s environmental petitive and mobile-first world.”

20 Mergers & Acquisitions June 2018

020_MAJ060118 20 5/1/2018 5:09:44 PM Great Lakes Capital Connection®

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021_MAJ0618 21 4/30/2018 11:22:42 AM Buyer’s Guide

VRC is seeing growth in purchase al- Valuation services locations for M&A in the middle market, and an increase in deals to take public With nine U.S. offices and a 40-year the limited partners to have third-party companies private. “PE fund manage- history, Valuation Research Corp., valuations,” says Miller, who expects the ment groups are also continuing to set known as VRC, calls itself one of the oldest and largest business valuation companies in the U.S. “We are a fully independent valuation firm, as we are not part of an accounting firm or investment bank, which means our clients enjoy specialized expertise and few conflicts,” says VRC managing director Jeff Miller. “We work with the fund itself or the portfolio companies, and offer experience across all major industries. And we can handle every valuation need – from fairness opinion to purchase allocation to stock-based ADOBE comp and impairment – throughout the life cycle of the investment.” pressure will continue to increase. “We up new or additional credit funds, and The need for independent valuation also do positive assurance, and review- we’ve been valuing many more of these services is increasing for the same rea- ing of firms’ internal valuations, and debt positions, as well as increased sons that fund administration services are seeing more private equity firms support of daily-NAV mutual funds for are on the rise. “There is increased reaching out for third-party valuation their investments in such private com- audit scrutiny, and more pressure from support.” panies as Uber,” Miller says.

users,” Wells says. “Our new platform Virtual data rooms is 50 percent faster across the board so no one is spending more time than Virtual data rooms, or VDRs, are now equity industry. Matthew Wells, senior necessary in the VDR. We want to help as much a part of the M&A industry director of strategy and product mar- users get to closing as fast as possible.” as auction processes. Gone are the keting with the company, says first and Intralinks is also offering clients days of traveling to an office to search foremost, Intralinks focuses on security. insights into future dealmaking. Given through papers in a physical data “We are hosting the most sensitive and that Intralinks is seeing a significant room. The virtual data room software confidential data for some of the larg- percentage of M&A transactions, the niche should continue to grow as busi- est companies in the world, so we have company has started publishing their nesses continue to become more com- a strong focus on security,” says Wells, Deal Flow Predictor, which makes pre- fortable using online services, and as adding the company is also very deeply dictions on future M&A volume based they transition away from physical data committed to helping add efficiency on early-stage activity on its platform. forms, according to research firm IBIS. and speed during the transaction “Deals on our platform are generally six At the end of 2017, the industry’s annual process. For this reason the company months out from public announcement, revenues were roughly $800 million. recently released the latest version of thus we’re able to make predictions More than 20 years ago, Intralinks its platform, with a new user interface about aggregate deal volume half a was one of the first companies to intro- focused on speed and ease of use. “We year into the future,” says Wells. duce virtual data rooms to the private want it to be as easy as possible for our Interlinks isn’t the only VDR company

22 Mergers & Acquisitions June 2018

022_MAJ060118 22 5/1/2018 5:09:45 PM DEALS TOO GOOD FOR A CONVENTION HALL.

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023_MAJ0618 23 4/30/2018 11:22:45 AM Buyer’s Guide

looking to entice clients with extra perks. Other data providers are also Back office technology innovating to keep clients coming back for their services. Technology provides new and “The concept of the virtual data room innovative techniques to help chief is not new, but we have been doing a financial officers do their job more lot to wrap services around Venue, our effectively and more accurately, yet VDR offering, to address the entire deal many CFOs are not taking advantage process,” says Craig Clay, president of of it. “It’s unfortunate, but private equity global capital markets at Donnelley firms usually find two or three key Financial Solutions (NYSE: DFIN). “We things to prioritize at portfolio com- have also invested in innovative fea- panies and back office support isn’t

tures, making it a lot easier to use.” ADOBE always on that list,” says Gavin Backos, Virtual data room companies are tell their story. Instead of just creating a tion to life with video, audio and other principal, technology and management also trying to stay on the cutting edge paper trail, users are able to communi- rich media,” says Clay. “These are no consulting at RSM US. “But most CFOs of technology to gain the upper hand cate more personally through video. longer stagnant PowerPoints. It makes have the same issues and there are with competitors. For example, Donnel- “Typically, banks are used to putting the process much more interactive. We tools to alleviate some of the burden.” ley Financial Solutions offers sellers op- out a classic pitch book, but with venue are communicating in an amazing new Many accounting firms known for their tions to create videos and graphics to deal marketing, we bring deal informa- way today.” due diligence on private equity deals have expanded their offerings to include sizing up back-office technology offerings that private equity firms and portfolio companies could benefit from. Not more, reputational as well as statistical all private equity firms take advantage Non-traditional due diligence and legal data is much more accessible of the new offerings, but their interest is to lenders and acquirers. Having the increasing. “We do have more firms com- In today’s world where people’s actions deal support services based in New ability to dig deeper into the leaders ing to us to help them because there’s can easily play out in public, online York, comb through thousands of press of industries and entities is allowing only so many things they can focus on or elsewhere, dealmakers are look- outlets and alert clients to any red flags for much more informed decisions,” and they are starting to recognize this is ing for a little more than traditional or negative information. says Moore. Anti-money-laundering due diligence. More and more buyers “As global M&A activity is forecasted and know-your-customer regulations perform reputational due diligence to rise in 2018, we can also expect have become important requirements and anti-money-laundering/know- deals to face increased regulatory of banks to verify the identity and your-customer due diligence. As part of scrutiny. It is critical to have the right business history of individuals with help early on to navigate whom firms are considering doing busi- Networking groups deal complexities,” says Bill ness. This type of search will uncover Moore, a senior manager if someone has political exposure or Networking with the right people can at CT. Since formalizing affiliations and if that person is on a go a long way. Investment bankers are its offering, For example, U.S. government or international watch always suggesting to clients that they a CT client was buying a list for money laundering or terrorist- meet people in the industry and keep food manufacturer, and the related activities. It can also uncover taking the pulses of the markets they reputational due diligence things like past insider trading viola- are interested in investing in. As the uncovered recalls, due to tions or other sanctions. “Different kinds M&A industry has grown over the years, improperly listed allergens of businesses have different risks and organizations supporting the industry ADOBE on product labels, a serious due diligence requirements associated have also grown substantially. reputational due diligence, many firms issue operationally and financially. The with them. It is all too easy to overlook These organizations not only provide are opting to conduct negative news searches can also uncover information critical information that could impact a networking opportunities, but a sense searches. Companies, such as CT Corp., about company executives. “As technol- deal timeline, or lead to fines, penalties of community, and in many cases, a a provider of business compliance and ogy and the Internet evolves more and and damaged reputation.” national voice for the M&A and private

24 Mergers & Acquisitions June 2018 TheMiddleMarket.com

024_MAJ060118 24 5/1/2018 5:09:47 PM pounds in three days if you take certain Back office technology steps. It really opens the CFOs’ eyes up, because it’s a game changer.” Technology provides new and The process of learning about auto- innovative techniques to help chief mation options and then implementing financial officers do their job more them can take anywhere from three to effectively and more accurately, yet six months, but can be worth it. Auto- many CFOs are not taking advantage mation technology can save on staffing of it. “It’s unfortunate, but private equity and other costs, and provide many ad- firms usually find two or three key ditional benefits. Back-office technol- things to prioritize at portfolio com- ogy can help a company mine its data panies and back office support isn’t better and get all financial statements

ADOBE always on that list,” says Gavin Backos, in a single repository. tion to life with video, audio and other principal, technology and management Backos went through this process ADOBE rich media,” says Clay. “These are no consulting at RSM US. “But most CFOs important,” says Backos. for a portfolio company of a reputable longer stagnant PowerPoints. It makes have the same issues and there are RSM has been helping private middle-market private equity firm and the process much more interactive. We tools to alleviate some of the burden.” equity firms with this for several years. it made a big difference. “You see im- are communicating in an amazing new Many accounting firms known for their The process requires RSM to assess mediate results. They had a team of way today.” due diligence on private equity deals the current situation, make recom- people working 12 hours days and they have expanded their offerings to include mendations and then implement new were able to cut that down to eight sizing up back-office technology offer- technology. “What if you can give your hours with technology enhancements,” ings that private equity firms and port- CFO the tools to close their books in a says Backos. “The client said, ‘The most folio companies could benefit from. Not timely manner and feel confident that important thing is making sure I can more, reputational as well as statistical all private equity firms take advantage they have accurate information? With close my books and provide accurate and legal data is much more accessible of the new offerings, but their interest is the right technology and process you financial reporting.’ The other thing he to lenders and acquirers. Having the increasing. “We do have more firms com- can, and this is so important, as key wanted was real-time visibility into the ability to dig deeper into the leaders ing to us to help them because there’s decisions are often made based on this results of that month and to be able of industries and entities is allowing only so many things they can focus on financial information,” says Backos. to compare them to previous months. for much more informed decisions,” and they are starting to recognize this is “It’s like advertising you can lose 10 That’s all doable today.” says Moore. Anti-money-laundering and know-your-customer regulations have become important requirements of banks to verify the identity and business history of individuals with Association for Corporate Growth has whom firms are considering doing busi- Networking groups become a go-to networking organiza- ness. This type of search will uncover tion for middle-market M&A profes- if someone has political exposure or Networking with the right people can equity industries. sionals. Although the association was affiliations and if that person is on a go a long way. Investment bankers are That is the case with the American founded in the 1950s, it wasn’t until the U.S. government or international watch always suggesting to clients that they Investment Council, or AIC. Founded late 1990s that the association started list for money laundering or terrorist- meet people in the industry and keep in 2007 as the Private Equity Council, focusing its efforts on the private equity related activities. It can also uncover taking the pulses of the markets they the Washington, D.C.-based organiza- community. Today, the association things like past insider trading viola- are interested in investing in. As the tion lobbies on behalf of the private offers guidance on compliance issues, tions or other sanctions. “Different kinds M&A industry has grown over the years, equity industry. AIC will host numerous provides a job source network and of businesses have different risks and organizations supporting the industry events in 2018 and convene various works with AIC to lobby on behalf of due diligence requirements associated have also grown substantially. committees and working groups to the middle-market M&A industry. with them. It is all too easy to overlook These organizations not only provide share private equity best practices and “Associations provide great net- critical information that could impact a networking opportunities, but a sense insights. But AIC is just one of many working opportunities; it’s great to deal timeline, or lead to fines, penalties of community, and in many cases, a organizations M&A and private equity hear what your peers are seeing in the and damaged reputation.” national voice for the M&A and private professionals belong to today. The market,” says Huron Capital Partners

TheMiddleMarket.com June 2018 Mergers & Acquisitions 25

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partner Gretchen Perkins. “They also peers about what’s work hard to promote the M&A and happening in the private equity because it has become market through increasingly important we have a voice either events or in Washington, D.C.” social media is a The Alliance of Merger & Acquisition huge time-saver. Advisors focuses on dealmaking in the These organiza- lower middle market, offering mem- tions also provide bers networking opportunities as well a voice for the ACG educational classes. The alliance also work together. ‘middle child’ of the M&A industry, a lobbies on behalf of private placement “Many of the associations and group that represents over 90 percent brokers. The Small Business Investment organizations in middle-market M&A of all M&A transactions. Historically this Alliance focuses on the lower middle have become invaluable tools because group has been absent from the major market and also provides networking they are so efficient,” says River- finance publications as well as from opportunities and lobbies on behalf of side Co. chief operating officer Pam Washington. It is great and important the industry. These groups commonly Hendrickson. “The ability to talk with to see us finally having a voice.”

Data. “Today, we find business owners Data providers will say they had a friend that sold for a high multiple and then they expect the The number of data providers has Data has provided benchmark historic same. The reality is this is a one-time grown substantially over the years, data for firms to value their portfolio event for most of these guys and they Venture Economics, now known as companies based on fair value ac- need perspective on what drives valu- Thomson Reuters Corp. (NYSE: TRI), counting standards. However, many ations. Buyers use the data to show the used to be the only formidable game dealmakers are also increasingly using sellers examples of what deals sold for in town, but today the industry has a the data of GF Data and other provid- and why.” wide variety of data providers. They are ers to guide the valuation expectations Investment bankers and private targeting narrow, tightly defined cat- of sellers. equity firms are particularly interested egories of customers according to size, in this issue because usually they have geography and other criteria. Some of to set sellers’ expectations. The data the most popular data providers are allows them to show the seller similar Dealogic, Pitchbook, Preqin and Thom- companies and explain why the com- son Reuters, all of which are constantly pany was valued as it was. “Instead of trying to gain market share. calling the baby ugly, you are showing Despite the growth in data providers, the sellers real examples of deals that the managers of GF Data Resources are similar to theirs that have closed. It LLC still felt there wasn’t enough data really helps define expectations,” says ADOBE available on the lower middle market. Frazier. In 2006, the company started collect- “There was so little data available In addition to helping to set deal ing data on deal values from private for deals in the $10 million to $250 prices and showing market trends, equity groups and selling it to other PE million enterprise value range, which the data can help the involved parties groups. Specializing in private equity- is why we launched the firm,” says understand the entire capital structure, sponsored transactions with enterprise Graeme Frazier, a partner in Con- including the debt and sub-debt in values of $10 million to $250 million, GF shohocken, Pennsylvania-based GF the deal. M&A

Danielle Fugazy is a contributing editor of Mergers & Acquisitions.

26 Mergers & Acquisitions June 2018

026_MAJ060118 26 5/1/2018 5:09:50 PM KEYNOTE SPEAKER SIR RICHARD BRANSON Founder, Virgin Group

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027_MAJ0618 27 5/1/2018 11:58:03 AM Private Equity

Q & A Our ability to realize this opportunity comes not only from the capital that we provide but also from the talent and and closely-held businesses strategies that we bring to the table navigate this wealth transfer with the exceptional team at Brightstar. they will be faced with challenges arising from an ever- Tell us about the background of changing operating environ- the team members. ment, pressures to maintain We have assembled a team of 20 in- sustainable growth and their vestment professionals, many of whom competitive positions, not to I’ve worked with for over a decade. mention the inherent issues Collectively, we have more than $25 associated to the ownership billion of transaction experience across group. multiple sectors, with both family/privately controlled and publicly traded There is a significant companies as investors, operators and opportunity for a PE in many cases, both. Our partners and firm, such as Brightstar, managing directors have extensive to serve as a partner private equity and C-level experience to selected companies at major companies including Dell, that fall within this latter range and that have Motorola, Waste Management, Carlson exceptional potential for Companies and URS. The combination growth and significant of the investing and operational back- value creation. grounds is integral to our proprietary As managing partner of Brightstar Capital Partners, Andrew Weinberg chairs the investment committee and serves on the boards of Global Resale and Texas Water Supply Co. investment sourcing and active role There are roughly in the value creation of the portfolio 200,000 companies in the companies post-investment. U.S. with revenues from $10 We were delighted with the success New kid on the block million to $1 billion, most of our inaugural raise, which we attribute of which are closely held both to our strategy and to the talent “Greatest generational transfer of wealth ever seen” benefits or family controlled. Within that we have gathered. We have secured Brightstar’s $710M debut fund. the middle-market universe, commitments from a diverse set of there are 32,000 businesses institutional investors, including university By Mary Kathleen Flynn with revenues between $50 endowments, high net worth investors, million and $1 billion, and pension funds, private foundations, fam- these companies are vital to ily offices and insurance companies. the U.S. economy, represent- Middle market private equity firm Brightstar Why is now a good time to launch a ing 16 times the number of What is your investment thesis? Capital Partners recently closed its inau- new PE firm? public companies with the We focus on control-oriented North gural fund at $710 million. New York-based Brightstar Capital Partners was founded in same revenue profile. American middle-market investment Brightstar, which invests up to $250 million 2015, and we recently closed on more than We believe that there is opportunities, with an emphasis on in businesses, has already invested in two $710 million for our inaugural private equity a significant opportunity for closely-held or family-owned businesses. portfolio companies: logistics technology fund program. The timing of our close takes a PE firm, such as Bright- The years of investing and operating ex- provider Global Resale and water supplier place against the backdrop of what will most star, to serve as a partner perience brought together by our firm’s Texas Water Supply Co. likely be the greatest generational transfer of to selected companies that professionals provide us an understand- We asked managing partner Andrew wealth ever seen to date. Estimates for this fall within this latter range ing of the complexities in the types of Weinberg to tell us more about the firm’s wealth transfer in the U.S. alone range from and that have exceptional investment thesis and the opportunities he $10 trillion over the next decade to $25-30 potential for growth and Mary Kathleen Flynn is the editor-in-chief of Mergers & Acquisitions. MK oversees the brand’s content on all media platforms, including website, sees for M&A this year. trillion in the next 25-30 years. As family significant value creation. e-newsletters, video, slideshows, podcasts and print. Follow her on Twitter at @MKFlynn

28 Mergers & Acquisitions June 2018 TheMiddleMarket.com

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Q & A Our ability to realize this opportunity investments we evaluate. Our experi- partners and limited partners alike. As comes not only from the capital that ence allows us to help existing manage- capital continues to be available in we provide but also from the talent and ment teams to take their companies abundance, valuations will continue to and closely-held businesses strategies that we bring to the table to the next level of growth, resulting in be one of the most significant chal- navigate this wealth transfer with the exceptional team at Brightstar. significant value creation. By partner- lenges. Without clearly differentiated they will be faced with chal- ing with the owners and/or manage- strategies for value creation, GPs will lenges arising from an ever- Tell us about the background of ment teams of our portfolio companies, likely be challenged to secure the right changing operating environ- the team members. Brightstar becomes the catalyst for opportunities. Auctions will continue to ment, pressures to maintain We have assembled a team of 20 in- improvements in operations, sourcing, drive valuations to ever higher levels, sustainable growth and their vestment professionals, many of whom marketing, and capital planning and al- impacting the returns that GPs are able competitive positions, not to I’ve worked with for over a decade. location. In addition, we actively engage to deliver to their LPs. Brightstar is well mention the inherent issues Collectively, we have more than $25 with management in developing and positioned to address this challenge, associated to the ownership billion of transaction experience across executing growth-oriented strategies in as we maintain a well developed and group. multiple sectors, with both family/pri- such areas as geographic, channel or tested strategy, which is complemented vately controlled and publicly traded product expansion; partnerships and by our propriety approach to sourcing There is a significant companies as investors, operators and joint ventures; and M&A. opportunities from select family and opportunity for a PE in many cases, both. Our partners and closely-held businesses. firm, such as Brightstar, managing directors have extensive Which sectors are attractive? to serve as a partner private equity and C-level experience While our first investments were made What is your outlook for M&A to selected companies at major companies including Dell, in logistics and water infrastructure in 2018? that fall within this latter range and that have Motorola, Waste Management, Carlson businesses, we are actively looking at M&A will likely continue apace into exceptional potential for Companies and URS. The combination opportunities across a broader range of 2018, assuming no major macro dis- growth and significant of the investing and operational back- sectors. More important than sector is ruption, and all indications are that value creation. grounds is integral to our proprietary the potential for our portfolio com- we may well see new record levels of investment sourcing and active role panies to benefit from the collective activity as PE firms deploy their well- There are roughly in the value creation of the portfolio investing and operating experience subscribed funds. 200,000 companies in the companies post-investment. of our firm to scale and build value However, there is a chance that we U.S. with revenues from $10 We were delighted with the success through identified strategic initia- may start to see early indicators of lon- million to $1 billion, most of our inaugural raise, which we attribute tives. Brightstar typically partners with ger term M&A activity beyond 2018/19 of which are closely held both to our strategy and to the talent closely-held businesses that may face cooling, as higher volatility reenters the or family controlled. Within that we have gathered. We have secured generational ownership transitions market and investors reconsider their the middle-market universe, commitments from a diverse set of or that may require capital to “rise to asset allocation given the potential for there are 32,000 businesses institutional investors, including university the next level” for organic or inorganic higher yields from mainstream invest- with revenues between $50 endowments, high net worth investors, growth. Thanks to our network, we have ments. Should this develop, it will be million and $1 billion, and pension funds, private foundations, fam- seen over 100 proprietary deals since the PE firms with the right strategy, tal- these companies are vital to ily offices and insurance companies. our inception and have a robust pipe- ent, track record and execution that will the U.S. economy, represent- line that we’re currently working on. be sought out by both LPs and busi- ing 16 times the number of What is your investment thesis? We plan to invest between $50 nesses alike for their ability to deliver public companies with the We focus on control-oriented North million and $250 million of equity into more than just capital alone. M&A same revenue profile. American middle-market investment each portfolio company between initial We believe that there is opportunities, with an emphasis on investment and opportunities for follow Advisors on Brightstar’s fund included Eaton a significant opportunity for closely-held or family-owned businesses. on investment thereafter. Partners as placement agent, while Simpson a PE firm, such as Bright- The years of investing and operating ex- Thacher & Bartlett LLP provided legal star, to serve as a partner perience brought together by our firm’s What are the biggest challenges counsel. Kirkland & Ellis LLP served as legal to selected companies that professionals provide us an understand- PE firms face today? advisor to Brightstar on the investment in fall within this latter range ing of the complexities in the types of There are many challenges for general Texas Water Supply Co. and that have exceptional potential for growth and Mary Kathleen Flynn is the editor-in-chief of Mergers & Acquisitions. MK oversees the brand’s content on all media platforms, including website, significant value creation. e-newsletters, video, slideshows, podcasts and print. Follow her on Twitter at @MKFlynn

TheMiddleMarket.com June 2018 Mergers & Acquisitions 29

029_MAJ060118 29 5/1/2018 5:10:17 PM Business Services

GUEST ARTICLE ness. This trend provides an obvious foot in the door for “specialized” service providers benefiting from economies Key Takeaways of scale. 1. Develop an expertise for The other factor, not to be over- sectors and subsectors looked, is that the competitive with tailwinds for growth. landscape has become so dynamic 2. Identify firms that provide – thanks to increasing regulation, value-added services to ongoing globalization, and emerging large and growing end digitalization trends – that many busi- markets. nesses simply need to solicit outside 3. Recognize where you domain expertise. This has created an are in the business cycle, added tailwind for the business services and run your downside sector at large. scenarios. Predictably, the demand for special- 4. Pick opportunities with ization across the business enterprise potential for operational is driving private equity interest. PE in- improvements and a mar- vestments in U.S. business-to-business gin of safety. companies reached nearly $140 billion Demand for specialization 5. Identify potential strategic in 2017, according to PitchBook Data, and financial buyers for which is more than a third higher than Business services enable executive teams to focus on core the exit. the deal volume of the next highest competencies, driving robust interest from private equity. sector. Private equity investors are By Vicente Miguel Ramos attracted to the business Secular trends services sector because The thesis, for many, is to target the they recognize, first hand, more fragmented areas within busi- the value proposition be- ness services and help these com- The business services sector is a category nance or third-party logistics, to knowledge ing offered – a draw that panies both diversify and scale their that often struggles with an identity crisis. skills, including marketing, HR, accounting or has only become more business through organic growth and Within Standard & Poor’s GIC classification legal services. The end markets addressed acute as disruptive change add-on acquisitions. Constitution system, it isn’t even listed as its own sec- are also as wide and varied as the economy, has forced companies to Capital, for instance, co-invested in tor, but rather included as a mere grouping itself, which is why the lines tend to blur be- rethink their entire business the buyout of HR outsourcing com- within the larger industrials space. Further tween business services and other sectors. model. Firms such as 3G, pany CoAdvantage, a regional player muddying the waters, the business services From a high level, though, the space has for instance, have helped to in the sector for professional employer sector can often seem like a “catch-all” been a beneficiary of the trend toward “hy- reintroduce concepts such organizations (PEOs). category within private equity for deals that per-specialization,” in which corporate func- as zero-based budgeting, in The company offers payroll process- don’t fit as easily into other, more obvious tions are increasingly isolated and distilled which portfolio companies ing, benefit administration, risk man- buckets. But while it can be hard to catego- down into highly focused tasks. As a recent are asked to re-examine agement and employee-development rize, business services very much belong as Deloitte survey identified, outsourcing is no every single cost and assess services, as well as a customized portal a distinct area of focus for sponsors, with longer about simply solving capacity issues what can be rationalized, for small- and mid-sized businesses. its own drivers and risks, as well as outsized or enabling global scalability; it’s also about outsourced, automated or Their value proposition is in helping rewards for those who know the space well. accessing intellectual capital that otherwise eliminated altogether. As smaller companies attract and retain By its strict definition, the business ser- wouldn’t be available. Executive teams, as a Bain & Company highlighted talent without making a dispropor- vices sector encompasses companies whose result, can focus on core competencies, while in a recent insight, organiza- tionately sized commitment to an HR core offering is built around supporting the tapping experts for ancillary functions that tions can cut as much as a function that doesn’t typically operations of other commercial enterprises. can perform these tasks far better and at a quarter of their overhead, The services can range from industrial ap- lower cost than trying to recreate the same while improving both their Vicente Miguel Ramos is a partner at Constitution Capital and is responsible for screening, evaluating, negotiating and monitoring private equity plications, such as security, facility mainte- capabilities in house. efficiency and competitive- investments. He is a member of the Investment Committee.

30 Mergers & Acquisitions June 2018 TheMiddleMarket.com

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GUEST ARTICLE ness. This trend provides an obvious foot in the door for “specialized” service providers benefiting from economies Key Takeaways of scale. 1. Develop an expertise for The other factor, not to be over- sectors and subsectors looked, is that the competitive with tailwinds for growth. landscape has become so dynamic 2. Identify firms that provide – thanks to increasing regulation, value-added services to ongoing globalization, and emerging large and growing end digitalization trends – that many busi- markets. nesses simply need to solicit outside 3. Recognize where you domain expertise. This has created an are in the business cycle, added tailwind for the business services and run your downside sector at large. scenarios. Predictably, the demand for special- 4. Pick opportunities with ization across the business enterprise potential for operational is driving private equity interest. PE in- improvements and a mar- vestments in U.S. business-to-business generate revenues. are often magnified in the small and gin of safety. companies reached nearly $140 billion The compelling secular trends, middle market. 5. Identify potential strategic in 2017, according to PitchBook Data, however, probably mask some of the The 2007 buyout of Avaya Inc. and financial buyers for which is more than a third higher than more prominent risks for those who provides a case study of what can the exit. the deal volume of the next highest are less familiar with the space. Of the go wrong. The company helps busi- sector. approximate 1,300 realized investments nesses manage their customer contact Private equity investors are that we’ve tracked in the sector over centers, while offering other managed attracted to the business Secular trends the past 27 years, more than one out services to support the integration and services sector because The thesis, for many, is to target the of every five has resulted in the loss of upkeep of its networking products. they recognize, first hand, more fragmented areas within busi- capital, or has only allowed sponsors to The economic downturn in 2008 hit the value proposition be- ness services and help these com- recoup their original investment. the company soon after this transac- ing offered – a draw that panies both diversify and scale their Historically, business services com- tion closed. For the next few years, the has only become more business through organic growth and panies have been more susceptible to company was affected by a number acute as disruptive change add-on acquisitions. Constitution the economic cycle than most other of factors, including high leverage, an has forced companies to Capital, for instance, co-invested in sectors. During periods when earnings underfunded pension plan, competition rethink their entire business the buyout of HR outsourcing com- performance wanes, the first area to be from larger rivals, and shifting technol- model. Firms such as 3G, pany CoAdvantage, a regional player scrutinized is typically third-party pro- ogy landscape. Avaya ultimately filed for instance, have helped to in the sector for professional employer fessional services. This is why sponsors for bankruptcy in January 2017. reintroduce concepts such organizations (PEOs). who have experience in the space tend But just as the business services as zero-based budgeting, in The company offers payroll process- to gravitate to asset-light companies sector has been a beneficiary of which portfolio companies ing, benefit administration, risk man- with fewer fixed costs and more flexibil- specialization, so too have sponsors are asked to re-examine agement and employee-development ity. They’re also that much more likely that have made a concerted effort to every single cost and assess services, as well as a customized portal to pursue a deeper level of upfront focus on the vertical. According to our what can be rationalized, for small- and mid-sized businesses. due diligence to understand potential proprietary database, realized busi- outsourced, automated or Their value proposition is in helping concentration risk, the strength of ness services deals have generated a eliminated altogether. As smaller companies attract and retain client relationships, and whether the median return of 2.4x invested equity Bain & Company highlighted talent without making a dispropor- services offered are vital or ancillary since 1990, while nearly a quarter of the in a recent insight, organiza- tionately sized commitment to an HR to the underlying value proposition of deals have generated return multiples tions can cut as much as a function that doesn’t typically the target company – all factors that of 4x or higher. M&A quarter of their overhead, while improving both their Vicente Miguel Ramos is a partner at Constitution Capital and is responsible for screening, evaluating, negotiating and monitoring private equity efficiency and competitive- investments. He is a member of the Investment Committee.

TheMiddleMarket.com June 2018 Mergers & Acquisitions 31

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Q & A platform that has served the broader lower middle market for almost 20 years. Whereas our flagship funds focus Acquisitions’ M&A Mid- on control investments, our Flex Fund Market Award for 2017 Seller seeks to make non-control investments of the Year for the trio of to provide customized and flexible solu- exits that included: the Olon tions to help business owners accom- Group, a manufacturer of plish a variety of growth and liquidity molding and drawers, sold objectives. to the Miller Group, an Ontario-based family office investor; LeadingResponse, We work closely with the business a provider of customer owner/management team to implement improvements and accelerate growth through add- Through our dedicated ons and revenue initiatives. deal sourcing program, we experienced increasing demand for Through our dedicated deal sourcing this type of solution, and program we experienced increasing we decided to leverage demand for this type of solution and our strong capabilities we decided to leverage our strong in the lower middle capabilities in the lower middle market market by expanding by expanding into this adjacent and into this adjacent and complementary strategy. complementary strategy. Our dedi- Mike Beauregard, Brian Demkowicz, Peter Mogk, John Higgins cated Flex Fund team, Doug Sutton and Charlie Sheridan, has a success- acquisition services, sold to ful 20-year history of making non- ICV Partners, a New York- control investments. The expansion Smaller stakes based private equity firm; demonstrates our focus on remaining and Systems Inc., a manu- a strategic solution provider to our Huron Capital’s Flex Fund courts owners who want growth but facturer of loading dock limited partners and working with them also want to retain control. leveling equipment, sold to to identify attractive entry points in the the Chamberlain Group, lower middle market. By Keith Button and Mary Kathleen Flynn corporate parent company to LiftMaster, Chamberlain, What types of companies is Huron Merlin and Grifco. will backing with this fund? We asked Huron manag- Through the Huron platform, our goal is Middle-market PE firms have shown in- In 2018, Huron Capital joined the fray, ing partner Brian Demkow- to leverage our buy-and-build strategy creasing interest in taking minority stakes in recently raising the $141 million Huron Flex icz about the new fund and in partnership with seasoned executives portfolio companies. The strategy is aimed Equity Fund, the firm’s first fund for making the thinking behind it. to improve and grow our businesses at benefiting business owners and entre- non-control investments. Michigan’s most through strategic initiatives, operational preneurs who need capital for acquisition active private equity firm, Since its found- How is the Huron Flex improvements and add-on acquisitions financing, liquidity events, organic growth ing in 1999, the Detroit firm has made more Fund different from the throughout the lower middle market. initiatives and recapitalizations but do not than 140 investments and raised six funds firm’s other funds? We typically focus on companies want to sell a controlling stake. One of the totaling over $1.8 billion, including the $550 The Huron Flex Fund is our having up to $200 million in revenue in firms that helped popularize the trend is million fund raised in 2017. Huron enjoyed sixth fund and represents the business services, specialty industri- the Riverside Co., which in 2017 closed the a stellar 2017, completing 21 transactions, the inaugural expansion als and consumer sectors that can ben- $418 million Riverside Strategic Capital Fund including 4 platforms and 14 add-ons and of Huron Capital’s well- (RSCF). 3 exits. The Detroit firm earned Mergers & established investment Keith Button is a contributing editor of Mergers & Acquisitions.

32 Mergers & Acquisitions June 2018 TheMiddleMarket.com

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Q & A platform that has served the broader data centers and B&B is a provider of lower middle market for almost 20 perimeter access and security solutions. years. Whereas our flagship funds focus Both companies were right in our strike Acquisitions’ M&A Mid- on control investments, our Flex Fund zone, and in each case we partnered Market Award for 2017 Seller seeks to make non-control investments with the management team and share- of the Year for the trio of to provide customized and flexible solu- holders to provide capital and opera- exits that included: the Olon tions to help business owners accom- tional resources to facilitate growth. Group, a manufacturer of plish a variety of growth and liquidity molding and drawers, sold objectives. How will Flex Fund portfolio to the Miller Group, an companies use the capital? Ontario-based family office As with our other funds, the Huron Flex investor; LeadingResponse, We work closely with the business Fund draws from Huron’s strengths as a provider of customer owner/management team to a value-added partner, using our broad implement improvements and operational, financial and strategic accelerate growth through add- resources to help businesses improve Through our dedicated ons and revenue initiatives. deal sourcing program, and accelerate growth. Our capital we experienced is typically used to facilitate business Brian Demkowicz increasing demand for Through our dedicated deal sourcing expansions, strategic add-ons, balance this type of solution, and program we experienced increasing sheet enhancements and shareholder we decided to leverage demand for this type of solution and efit from our operational approach to repurchases. Our Flex Fund focuses our strong capabilities we decided to leverage our strong creating value. The Flex Fund will focus on providing non-control solutions in the lower middle capabilities in the lower middle market on the same types of companies in the that allow some or all of the existing market by expanding by expanding into this adjacent and same sectors where we’ve historically shareholder group to retain its control- into this adjacent and complementary strategy. complementary strategy. Our dedi- been successful. ling interest. cated Flex Fund team, Doug Sutton and Charlie Sheridan, has a success- How does the “buy-and-build acquisition services, sold to ful 20-year history of making non- strategy” play out with the Flex Our capital is typically used to ICV Partners, a New York- control investments. The expansion Fund portfolio? facilitate business expansions, based private equity firm; demonstrates our focus on remaining We are taking the same buy-and-build strategic add-ons, balance sheet and Systems Inc., a manu- a strategic solution provider to our approach with the Flex Fund. We work enhancements and shareholder repurchases. facturer of loading dock limited partners and working with them closely with the business owner/man- leveling equipment, sold to to identify attractive entry points in the agement team to implement improve- the Chamberlain Group, lower middle market. ments and accelerate growth through corporate parent company add-ons and revenue initiatives. We Why are more PE firms expanding to LiftMaster, Chamberlain, What types of companies is Huron offer a great solution for those own- into minority stake investments? Merlin and Grifco. will backing with this fund? ers seeking a value-added partner There is growing demand for this type We asked Huron manag- Through the Huron platform, our goal is for growth but are not yet ready for a of capital solution, and PE firms are ing partner Brian Demkow- to leverage our buy-and-build strategy control transaction. looking to capitalize on this trend. icz about the new fund and in partnership with seasoned executives The PE industry is incredibly competi- the thinking behind it. to improve and grow our businesses Tell us about the investments tive and firms are looking for ways to through strategic initiatives, operational Huron is making from the fund. leverage their brands and capabilities How is the Huron Flex improvements and add-on acquisitions We have already closed two invest- to expand into adjacent strategies Fund different from the throughout the lower middle market. ments in the Flex Fund, with Stay Online to grow and diversify their firms. For firm’s other funds? We typically focus on companies based in North Carolina and B&B Road- Huron Capital, the expansion allowed The Huron Flex Fund is our having up to $200 million in revenue in way Security Solutions based in Texas. us to continue growing our firm while sixth fund and represents the business services, specialty industri- Stay Online is a manufacturer of high- remaining focused on the lower the inaugural expansion als and consumer sectors that can ben- end, specialty cables used primarily in middle market. M&A of Huron Capital’s well- established investment Keith Button is a contributing editor of Mergers & Acquisitions.

TheMiddleMarket.com June 2018 Mergers & Acquisitions 33

033_MAJ060118 33 5/1/2018 5:09:16 PM Marketing

GUEST ARTICLE

This is done through content. For a private equity firm, that could mean articles about how to close deals, alternative investment options, entrepreneurship, the importance of using CRM tools, and more.

Secure your domain According to MineWhat. com, 81% of consumers conduct online research prior to purchasing. When potential investors and companies seeking liquidity search for Branding tips for PE your business on Google, you don’t want them to be Running paid campaigns and having a social media presence led to websites and content can help firms get their names out there. you don’t control. You want them discovering content By Joe Burkhart and info that showcases you know how to invest in and grow businesses. This means you have to The digital age necessitates that everyone — informative content that’s relevant to the secure a domain name. As not just organizations — build and main- field. Those reading it should walk away noted in a guide published tain an online presence in order to achieve feeling they’ve learned something helpful. by GoDaddy, having a do- greater success. This is especially true for pri- No matter what you specialize in, you can main name offers you many vate equity. Without an online brand, you risk produce articles, videos, infographics, and benefits, including: losing out on business deals and networking other content that informs (and doesn’t Increased accessibility: opportunities. advertise). You’ll be within reach 24/7. Of course, making your brand work prop- According to a survey by BackBay Com- Brand protection: Don’t erly for you requires the right strategy. Here, munications, an incredible 70% of private give someone else the op- we’ll examine several key online branding equity firms believe that having a strong portunity to register your tips that both individuals and companies can brand is very important. It’s very encouraging domain name. apply. Use it as a guide to establish a brand that so many are recognizing the importance Promotion: You can use that delivers you greater success. of branding. the website to publish Potential investors and partners may So, how do private equity firms and team content, make offers to be impressed by announcements of new members build that strong brand? clients, etc. business endeavors, transactions, financial Bill Haynes, President and CEO of Back- When choosing a domain results, milestones, and other positive news. Bay Communications, says private equity name for yourself, try to You absolutely need that sort of good press firms must “embrace the need for differenti- make it your first and last in private equity. ated firm positioning and ongoing integrated name, like so: http://www. However, what’s going to deliver the most communications programs that position [firstnamelastname].com. If return on your investment in branding is them as experts.” choosing one for a business,

34 Mergers & Acquisitions June 2018

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035_MAJ0618 35 4/30/2018 11:22:46 AM d34541_MASubscriptionHouse_Ad_Final.indd 1 4/27/18 4:57 PM Marketing

it should be your exact company name: http://www.[companyname].com/. Just remember: Do what fits you on the website. As Gary Vaynerchuk, a serial entrepreneur and digital marketing guru, states, “you need to know your personal brand and stay true to it,” instead of doing things just because a famous person in the industry does it.

Run paid campaigns By producing content and maintaining your website, you’ll drive organic traffic over time. This will increase your chances of gaining business and finding networking and investment opportunities. The issue is that this can take time in private equity. To speed up the process, you could pay for promotion through content distribution networks, such as Taboola. Content distribution networks enable you to engage new audiences conversions. Start small if necessary. If active on some other social media and maximize the reach of your con- the campaign works, you can put even sites. For instance, since private equity tent and products or services. more money into and continue to grow firms engage in leveraged buyouts, For instance, if you maintain a your brand. recapitalizations, growth financing blog on your company’s website, a As of late 2017, LinkedIn estimated and other types of investments, you paid campaign gets you native ads in that it had more than 500 million users. want to go where many middle-market well-known media sites like ESPN, USA That’s a lot of people sharing content businesses are: Facebook, Twitter, Today, and Time. According to Out- in their field, networking with potential Instagram, etc. On such sites, you may brain, brand recall with native ads is partners, and looking for jobs. be able to find hidden treasures, like a twice as effective as brand traditional Both companies and individuals in lower middle-market company with a banner ads. private equity must be on LinkedIn. It’s disruptive business model and strong Just imagine how many people where the professional world interacts potential for explosive growth. come across those ads. With the right — and where you’re most likely to con- Investors and companies want to headline and great content, you could nect with the most promising investors trust the people they’re working with. position yourself as a thought leader in and investment opportunities. You can do that by publishing valuable the investment industry, making it more You can also maintain existing content, maintaining a website, running likely to gain access to investment dol- relationships with shareholders through paid campaigns, and connecting with lars and close deals. LinkedIn. I personally use it to network audiences on social media. Do note major online advertisers like and share articles about private equity, As private equity firms increas- Outbrain and Google Adwords allow investment, business development, and ingly have to compete for dollars and you to set budgets with flexible pricing. other related topics. The conversations deals, you must find a way stand out. Using real-time data, you can see how those pieces generate help me build a Branding is how you can differentiate effective the campaign is and calcu- brand. yourself in the industry and get a late ROI based on traffic, leads, and Beyond LinkedIn, you should be step ahead. M&A

Having spent almost 20 years working with lower middle-market companies, Joe Burkhart started his career in investment execution before coming onto Saratoga Investment Corporation, where he built the business development (BD) function from scratch.

36 Mergers & Acquisitions June 2018

036_MAJ060118 36 5/1/2018 5:09:21 PM Introducing The New

DealMaker Portal is your dashboard view into the people and information you need to compete in private equity and mid-market M&A.

DealMakerPortal.com

Search & Connect Build Your Brand Search more than 6,000 industry listings Enhance your firm’s listing in the in the DealMaker Directory for direct access to: DealMaker Directory to build your brand ■ Investment Firm Professionals and gain wider exposure. Enhanced listings include company logo, ■ Seller and Buyer Intermediaries rotation on the homepage, ■ Banks and Lenders preferred placement in the directory ■ Attorneys and Consultants and more!

Contact Dominique Gageant at 212-803-8882 or [email protected] for more information.

037_MAJ0618 37 4/30/2018 11:22:46 AM People Moves

vate equity and financing in New hires and promotions the real estate sector.

By Demitri Diakantonis Fenton Healy was hired by Gordon Brothers to lead the firm’s new Melbourne office. Healy previously held lead- Björn Åkerlund, Gunnar Brundin and John team in New York as a managing director. ership positions at Austra- Hamilton have joined Lincoln International as Carlyle’s credit opportunities group invests lian online retail and auction managing directors in Stockholm. They focus primarily in highly-structured and privately- company GraysOnline. on M&A in the business services, technology, negotiated capital through secured loans, consumer and industrial sectors, and were senior subordinated debt, mezzanine debt, mostly recently with advisory firm Nordhaven. convertible notes as well as common equity. Boswell was most recently with Apollo Global Eric Anderson has been named CEO at Management LLC (NYSE: APO). Riata Capital Group-backed Acuity Eyecare Group. Anderson most recently served as Chris Carmosino has joined Gordon Broth- executive vice president at Fossil Group Inc. ers as president, valuations. He was most (Nasdaq: FOSL). recently with Citizens Business Capital where he led the asset-based lending unit. Tony Armand has joined Norwest Equity

Partners as an operating partner to help Stephen DeFalco was hired by Lindsay Taylor Boswell the firm expand its consumer, sports and Goldberg as a partner. He will lead the firm’s outdoor investment opportunities. Armand efforts in enhancing operational and tech- has had a previous working relationship with nological resources to support growth across Norwest through portfolio management, portfolio companies. DeFalco is the former including serving as CEO of Shock Doctor CEO of Crane & Co., supplier of currency Sports. Armand most recently served as CEO paper and anti-counterfeiting technology to of United Sports brands. the U.S. government.

David Bard has joined the Halifax Group’s Michael Doppelt has rejoined middle-market Washington D.C. office as a managing private equity firm Irving Place Capital as director. In his role, he will be responsible for a partner and head of fundraising. Doppelt sourcing, evaluating, executing and working was most recently with Lightyear Capital with the firm’s investments. Bard was previ- and was previously with Irving Place from Michael Doppelt ously a principal at American Securities. 2005 to 2010. Jeffrey Huddleston has David Bartleme has joined Milwaukee-based Kaarli Eichhorn joined Jones Day’s antitrust joined Alvarez & Marsal as a private equity firm Borgman Capital as a and competition practice in Brussels. Eichhorn managing director in Hous- managing director, where he will focus on is a former global executive counsel at GE ton. Previously with Conway the oil and gas and chemicals sectors. He (NYSE: GE), and focuses on complex, multina- MacKenzie, Huddleston spe- previously worked in Shell Oil‘s corporate tional mergers, antitrust and compliance. cializes in advising distressed M&A group. companies, lenders and Michael Haas has joined Latham & Watkins creditors on both in-court Taylor Boswell was hired by the Carlyle as a partner in New York. Most recently with and out-of-court restructur- Group LP’s (Nasdaq: CG) credit opportunities Jones Day, Haas concentrates on M&A, pri- ings and turnarounds.

38 Mergers & Acquisitions June 2018

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Scott Joachim and David Johanson Marlin Equity-backed Serenova. Nelson employee-owned financial services firm have joined law firm Goodwin as is the former CFO of Periscope Holdings. Baird as a managing director on the partners. They both concentrate on global healthcare team. Based in New private equity and M&A in the technol- Jonathan Pearce and Eric Weiner York, Skolnik is covering healthcare ogy sector and were previously with have been promoted from principal to facilities and alternate site providers, Fenwick & West. partner at Austin, Texas-based private with a focus on multi-site physician equity firm Blue Sage Capital. They are and other provider groups, behavioral Scott Jones has joined Kirkland & Ellis’ both responsible for sourcing and ex- health and post-acute care. He joins Boston office as a partner. Previously ecuting investment opportunities, and Baird from BMO Capital Markets, with Proskauer Rose, Jones advises portfolio company monitoring. where he served as managing director, private equity and investment funds on responsible for the firm’s healthcare complex tax issues. Arash Attar-Rezvani, Holger Hofmeister, M&A practice. Akira Kumaki, Richard Oliver and Blair Jeremy Kogler was promoted from Thetford have been named partners at Matthew Smith was hired by Perella principal to partner at New York-based Skadden Arps Slate Meagher & Flom Weinberg as a partner in London. He Blue Wolf Capital LLP. The group focuses was most recently the head of U.K. cor- Partners. Kogler joined on M&A and private porate finance and advisory at Barclays. Blue Wolf in 2010 and equity. focuses on healthcare Thierry Somma has joined Simmons & investments. David Schwartz has Simmons as a partner in Luxembourg. joined Orrick as a part- Previously with Hogan Lovells, Somma Marc Liebman was ner in New York. Previ- focuses on M&A and private equity. named co-head of the ously with Hughes Hub- western region in Al- bard & Reed, Schwartz Craig Vogelsang got hired by Baker varez & Marsal’s North focuses on M&A in the Botts as a partner in Houston. Previ- American restructuring technology and life sci- ously with Winston & Strawn, Vogel- group. Liebman focuses ences sectors. sang focuses on oil and gas financing Brett Skolnik on the development and acquisitions. and implementation David Segre has joined of strategic, financial Cooley as a partner in Louis Susman got hired by Perella and operating plans for San Francisco. Most Weinberg Partners as a senior advisor. over-leveraged and un- recently with Wilson Susman previously served as the U.S. dercapitalized compa- Sonsini Goodrich & Ambassador to the Court of St. James, nies in both out-of-court Rosati, Segre focuses on a member of the Secretary of State’s and in chapter 11 cases. M&A. Foreign Affairs policy board, and as vice chairman of Citigroup (NYSE: C) Martin Mumford has Alex Wilmot-Sitwell has investment banking. joined Angeles Equity been hired by Perella Partners as an operat- Weinberg as a part- Albert Yang has joined real estate ing partner, focusing Albert Yang ner in London. Sitwell investment firm Harrison Street Real on industrial services. was most recently the Estate Capital in London as a head of He was most recently a principal in president of EMEA at Bank of America European investor relations. Previously the consumer, industrials and services Merrill Lynch. with Barings Real Estate, Yang will be group at Oliver Wyman. responsible for capital raising and busi- Brett Skolnik (pictured) has joined the ness development in the Europe, Middle David Nelson has been hired as CFO at global investment banking group of East, and Africa (EMEA) region.

40 Mergers & Acquisitions June 2018

040_MAJ060118 40 5/1/2018 5:09:05 PM 0C3_MAJ0618 3 4/30/2018 11:22:40 AM FROM TO RUSTED REVIVED

Abandoned Bethlehem Steel complex New Tradepoint Atlantic project

Innovative Real Estate Redevelopment Solutions for the 21st Century Hilco Global’s vision of transforming obsolete industrial and manufacturing facilities was realized by transforming a closed steel mill into a powerful economic engine in the Baltimore/Washington DC area. Today, Hilco-owned Tradepoint Atlantic is a growing trimodal logistics facility attracting new tenants such as Amazon®, FedEx®, Fiat Chrysler®, Harley-Davidson® and others. Hilco Redevelopment Partners provides:

• Capital to guarantee completion of all • Redevelopment of the sites in a socially project phases. responsible manner. • Monetization of assets, including receivables, • All remediation to regulatory standards. inventory and PP&E.

Gary Epstein at 847.418.2712 or [email protected]

VALUATION I MONETIZATION I ADVISORY

0C4_MAJ0618 4 5/1/2018 11:01:42 AM

Redevelopment Ad – Bulleted Version

HILC-148951 05 1p kjf102717, plh121417, DM122717, sv020518, BBpff2.15.18, sv021518, 147951_HILC_Redevelopment_Ad_v4.ai BBpff2.22.18 4/C Offset N/A CMYK 147357_HILC_Presentation_v5.ai 100% BLEED: 8.125" x 10.75" TRIM: 7.875" x 10.5" LIVE: 7" x 10"