PE Firm of the Year Winner LLR Raises New Fund

CV1_MAJ070818.indd 1 7/2/18 4:37 PM CV1_MAJ070818.indd 2 7/2/18 4:37 PM WHAT’S THE DEAL WITH DUANE MORRIS? THAT NAME KEEPS POPPING UP MORE AND MORE AS DEAL COUNSEL

Representative M&A and Financing Deals

$350 MILLION $1 BILLION C$1 BILLION $1.37 BILLION $631 MILLION Sale of fiber optic Senior syndicated Advised on the sale Sale to Scientific Disposition of licensing operations secured credit facility of NCell (the market- Games Corporation, polypropylene business to Crown Castle for acquisition of leading Nepalese a global leader in to Braskem for International Corp. for leading U.S. auto telecommunications technology-based integrated power/energy/ dealerships on behalf of operator) to Axiata for gaming, for resource leader

Acted as administrative agent

$60 MILLION $175 MILLION $500 MILLION $233 MILLION Acquisition of remaining Secured unitranche Sale to generics leader Syndicated loan Representation in 50% of this alternative credit facility to high- Par Pharmaceuticals, facility led by sale of company energy/power services profile media and Inc. for injectable and JPMorgan Chase for to Curtiss-Wright and solutions company marketing company for ophthalmic specialist NASDAQ-listed Corporation for for global marine transportation logistics and equipment provider

$150 MILLION PT KOMET INFRA NUSANTARA $300 MILLION $115 MILLION $27 MILLION Acquisition of this Share repurchase Indonesian cell tower Sale to Madison Dearborn Acquisition of Natural Acquisition of 350-unit from Warburg Pincus company for largest Partners for Toronto- Flavors, Inc., a producer Knights Inn brand from Wyndham Hotel Group Private Equity VIII for independent owner/ based enterprise domain of natural and organic LLC for NYSE-listed NYSE-listed higher operator of wireless name system solutions flavor products, for education leader infrastructure in Indonesia technology leader

$44 MILLION $24 MILLION C$563 MILLION $147 MILLION $45 MILLION Representation in Acquisition of leading Sale of majority Agreement to sell Debt facility for negotiation and signing prosthetic device interest to PE leader Construction Claims world’s first skill- of a merger agreement manufacturer BionX Apax for Canada-based Group to UK- based video game with Americas United Medical Technologies weight loss/wellness based Bridgepoint gambling machine Bank for for German prosthetics solutions innovator Development Capital creator for NYSE-listed innovator

For more information on how $115 MILLION seriously we take our deals, get Acquisition of engineered Sale of Donegal Financial in touch with BRIAN KERWIN, Merger with Australia- carbon-fiber composite Services Corporation chair of our global Corporate based global leader in 363 sale of all assets manufacturer Citadel and Union Community Practice, at 312.499.6737 or intimate apparel and to these industry for composite pipeline Bank to Northwest [email protected]. swimwear for fashion/ leaders for injectable and pipework repair Bancshares for lifestyle brand innovator drug delivery systems specialist solutions leader

A n A m L aw 1 0 0 l aw fi r m | M o re t h a n 8 0 0 l aw ye rs | E sta b l i s h e d 1 9 0 4 |Duane Morris LLP – A Delaware limited liability partnership | w w w.d u a n e m o r r i s.co m

0C2_MAJ070818 2 7/5/2018 9:29:09 AM Contents July / August 2018 | VOL. 53 | NO. 7

Cover Story 16 Rising Stars of Private Equity Ethan Liebermann and Jennifer Roach are among 11 private equity investors who are expected to play significant leadership roles in the future of their firms and the industry.

Private Equity Perspective 12 Changing the dynamic Goldman Sachs launches a fund to back women-led companies, and a new networking group focus on female dealmakers.

The Buyside 14 Staying the course Tyler Technologies is acquisitive in the government software sector and plans to stay that way.

Ethan Liebermann led TA Associates’ investment in MedRisk and co-sponsored CCRM, Datix and SoftWriters. Jennifer Roach helped Yellow Wood Partners build PDC Brands and sell it to CVC.

Watercooler Guest Articles M&A Scene 6 30 36 Phil Mickelson, Jessica Alba, Carlyle Lower mid-market healthcare M&A ACG NY Industial Conference Golf legend “Lefty” Phil Mickelson Deal drivers include PE firms raising The conference was held at the New invests in robotic frozen yogurt funds and strategics divesting assets. York Athletic Club. chain. Jessica Alba’s the Honest Co. 32 sells stake to L Catterton. Carlyle co- 10 tips on integrating healthcare deals CEOs give first major joint interview. Finance should play a leadership role People Moves Q&As in post-merger integration. 38 22 Lovell Minnick, Blue Point, Arbor Private Equity Lovell Minnick hires Joan Binstock as TA Associates’ Ajit Nedungadi talks an advisor. Megan Kneipp, formerly about the firm’s culture. Snapshot of CenterOak, joins Blue Point. Arbor Investments hires former Chicago 24 26 Cubs executive. Venture Capital High valuations drive first quarter M&A Robotics developers are ripe for The overall average valuation mark investment, says Innovation Works for the quarter was 6.9x. CEO Rich Lunak.

TheMiddleMarket.com July / August 2018 Mergers & Acquisitions 1

001_MAJ0818 1 7/3/2018 2:38:04 PM Inside Word July / August 2018 | VOL. 53 | NO. 7

TheMiddleMarket.com 1 STATE STREET PLAZA, 27TH FLOOR Meet the future NEW YORK, NY 100041505 212 8038200 EDITORINCHIEF Mary Kathleen Flynn MANAGING EDITOR leaders of private equity Demitri Diakantonis CONTRIBUTING EDITORS Keith Button, Danielle Fugazy

GROUP EDITORIAL DIRECTOR, These 11 dealmakers are already making an impact BANKING AND CAPITAL MARKETS on their firms, and their best days are yet to come. Richard Melville VP, RESEARCH Dana Jackson

VP, CONTENT OPERATIONS AND Ethan Liebermann led TA Associates’ investment CREATIVE SERVICES Paul Vogel in MedRisk and co-sponsored CCRM, Datix and Soft- EXECUTIVE DIRECTOR, CONTENT OPERATIONS AND CREATIVE SERVICES Writers. Jennifer Roach helped Yellow Wood Partners Michael Chu build PDC Brands and sell it to CVC Capital Part ners. DIRECTOR OF CONTENT OPERATIONS Theresa Hambel They are among the private equity investors expect- SR. ART DIRECTOR ed to play significant leadership roles in the future. Nick Perkins

To identify the investors on our list, Mergers & Ac- VICE PRESIDENT, CAPITAL MARKETS Harry Nikpour (212) 803-8638 quisitions asked for nomi nations from our audience SENIOR SALES MANAGER through articles on our website, www.TheMiddle- Richard Grant (212) 803-8634 ASSOCIATE MARKETING MANAGER Market.com, and our e-newsletter, the Daily Briefing. Leatha Jones We vetted all the candi dates by looking at their dealmaking track records

and speaking with people inside and outside their firms. As we spoke with dealmakers about the Rising Stars, common themes emerged. All have demonstrated the ability to handle many aspects of the CHIEF EXECUTIVE OFFICER ...... Gemma Postlethwaite CHIEF FINANCIAL OFFICER ...... Sean Kron PE business, including: fostering trusted relationships and developing deep EVP & CHIEF CONTENT OFFICER ...... David Longobardi CHIEF MARKETING OFFICER ...... Matthew Yorke networks throughout the sectors they invest in; expanding their firm’s invest- CHIEF SUBSCRIPTION OFFICER ...... Allison Adams ments in key sectors; identifying add-on acquisitions and other opportuni- SVP, CONFERENCES & EVENTS ...... John DelMauro SVP, HUMAN RESOURCES ...... Ying Wong ties for portfolio companies; representing their firms well in the marketplace; and taking on leadership roles within their firms, including developing new REPRINTS AND LICENSING CONTENT systems and tools and training other dealmakers. For more information about reprints and licensing content from Mergers & Acquisitions, please visit sourcemediareprints. Meet Mergers & Acquisitions’ 11 Rising Stars of Private Equity: com or contact pars international at (212) 221-9595.

Daniel Hopkin, Partner, Kainos Capital CUSTOMER SERVICE John Kos, Principal, GTCR [email protected] or (212) 803-8500

Erik Latterell, Director, Stone Arch Capital Mergers & Acquisitions Vol. 53/No. 7 (ISSN 0026-0010) is published monthly with combined issues in July/August Ethan Liebermann, Principal, TA Associates and November/December by SourceMedia, One State Jaime McKenzie, Director, Monomoy Capital Street Plaza, 27th Floor, New York, NY 10004-1505. Yearly subscription is $1,995; $2035 for one year in all other Jennifer Roach, Vice President, Yellow Wood Partners countries. Periodical postage paid at New York, NY and U.S. additional mailing offices. POSTMASTER: Send address Joseph Rondinelli, Principal, Frontenac changes to Mergers & Acquisitions / SourceMedia, One State Street Plaza, New York, NY 10004. For subscriptions, David Shainberg, Vice President, Balmoral renewals, address changes and delivery service issues contact our Customer Service department at (212) 803- Tom Smithburg, Vice President, Shore Capital Partners 8500 or email: [email protected]. This publication is designed to provide accurate and authoritative information Nicholas Stone, Managing Director, Cyprium Partners regarding the subject matter covered. It is sold with Afaf Ibraheem Warren, Senior Associate, Siris Capital the understanding that the publisher is not engaged in rendering financial, legal, accounting, tax, or other We can’t wait to see what they’ll do next! professional service. Mergers & Acquisitions is a registered trademark used herein under license. © 2018 Mergers & – Mary Kathleen Flynn Acquisitions and SourceMedia, Inc. All rights reserved.

2 Mergers & Acquisitions July / August 2018

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003_MAJ070818 3 7/5/2018 9:29:12 AM What’s going on @ TheMiddleMarket.com

www.themiddlemarket.com

Slideshow Video News

Summertime reading Networking advice Record breaker From stories of star athletes Arnold “Clamoring to be the loudest person in Robert Smith, the founder and CEO Palmer, Keith Hernandez and Tiger the room” is not the way to bring more of Vista Equity Partners, bought a $59 Woods to advice from entrepreneurs women into the middle market, says million three-story, 10,000-square-foot Ray Dalio, John Doerr, Phil Knight and Suzie Doran of SingerLewak, in this penthouse in the Chelsea neighbor- Nathalie Molina Niño, the 15 books on video interview shot at ACG Inter- hood of New York. The purchase Mergers & Acquisitions’ summer read- Growth 2018. Doran serves as presi- marks the most expensive residential ing list entertain, instruct and inspire. dent of ACG Los Angeles. real estate deal recorded in Chelsea.

4 Mergers & Acquisitions July / August 2018

004_MAJ0818 4 7/3/2018 2:36:26 PM 005_MAJ070818 5 7/5/2018 9:29:13 AM Watercooler Watercooler BLOOMBERG NEWS How L Catteron will help Jessica Alba’s personal care brand grow

The Honest Co. forged a distribution agreement with European beauty

BLOOMBERG NEWS retailer Douglas

L Catterton has acquired a minority Why golf legend “Lefty” Phil Mickelson stake in actress Jessica Alba’s beauty and personal care company the Honest thinks robots go well with fro-yo Co. for $200 million. “Our mission from day one has been to empower people Reis & Irvy’s is known for robotic dispensers to live happy and healthy lives, and we are always in search of new ways Phil Mickelson and his agent Steve botic arms to dispense frozen yogurt, world golf rankings for more than 24 to bring that to life,” Alba said in a Loy are investing in frozen yogurt ice cream, gelatos and sorbet in less straight years, becoming the sport’s statement. “This partnership will enable chain Reis & Irvy’s, a subsidiary of than 60 seconds. The target, founded first player to do so. us to empower more people in more Generation Next Franchise Brands in 2016, operates 235 franchises “Phil is consistently ranked by places by delighting them with prod- Inc. The deal includes 30 new Reis & throughout the U.S. ESPN as one of the ten most highly- ucts that meet their desire for safety, Irvy’s stores to open throughout Mick- A member of the World Golf Hall of regarded athletes in the world. Hav- design and performance.” elson’s hometown of San Diego. Fame, Mickelson has won five major ing such a well-respected champion Alba is best known for playing the “I’m absolutely thrilled to be part of PGA Tour tournaments including three as a stakeholder and franchisee, in lead in TV’s Dark Angel and the Sue such transformative industry change,” Masters, a PGA championship and an our own backyard here in San Diego, Storm/Invisible Woman character in Mickelson said in a statement. “I’ve Open Championship. He learned the is an honor, and a confirmation of the Marvel Comics’ Fantastic Four film pushed boundaries my whole career, basics of the sport by mirroring his our mission to help bring about a series. She was recently tapped to star and that mindset carries over into the father’s swing, which led the naturally dramatic change in food retail,” says with Gabrielle Union in an upcoming business world. The energy and pas- right-handed Phil to adopt the left- Generation Next chairman Nick Yates. Bad Boys TV spinoff called L.A.’s Finest. sion from the Generation Next team handed stroke that would later lead Generation Next has sold 600 fran- She founded the company, which pro- to both deliver a quality product and to his nickname, “Lefty,” according to chises worldwide. duces a wide range of self-care items disrupt food retail is exciting.” Encyclopedia Britannica. Mickelson — By Demitri Diakantonis from diapers to body lotions, in 2012. Reis & Irvy’s is known for using ro- has been inside the top of the official Honest recently announced a

6 Mergers & Acquisitions July / August 2018 TheMiddleMarket.com

006_MAJ070818 6 7/5/2018 9:46:15 AM Watercooler Watercooler

distribution agreement with European “These are all fantastic properties beauty retailer Douglas, which has that complement our existing portfolio more than 2,500 stores. The target also and provide tremendous added value faced some challenges lately. For ex- and cross-visitation opportunities for ample, in 2017, it recalled baby powder our extensive membership and season over concerns about skin and eye infec- pass base,” says Six Flags CEO Jim tions. Honest previously raised funding Reid-Anderson. After the deal closes, from Lightspeed Venture Partners and Six Flags will become the largest wa-

BLOOMBERG NEWS General Catalyst Partners. Goldman terpark operator in North America. Sachs & Co. (NYSE: GS) advised Honest. Outdoor-related deals are thriving. — By Demitri Diakantonis How L Catteron — By Demitri Diakantonis For example, retailer Camping World — By Mary Kathleen Flynn will help Jessica Holdings Inc. (NYSE: CWH) agreed to acquire Cullum & Maxey Camping Alba’s personal Center and Middleby Corp. (Nasdaq: care brand grow MIDD), the world’s largest commercial kitchen equipment manufacturer, has The Honest Co. forged a agreed to buy Taylor Co. a seller of distribution agreement ice cream dispensing equipment and with European beauty frozen drink machines from United Technologies for $1 billion. BLOOMBERG NEWS retailer Douglas WET N’ WILD PHOENIX — By Demitri Diakantonis Summer deals Why golf legend “Lefty” Phil Mickelson L Catterton has acquired a minority stake in actress Jessica Alba’s beauty sizzle up and personal care company the Honest thinks robots go well with fro-yo Co. for $200 million. “Our mission from Six Flags is buying five day one has been to empower people parks from EPR Properties Reis & Irvy’s is known for robotic dispensers to live happy and healthy lives, and we are always in search of new ways world golf rankings for more than 24 to bring that to life,” Alba said in a Six Flags Entertainment Corp. (NYSE: straight years, becoming the sport’s statement. “This partnership will enable SIX), the world’s largest regional theme TATE’S BAKE SHOP first player to do so. us to empower more people in more park company, has agreed to buy the “Phil is consistently ranked by places by delighting them with prod- lease rights for five parks from EPR Baking up cookie ESPN as one of the ten most highly- ucts that meet their desire for safety, Properties (NYSE: EPR). The parks were acquisitions regarded athletes in the world. Hav- design and performance.” previously operated by Oklahoma ing such a well-respected champion Alba is best known for playing the City-based Premier Parks LLC. The Mondelēz pledges as a stakeholder and franchisee, in lead in TV’s Dark Angel and the Sue deal includes: Wet n’ Wild Splashtown, to maintain Tate’s our own backyard here in San Diego, Storm/Invisible Woman character in Houston’s largest waterpark; Wet n’ is an honor, and a confirmation of the Marvel Comics’ Fantastic Four film Wild Phoenix, the largest waterpark in “entrepreneurial spirit” and our mission to help bring about a series. She was recently tapped to star Arizona; Darien Lake near Buffalo, New the brand’s authenticity dramatic change in food retail,” says with Gabrielle Union in an upcoming York; Frontier City, a western theme Generation Next chairman Nick Yates. Bad Boys TV spinoff called L.A.’s Finest. park in Oklahoma City; and White Wa- Mondelēz International Inc. (Nasdaq: Generation Next has sold 600 fran- She founded the company, which pro- ter Bay, also near Frontier City. Darien MDLZ), which aims to build the “best chises worldwide. duces a wide range of self-care items Lake is a resort that has a theme park, snacking company in the world,” has — By Demitri Diakantonis from diapers to body lotions, in 2012. a waterpark, campgrounds, a hotel and completed the $500 million acquisition Honest recently announced a an amphitheater. of Tate’s Bake Shop from the River-

TheMiddleMarket.com July / August 2018 Mergers & Acquisitions 7

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side Co. Mondelēz produces biscuits, to take Tate’s to the next level and side Food Solutions, an independent “VetCor’s future has never been chocolate, gum, candy and powdered offer our cookies and baked treats to bakery and contract manufacturer brighter, as we continue to expand our beverages under well-known global many more consumers across North for grain-based food and snacks for network and our level of collective re- brands, including: Oreo and belVita America.” brands. Hershey Co. (NYSE: HSY) sources for our hospitals to best serve biscuits; Cadbury Dairy Milk and “With new products like snack-sized bought SkinnyPop popcorn maker their patients, clients, and communi- Milka chocolate; and Trident gum. Tiny Tate’s and on-trend flavors like Amplify Snack Brands, and Campbell ties,” says CEO Dan Adams. Americans Headquartered in East Hanover, New Coconut Crisps and Ginger Zinger, Soup Co. (NYSE: CPB) paid almost $5 are treating pets more and more like Jersey, Mondelēz earned net revenues we helped the company respond to billion for Snyder’s-Lance, the owner of people, which has triggered a surge of approximately $26 billion in 2017. marketplace demands,” said Riverside Cape Cod potato chips. in products and services for animals, “Tate’s on-trend products comple- partner Alan Peyrat when the deal — By Mary Kathleen Flynn prompting many a middle-market ment our existing biscuits portfolio was announced in May. Mondelēz deal. Jefferies is advising VetCor; Paul, and provide access into the fast- is operating Tate’s as a separate Weiss, Rifkind, Wharton & Garrison growing premium cookie segment,” standalone business under its current LLP is representing Oak Hill; White said Mondelēz CEO Dirk Van de Put in management team “to nurture its en- & Case is representing Harvest; and a statement. Tate’s is best known for trepreneurial spirit and maintain the Ropes & gray is representing Cressey. crisp, buttery Chocolate Chip Cookies. authenticity of the brand while provid- — By Demitri Diakantonis Founder Kathleen King began selling ing resources to accelerate growth,” small batches of cookies at her fam- according to the buyer’s press release ily’s farmstead when she was 11 years announcing the June 7 deal clos- old and still “perfects every recipe ing. Jones Day and Deloitte advised herself,” according to the company, Riverside on the transaction. Houlihan which operates a specialty bake shop Lokey Inc. (NYSE: HLI) led the sales 22 in Southampton, New York. process along with TM Capital. YEARS IN BUSINESS The current CEO is Maura Motto- Tate’s marks Mondelēz’s first acqui- VETCOR GROUP lese. Riverside invested in the compa- sition under Van de Put’s leadership ny in 2014. Tate’s saw sales and earn- and it comes at a time when tradi- Why PE firms like 6 INVESTMENT FUNDS RAISED ings increase 4x during in the last five tional snack companies are adapting vet groups years, according to the private equity to rapidly changing consumer habits firm. Key initiatives during Riverside’s as Americans are opting for healthier 1.6 Oak Hill joins existing BILLION OF COMMITTED CAPITAL investment included: the significant snacks. In addition to Oreo, Mondelēz investors Harvest Partners expansion and improvement of pro- also owns the Chips Ahoy! and Ritz and Cressey to take stake + cesses around production; deepening crackers brands. 120 of existing customer relationships; Snacks is an important growth cat- in VetCor Group PLATFORM INVESTMENTS expanding distribution; new product egory for Mondelēz, according to the LENDING A HELPING HAND FOR OVER 20 YEARS launches; and boosting the national company. “We see tremendous op- Oak Hill Capital Partners is buy- 60+ sales and marketing team. portunities ahead of us as the market ing a stake in veterinary hospital chain INDEPENDENT SPONSOR PLATFORMS “Consistent with Mondelēz Interna- dynamics that make snacking exciting VetCor Group Holdings Corp. Existing tional’s purpose to create more mo- align well to our strengths,” the com- shareholders Harvest Partners, Cressey Peninsula Capital Partners provides ments of joy for consumers, providing pany states in its fact sheet. “We are & Co. and the target’s management are customized debt and equity solutions an authentic, delicious indulgence modernizing our portfolio and keeping also investing. VetCor, based in Hing- to middle-market companies as either a control or non-control investor. has been at the heart of Tate’s Bake it relevant with changing consumer ham, Massachusetts, operates 272 hos- We specialize in working with independent sponsors and directly with companies Shop since Kathleen first opened her needs and we continue to expand our pitals, with a total of 900 veterinarians, on buyout, recapitalization, growth storefront nearly two decades ago,” Power Brands to accelerate growth.” in 28 states. VetCor hospitals provide a and other leveraged capital transactions. Please allow us to share our unique Mottolese said in a statement. “Now, In other related-snack deals, range of products and services, includ- depth of experience with you on your together with Mondelēz Interna- Charlesbank Capital Partners and ing medical and surgical treatments, next transaction. tional, we’ll have the opportunity Partners Group are acquiring Hearth- boarding and grooming. 313.237.5100 | PENINSULAFUNDS.COM

8 Mergers & Acquisitions July / August 2018 TheMiddleMarket.com

008_MAJ070818 8 7/5/2018 9:46:21 AM side Food Solutions, an independent “VetCor’s future has never been bakery and contract manufacturer brighter, as we continue to expand our Carlyle co-CEOs for grain-based food and snacks for network and our level of collective re- speak out brands. Hershey Co. (NYSE: HSY) sources for our hospitals to best serve bought SkinnyPop popcorn maker their patients, clients, and communi- Glenn Youngkin and Amplify Snack Brands, and Campbell ties,” says CEO Dan Adams. Americans Kewsong Lee discuss Soup Co. (NYSE: CPB) paid almost $5 are treating pets more and more like diversity in first joint billion for Snyder’s-Lance, the owner of people, which has triggered a surge Cape Cod potato chips. in products and services for animals, interview — By Mary Kathleen Flynn prompting many a middle-market deal. Jefferies is advising VetCor; Paul, “One of the clear challenges in the Weiss, Rifkind, Wharton & Garrison financial sector broadly is both race

LLP is representing Oak Hill; White and gender diversity,” said Glenn BLOOMBERG NEWS & Case is representing Harvest; and Youngkin (pictured), co-CEO of the Car- co-CEO Kewsong Lee. “The numbers Ropes & gray is representing Cressey. lyle Group LP (Nasdaq: CG), in an inter- are something like 9 percent of senior — By Demitri Diakantonis view with Bloomberg Markets, the first executives are minorities or women,” major joint interview of Youngkin and Youngkin continued. “Carlyle, a number

22 YEARS IN BUSINESS Why PE firms like 6 vet groups INVESTMENT FUNDS RAISED 1.6 Oak Hill joins existing BILLION OF COMMITTED CAPITAL investors Harvest Partners and Cressey to take stake 120+ in VetCor Group PLATFORM INVESTMENTS LENDING A HELPING HAND FOR OVER 20 YEARS Oak Hill Capital Partners is buy- 60+ ing a stake in veterinary hospital chain INDEPENDENT SPONSOR PLATFORMS VetCor Group Holdings Corp. Existing shareholders Harvest Partners, Cressey Peninsula Capital Partners provides & Co. and the target’s management are customized debt and equity solutions also investing. VetCor, based in Hing- to middle-market companies as either a control or non-control investor. ham, Massachusetts, operates 272 hos- We specialize in working with independent sponsors and directly with companies pitals, with a total of 900 veterinarians, on buyout, recapitalization, growth in 28 states. VetCor hospitals provide a and other leveraged capital transactions. Please allow us to share our unique range of products and services, includ- depth of experience with you on your ing medical and surgical treatments, next transaction. boarding and grooming. 313.237.5100 | PENINSULAFUNDS.COM

TheMiddleMarket.com July / August 2018 Mergers & Acquisitions 9

009_MAJ070818_001 9 7/5/2018 9:59:17 AM Watercooler

of years ago, began to dedicate itself Onapsis, PhishLabs and Professional Medidata held a 6 percent stake in the to addressing this. We adopted a Capital Services. “Our collaborative and target before the deal was announced. How neuroscience top-down approach, which I think was flexible investment approach has re- “Together, Medidata and Shyft are research is about critical. We did it systematically through mained consistent since LLR’s founding powering customers’ digital transfor- to expand hiring in the entry-level and middle-level in 1999,” said partner Mitchell Hollin in a mation with artificial intelligence and and growing talent, although we had a statement. real-world analytics to reduce risk, few notable external hires.” optimize revenue, and ultimately help Pfizer is growing its VC The interview covered many topics, patients,” says Medidata CEO Tarek arm to back early-stage including how the private equity indus- Sherif. Shyft’s data and cloud services neuroscience companies try has changed over the years. “Private combines information together to pro- equity is an old turn of phrase for what vide insights and visualizations. we are really doing,” said Lee. “Even the Pfizer Inc. (NYSE: PFE) is invest- word ‘alternative’ in front of ‘investment’ ing $600 million in its venture capital in 20 years may no longer be there. The arm Pfizer Ventures. About $150 mil- whole role of what we do in the global lion of the funds will be used to back economy is only going to grow. Look at early-stage neuroscience companies, the number of IPOs that are happening LLR PARTNERS particularly those that focus on neuro- now vs. 10 to 15 years ago. It’s a fraction. “More than ever, we leverage the col- Who wants to be a public company lective expertise of our multi-disciplinary these days if you can get more money team, portfolio executives and extensive from us on great terms? Do you need to third-party network to help create value go public just for a branding event? No, for our companies.” LLR won Mergers you can do a deal with a private equity & Acquisitions’ M&A Mid-Market Award

firm. Do you need an IPO to attract for 2017 Private Equity Firm of the Year, MEDIDATA management talent? In fact, we can at- in part for its innovations in developing Medidata uses research and third tract better management talent.” content with the GrowthBits series and party data to help pharmaceutical, — By Demitri Diakantonis leveraging social media to communi- biotech and medical device compa- cate its strategy. Asante Capital Group nies develop drug discoveries. Medi- PE firm of the Year acted as the European placement data and Shyft formed a partnership agent for the new fund, and Latham & in 2016 in an effort to add real-time winner LLR raises Watkins provided legal counsel. data to electronic medical records, new fund — By Mary Kathleen Flynn and to help life science companies more accurately collect information LLR has already closed Healthcare deals from clinical trials and assess patient health. Medidata also participated in eight deals out of the fund thrive Shyft’s Series B funding round in 2016. Healthcare information technology LLR Partners has announced the final Medidata is acquiring the companies are proving increasingly close of LLR Equity Partners V LP at remaining stake in Shyft attractive to buyers. For example, in $1.2 billion. The Philadelphia firm, which Analytics 2018, Inovalon (Nasdaq: INOV), a pro- backs companies in five industries – vider of cloud-based software for the education, fintech, healthcare, security healthcare industry, agreed to acquire and software – has already closed Medidata (Nasdaq: MDSO) has healthcare software company Ability investments from the fund in eight com- agreed to buy the stake it did not Network. panies: 3SI Security Systems, eLocal, Eye already own in healthcare data com- — By Demitri Diakantonis Health America, MedBridge, Midigator, pany Shyft Analytics for $195 million.

10 Mergers & Acquisitions July / August 2018 TheMiddleMarket.com

010_MAJ070818 10 7/5/2018 9:46:25 AM Medidata held a 6 percent stake in the degeneration, neuro-inflammation and people with neurological conditions,” target before the deal was announced. How neuroscience neuro-metabolic disorders. says Pfizer Ventures managing partner “Together, Medidata and Shyft are research is about Denis Patrick. powering customers’ digital transfor- to expand Six of Pfizer Ventures’ current invest- mation with artificial intelligence and ments are involved in neuroscience real-world analytics to reduce risk, research including: Aquinnah, Autifony, optimize revenue, and ultimately help Pfizer is growing its VC Cortexyme, MindImmune, Mission, and patients,” says Medidata CEO Tarek arm to back early-stage Neuronetics. Outside of neursoscience, Sherif. Shyft’s data and cloud services neuroscience companies Pfizer Ventures will also invest in the combines information together to pro- BLOOMBERG NEWS areas of oncology, inflammation and vide insights and visualizations. “By changing the way we invest immunology, rare disease, internal Pfizer Inc. (NYSE: PFE) is invest- in neuroscience, we hope to support medicine and vaccines. In 2016, Pfizer ing $600 million in its venture capital an energized community of biotech acquired cancer treatment company arm Pfizer Ventures. About $150 mil- entrepreneurs who are progressing Medivation. With the new investment, lion of the funds will be used to back the understanding of the molecular Pfizer Ventures now has over $1 billion early-stage neuroscience companies, mechanisms of neurologic diseases and under management. particularly those that focus on neuro- help advance potential treatments for — By Demitri Diakantonis

Medidata uses research and third party data to help pharmaceutical, biotech and medical device companies develop drug discoveries. Medi- data and Shyft formed a partnership in 2016 in an effort to add real-time data to electronic medical records, and to help life science companies more accurately collect information from clinical trials and assess patient health. Medidata also participated in Shyft’s Series B funding round in 2016. Healthcare information technology companies are proving increasingly attractive to buyers. For example, in 2018, Inovalon (Nasdaq: INOV), a provider of cloud-based software for the healthcare industry, agreed to acquire healthcare software company Ability Network. — By Demitri Diakantonis

TheMiddleMarket.com July / August 2018 Mergers & Acquisitions 11

011_MAJ070818 11 7/5/2018 9:46:27 AM Private Equity Perspective

lemont, managing director, Accordion Partners; and Amy Weisman, director of business development, Ster- ling Investment Partners. As we went to press, the New York group was gear- ing up for its first marquee Exponent Exchange event on July 12. The event was designed to bring “the best people and the best content together,” explained Heide.

BLOOMBERG NEWS Exponent Exchange was Sallie Krawcheck expected to feature Sallie Krawcheck, who previously served as CEO of several Changing the dynamic banks, including Mer- rill Lynch Wealth Manage- Goldman Sachs launches fund to back women-led companies, ment and the Citi Private and a new networking group focuses on female dealmakers. Bank, and is the current CEO of Ellevest, an online By Mary Kathleen Flynn investing platform aimed at women. Other scheduled speakers included: The number of resources designed for meetings has its drawbacks – and not only Lisa Bernstein, global head women dealmakers is growing rapidly. for women. The global economy is propelled of human capital, Apollo Among the recent initiatives are a new fund- by innovation, creativity and the sharing Global Management LLC ing program aimed at female-led companies of diverse perspectives. Effectively shutting (NYSE: APO); Sarah Brad- and a new networking group for women out half the population from conversations ley, partner, Kainos Capi- dealmakers. at the highest levels of business is holding tal; Jennifer Lu, executive In June, Goldman Sachs announced a new everyone back. Changing that dynamic is director, Moelis & Co. (NYSE: program called Launch With GS, which is in- going to take time, and it’s going to take a MC); and Cheraé Robin- vesting $500 million of the firm’s and clients’ concerted effort by all organizations to foster son, founder, Tastemakers capital in private, late-stage, women-found- environments that allow talent to thrive, re- Africa. I was scheduled as a ed, women-owned or women-led companies. gardless of race, ethnicity, gender, disability, moderator. “I’ve worked my whole career in an sexual orientation or age.” The organizers succeeded industry dominated by men,” writes Stepha- One new networking group focused on in attracting an impressive nie Cohen, chief strategy officer, Goldman changing the dynamic is Exponent, which group of sponsors for Ex- Sachs, in a blog post. “As an investment launched at the end of 2017. The group ponent Exchange, including banker for close to 20 years, my presence in was co-founded by a wide array of women Apollo, Baird, BDO, Merrill board rooms was often an anomaly. Certain executives who work on deals, including: Corp. and Moelis, under- aspects of that experience were actually Marilyn Adler, senior managing director, scoring increased interest in helpful: for one thing, people usually re- Medley; Bonnie Harland, director, Pouschine initiatives aimed at women membered what I had to say. But serving as Cook Capital Management; Nanette Heide, dealmakers. M&A the by-default ‘female perspective’ in many partner, Duane Morris; Michelle Van Hel-

12 Mergers & Acquisitions July / August 2018

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013_MAJ070818MAJ030118_Analysis.indd 13 10 6/29/20187/5/2018 11:30:35 9:29:14 AMPM The Buyside

ernment, ranging from 911 Staying the course dispatch to courts and jails, as well as permits and business licenses. The company Tyler Technologies is acquisitive in the government software serves more than 15,000 sector and plans to stay that way, despite more PE competition. organizations. In 2015, Tyler paid $670 By Demitri Diakantonis million for Troy, Michigan- based New World Systems. a software maker for dis-

“Private equity is information technology more active in the division. The business public sector space offers communications, from a couple of engineering, and IT years ago,” says services for intelligence, Brian Miller, the CFO defense and federal of Tyler Technolo- civilians. In addition, gies Inc. (NYSE: TYL). the target supports The company’s NASA’s Space Commu- $150 million deal nications Network and for data service company Socrata probably Deep Space Network will not be the company’s last. Tyler has programs. Veritas is a completed over 40 acquisitions in the past New York-based pri- decade, according to Miller. vate equity firm invest- The public sector software space is attrac- ing primarily in com- tive to companies like Plano, Texas-based panies that provide Tyler because government agencies typically technology-enabled hold on to old software systems longer than products and services TYLER TECHNOLOGIES most companies and are slower to replace to government and

them. commercial clients. Brian Miller Socrata, headquarted in Seattle, provides In that same year, H.I.G cloud-based data integration, visualization, Capital bought NIC Inc., which provides data patch centers, paramedics, analysis, and reporting services to state, analytics, engineering and logistics, cyberse- police officers, firefight- local and federal government agencies to curity, and IT infrastructure optimization to ers and other emergency help them improve performance, increase U.S. defense, intelligence, health and civilian personnel that help them accountability, gain better financial insights, government agencies, for $283 million. reduce response times. New and extend citizen engagement. “Anything in In May 2018, Tyler acquired cybersecu- World’s other product is the public software space is of interest to us. rity company Sage Data Security. Portland, Logos, which is designed Anything is fair game,” says Brian Miller. “We Maine-based Sage offers education and to assist government and want to acquire companies that will increase training, threat detection, technology test- public agencies with their our competitive position.” ing, advisory services, and digital forensics. financial matters. The company works with companies in the “We don’t have any quo- Deal history education and government sectors. tas on deals. We’re pretty In 2017, Veritas Capital paid $690 million Tyler’s technology is aimed to automate disciplined,” Miller con- for Harris Corp.’s (NYSE: HRS) government and support mostly all processes in gov- cludes. M&A

14 Mergers & Acquisitions July / August 2018

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CMY

015_MAJ070818 15 7/5/2018 9:29:14 AM Daniel Hopkin Partner, Kainos Capital

“Dan proactively develops relationships,” says Kainos Capital managing partner Andrew Rosen, when asked to describe partner Daniel Hopkin’s role at the Dallas firm. “That’s what he did in the case of Kettle, and his skills have been instrumental in helping the company double in size since we purchased it.” Kainos bought Kettle Cuisine in 2015, and quickly developed a deep network within the refrigerated soup category, which led to two add-on acquisitions within the first year of Kai- nos’ ownership. Kettle is just one of many investments Hopkin has worked on since he was one of the original team members when Kainos was spun out of HM Capital in 2012. He has also worked on: Bonewerks Culinarte’, Country Fresh, Fem- pro, InterHealth Nutraceuticals and Olde Thompson. Hopkin received his B.A. in accounting and his Master of Professional Accountancy from Brigham Young Univer- sity. He worked in the M&A department of Morgan Stanley and joined HM in 2004 as an associate and was quickly promoted to vice president. He made partner at Kainos in 2015. “Dan’s work ethic and insights into the underlying drivers of a business are key,” says Rosen. “He has terrific instincts and a lot of runway ahead of him.”

Erik Latterell Director, Stone Arch Capital

Erik Latterell wears many hats at Stone Arch. His responsibilities include sourcing and reviewing new investment opportunities, negotiating transactions, leading financings, conducting due diligence, and working with various portfolio companies on add-on acquisitions and other strategic Mary Kathleen Flynn and Danielle Fugazy initiatives. “We are a little different. We all do everything here,” says director Michael O’Neill. “Erik does a Ethan Liebermann led TA Associates’ investment in MedRisk and co-sponsored CCRM, great job listening. He’s also smart, which makes him great at finding opportunities, but also seeing the challenges. He will Datix and SoftWriters. Jennifer Roach helped Yellow Wood Partners build PDC Brands then find the right people to help him tackle those challenges.” and sell it to CVC Capital Partners. Liebermann and Roach are among 11 private Latterell first joined the Minneapolis firm as an analyst in 2007, and then rejoined in 2013 as a vice president, after equity investors who are expected to play significant leadership roles in the future of graduating from the Carlson School of Management at the University of Minnesota. He was promoted to director in 2016. Prior to joining Stone Arch, Latterell was an analyst at the Minneapolis-based boutique investment bank TripleTree LLC. their firms and the industry. At Stone Arch, Latterell has been involved with six of the private equity firm’s portfolio companies in a range of industries. He is also leading the development and execution of the company’s value creation roadmap, which has included hiring a CFO and additional support staff, as well as developing the company’s first robust reporting packages.

TheMiddleMarket.com

016_MAJ0818 16 7/3/2018 2:30:02 PM Daniel Hopkin John Kos Partner, Kainos Capital Principal, GTCR

“Dan proactively develops It’s been a busy five years for relationships,” says Kainos John Kos, who has been spear- Capital managing partner heading GTCR’s foray into the Andrew Rosen, when asked to healthcare sector. Back in 2013, describe partner Daniel Hopkin’s the firm had no healthcare com- role at the Dallas firm. “That’s what he did in the case of panies in its portfolio. Today, the firm has four and has Kettle, and his skills have been instrumental in helping already enjoyed some exits in the vertical. the company double in size since we purchased it.” Kainos Kos earned a BS in finance with highest honors from the bought Kettle Cuisine in 2015, and quickly developed a University of Illinois. Early in his career, he worked as an deep network within the refrigerated soup category, which analyst in the healthcare investment banking group of Citi- led to two add-on acquisitions within the first year of Kai- nos’ ownership. group Global Markets in New York. He first joined GTCR as Kettle is just one of many investments Hopkin has an associate in back in 2006, then left to attend Harvard worked on since he was one of the original team members Business School, where he earned an MBA with distinction. when Kainos was spun out of HM Capital in 2012. He has He rejoined GTCR as a vice president in 2011. Since coming also worked on: Bonewerks Culinarte’, Country Fresh, Fem- back to the Chicago firm, Kos has closed 33 M&A deals pro, InterHealth Nutraceuticals and Olde Thompson. associated with 7 portfolio companies he acquired and/or Hopkin received his B.A. in accounting and his Master oversees. He was promoted to principal in 2017. of Professional Accountancy from Brigham Young Univer- One of the GTCR portfolio companies Kos nurtured is sity. He worked in the M&A department of Morgan Stanley Cole-Parmer, a carve-out from Thermo Fisher,in a $480 and joined HM in 2004 as an associate and was quickly million transaction in 2014. Under the firm’s ownership, promoted to vice president. He made partner at Kainos in Cole-Parmer, which makes test and measurement prod- 2015. ucts for laboratory research, acquired six companies. It all “Dan’s work ethic and insights into the underlying drivers of a business are key,” says Rosen. “He has terrific added up to GTCR’s selling Cole-Palmer to Golden Gate instincts and a lot of runway ahead of him.” Capital in 2017.

Erik Latterell Director, Stone Arch Capital

Erik Latterell wears many hats at Stone Arch. His responsibilities include sourcing and reviewing new investment opportunities, negotiating transactions, leading financings, conducting due diligence, and working with various portfolio companies on add-on acquisitions and other strategic initiatives. “We are a little different. We all do everything here,” says director Michael O’Neill. “Erik does a Ethan Liebermann led TA Associates’ investment in MedRisk and co-sponsored CCRM, great job listening. He’s also smart, which makes him great at finding opportunities, but also seeing the challenges. He will Datix and SoftWriters. Jennifer Roach helped Yellow Wood Partners build PDC Brands then find the right people to help him tackle those challenges.” and sell it to CVC Capital Partners. Liebermann and Roach are among 11 private Latterell first joined the Minneapolis firm as an analyst in 2007, and then rejoined in 2013 as a vice president, after equity investors who are expected to play significant leadership roles in the future of graduating from the Carlson School of Management at the University of Minnesota. He was promoted to director in 2016. Prior to joining Stone Arch, Latterell was an analyst at the Minneapolis-based boutique investment bank TripleTree LLC. their firms and the industry. At Stone Arch, Latterell has been involved with six of the private equity firm’s portfolio companies in a range of industries. He is also leading the development and execution of the company’s value creation roadmap, which has included hiring a CFO and additional support staff, as well as developing the company’s first robust reporting packages.

TheMiddleMarket.com July / August 2018 Mergers & Acquisitions 17

017_MAJ0818 17 7/3/2018 2:30:05 PM Cover Story: Rising Stars of Private Equity

Ethan Liebermann Jaime McKenzie Joseph Rondinelli Principal, TA Associates Managing Director, Monomoy Principal, Frontenac Capital Partners Ethan Liebermann helps lead TA Joseph Rondinelli was recently Associates’ healthcare investments. A freshly minted managing promoted to principal at Frontenac, He first joined the firm’s Boston director, Jaime McKenzie has where he focuses on investments in office in 2007, left to get an MBA become a vital part of Monomoy the industrial and business services from Harvard Business School and Capital Partners. McKenzie has sector. He is an integral member of then returned to the firm in 2012. Since then, Liebermann has been involved in more deals than any other professional at Chicago firm, managing more than $600 million of equity earned several promotions, most recently in 2017, when he the firm, reports Justin Hillenbrand, co-founder of the New capital. was promoted from senior vice president to principal. York firm. She has worked on everything from a traditional Rondinelli originally joined the firm in 2008 as an associ- Liebermann led TA’s investment in MedRisk and co-spon- leveraged buyout to a complex special purpose acquisition ate and became senior associate in 2010. Rondinelli was then sored the firm’s investments in CCRM, Datix and SoftWriters. company (SPAC). She is also the first woman at the firm to promoted to vice president in 2014. Following the launch of He was also actively involved in the firm’s investment in Evi- be the chair of a portfolio company. Frontenac 11, earned his recent promotion to principal. His pri- Core Healthcare. In aggregate, the deals represent approxi- McKenzie has become a great ambassador of the firm, mary responsibilities include originating, sourcing, evaluating, mately $800 million in committed capital. presenting to investors and at management meetings. and structuring transactions with middle market companies. Liebermann plays a critical role from a value-add per- “She articulates our message very well, and it became Since joining the firm, Rondinelli has evaluated more than spective, in that he has helped promote and drive growth at clear we could put her in front of any audience. At just 33, 2,000 acquisition opportunities and successfully completed the portfolio level. He has sourced and recruited three inde- she already has so much experience, which is unique,” says 30 transactions, totaling approximately $765 million in pendent directors and five senior executives. Additionally, Hillenbrand. “She is definitely a proven leader at the firm.” value. These include seven platform acquisitions, 30 add-on Liebermann is known for forging deep, trusting relationships McKenzie started at Monomoy as an analyst in 2008. In acquisitions and 10 refinancing or recapitalizations. He cur- with many of TA’s portfolio company executives. addition to her outward-facing responsibilities, McKenzie rently serves as a director and provides oversight for four of In-house, Liebermann led the firm’s global associate train- takes on training and developing vice presidents, associ- the firm’s 12 active portfolio companies including CoCreativ, ing program from 2013 to 2016 and currently serves on the ates and senior associates at the firm. GNAP LLC, La Tavola and Whitebridge Pet Brands. firm’s technology committee. He is also team captain for the McKenzie started as an investment banker at Bear, Rondinelli started his career in investment banking with firm’s Pan-Mass Challenge, an annual charity bicycle ride. TA Stearns & Co. and moved to Monomoy after the financial Citigroup Global Markets in Chicago, where he focused on and sponsors of the firm’s team have contributed more than crisis. There were about 12 people working at Monomoy mergers and acquisitions and debt and equity financings in $1.2 million to the ride over the past eight years. when she joined the firm. Today, there are 40. the firm’s metals, mining, and industrial groups. He earned his MBA in 2014 from the University of Chicago Booth School of Business.

Tom Smithburg Vice President, Shore Capital Partners Jennifer Roach Vice President, Yellow Wood Partners

Tom Smithburg is a vice president at the healthcare-focused private equity firm Shore Capital Partners. Having initially joined Chicago firm in 2011 as an associate, Smithburg was the first junior Since joining Yellow Wood Partners in 2014, Jennifer Roach has been “an integral part of the hire at the firm. He created many of the processes and tools in place at Shore today. growth of our organization,” says principal Kevin McCafferty. “She has been a key member of our Smithburg has successfully completed the acquisition of two transformative add-ons for two deal execution team and has overseen the customization and refinement of our primary dili - different portfolio companies. With these transactions, Smithburg proved himself to be a skillful gence analysis tools. Jen has also cultivated our deal sourcing efforts in multiple sectors of the dealmaker and an effective deal quarterback. consumer industry and enhanced our outreach process. Most importantly, our portfolio compa - Simultaneously, he led the development and implementation of Shore Capital’s proprietary De Novo Machine system, a ny management teams repeatedly remind us how invaluable Jen has been with analyzing the important trends affecting cloud-based market planning and project management tool. This tool has proven to increase annual de novo production their brands and product categories.” capacity and overall return on investment. The Boston firm promoted Roach to vice president in June. Prior to joining Yellow Wood, Roach was a senior analyst Currently, Smithburg is developing an investment thesis in a new healthcare sub-sector. He is expected to lead and com- at Analysis Group, an economic consulting firm, and worked at JP Morgan Chase & Co. in the Commercial Banking Divi - plete a platform investment within the next two years. He is a member of the board at Hulin Health and Behavioral Innova- sion. She received a B.A. in Economics, cum laude, from the University of Rochester. tions. Additionally, he developed and leads the CXO program at Shore Capital, helping to place talented MBA graduates into At Yellow Wood, Roach helped build PDC Brands into a compelling beauty and wellness platform, including working leadership roles within portfolio companies. on three of the company’s add-on acquisitions. Yellow Wood sold PDC to CVC Capital Partners in June. Currently, Roach Smithburg graduated first in his class from the Kellogg School of Management at Northwestern University. is working with Freeman Beauty, including analyzing retail placement and expansion.

18 Mergers & Acquisitions July / August 2018 TheMiddleMarket.com

018_MAJ0818 18 7/3/2018 2:30:13 PM Jaime McKenzie Joseph Rondinelli David Shainberg Managing Director, Monomoy Principal, Frontenac Vice President, Balmoral Funds Capital Partners Joseph Rondinelli was recently David Shainberg has been A freshly minted managing promoted to principal at Frontenac, working at lower middle-market director, Jaime McKenzie has where he focuses on investments in private equity firm Balmoral become a vital part of Monomoy the industrial and business services Funds since 2012, but in the last 18 Capital Partners. McKenzie has sector. He is an integral member of months he really began to shine. been involved in more deals than any other professional at Chicago firm, managing more than $600 million of equity Shainberg started his career as an investment banker the firm, reports Justin Hillenbrand, co-founder of the New capital. with JP Morgan and then moved to Brookfield Asset Man- York firm. She has worked on everything from a traditional Rondinelli originally joined the firm in 2008 as an associ- agement before joining Balmoral as a senior associate in leveraged buyout to a complex special purpose acquisition ate and became senior associate in 2010. Rondinelli was then 2012. company (SPAC). She is also the first woman at the firm to promoted to vice president in 2014. Following the launch of Shainberg has increasingly sought and excelled at be the chair of a portfolio company. Frontenac 11, earned his recent promotion to principal. His pri- transaction due diligence and arranging debt financing. McKenzie has become a great ambassador of the firm, mary responsibilities include originating, sourcing, evaluating, In the second quarter of 2018, Shainberg ran his first deal, presenting to investors and at management meetings. and structuring transactions with middle market companies. purchasing burger chain Mooyah. He led all aspects of “She articulates our message very well, and it became Since joining the firm, Rondinelli has evaluated more than the deal, including due diligence and execution, front to clear we could put her in front of any audience. At just 33, 2,000 acquisition opportunities and successfully completed back, stepping into board level roles, expanding business she already has so much experience, which is unique,” says 30 transactions, totaling approximately $765 million in development capabilities, growing his network, and working Hillenbrand. “She is definitely a proven leader at the firm.” value. These include seven platform acquisitions, 30 add-on closely with operating advisors, CEOs and industry consul- McKenzie started at Monomoy as an analyst in 2008. In acquisitions and 10 refinancing or recapitalizations. He cur- tants. addition to her outward-facing responsibilities, McKenzie rently serves as a director and provides oversight for four of “David has been looking to take more of a leadership takes on training and developing vice presidents, associ- the firm’s 12 active portfolio companies including CoCreativ, role, and it happened on this deal,” says Balmoral manag- ates and senior associates at the firm. GNAP LLC, La Tavola and Whitebridge Pet Brands. ing director Robin Nourmand. “Before leading this deal, McKenzie started as an investment banker at Bear, Rondinelli started his career in investment banking with he had been putting pieces of deals together, but he took Stearns & Co. and moved to Monomoy after the financial Citigroup Global Markets in Chicago, where he focused on the reins on this, and he did a good job soliciting feedback crisis. There were about 12 people working at Monomoy mergers and acquisitions and debt and equity financings in from us, negotiating on all points and serving as a liaison when she joined the firm. Today, there are 40. the firm’s metals, mining, and industrial groups. He earned his between the operating advisors and everyone else.” Today, MBA in 2014 from the University of Chicago Booth School of Shainberg is responsible for finding and vetting all potential Business. deals in the restaurant sector.

Tom Smithburg Vice President, Shore Capital Partners Jennifer Roach Vice President, Yellow Wood Partners

TheMiddleMarket.com July / August 2018 Mergers & Acquisitions 19

019_MAJ0818 19 7/3/2018 2:30:15 PM Cover Story: Rising Stars of Private Equity

Nicholas Stone Afaf Ibraheem Warren Managing Director, Cyprium Partners Senior Associate, Siris Capital

With the 2017 close of Cyprium Afaf Ibraheem Warren joined Investors IV, Nicholas Stone was Siris Capital in 2017 as an intern, promoted to managing director. while simultaneously earning He leads the firm’s deal origina- her MBA from Harvard Business tion efforts and oversees the Chi- School with distinction. She was cago office. “There’s a lot of capital out there,” says man- hired after the completion of the internship and is pres- aging partner Mike Conaton. “We distinguish ourselves ently a senior associate on the firm’s investment team. by building a rapport with management teams. Nick is Previously, Warren worked at Vance Street Capital and in incredibly talented at doing that. There’s a trust factor he the industrials investment banking group at Morgan Stan- establishes with people early on, and it helps us win deals. ley. She holds an A.B. in Psychology from Harvard Univer- He is able to really resonate with folks, which is critical in sity and is a 2007 recipient of the Ron Brown Scholar Fund, our business,” says Conaton. Stone’s background of grow- which is awarded for academic performance and service ing up on a farm in Nebraska may be one reason Stone and named for the late U.S. Secretary of Commerce. appreciates hard work and loyalty, Conaton suggests. “Even as an intern, she had a lot of poise, was taking When Stone is not on the hunt for new deals, he is on responsibility and commanding respect from portfolio managing Cyprium’s six operating partners who help the companies,” says Siris co-founder Peter Berger. Today, firm evaluate various investment opportunities. Although Warren works closely with Siris’ portfolio companies and is working with very experienced professionals, Stone is able leading diligence efforts on various investment opportuni- to keep them engaged and involved in every process. ties for the firm, as well as leading some deals. “Once we Stone was a member of the investment team previously buy a business, there is significant oversight and a lot to known as Key Principal Partners, which became Cyprium do involving strategy. Afaf is able to handle all aspects of in 2011. Before joining KPP in 2007, he worked at North- the operation, including working with our executive part- light Capital. He holds an MBA from the University of ners, which is unique,” says Berger. “She is very talented. Chicago Booth School of Business. She is a strong member of our team and we have high expectations for her.”

How we selected the Rising Stars In choosing the Rising Stars of Private Equity, Mergers & Acquisitions sought full-time private equity investors whose best days are expected to be in the future. These are the folks predicted to one day play a key leadership role at their PE firm – or to be heading up their own firm. There was no specific criteria, but investing in middle-market companies and growing them had to be the focus of the candidates’ day-to-day activities. Promising candidates were likely recently promoted, or had recently launched a new endeavor. There was no age cut-off. To help identify emerging leaders, we reached out to the industry and requested input from our readers through articles on our website, www.TheMiddleMarket.com, and in our Daily Briefing e-newsletter. The nomination process was informal, and all decisions were made by our editorial team, headed by Editor-in-Chief Mary Kathleen Flynn. There was no fee and no limit on the number of individuals recommended. The deadline for nominations was June 8.

20 Mergers & Acquisitions July / August 2018

020_MAJ0818 20 7/3/2018 2:30:22 PM DEALS TOO GOOD FOR A CONVENTION HALL.

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021_MAJ070818 21 7/5/2018 9:29:17 AM Q&A Q&A

business. We also prefer asset-light companies in which cash flows can be reinvested to fund further growth e-commerce sectors. We versus asset-heavy businesses that asked Nedungadi about are less flexible in a dynamic market. TA’s investment strategy These themes also extend to in Europe and the firm’s our other sector specializations. In culture, including the focus healthcare, for instance, we’re active on proprietary deal flow. in the medical device market and specialty healthcare services. We For each of the sectors look to zero in on those subsectors in TA focuses on in which innovation provides a catalyst Europe, what is the for rapid growth. We have found that firm looking for in in the dental and optical segments, portfolio companies? to name two areas. Amann Girrbach For our entire history, is an Austrian company that we TA Associates has been backed in 2010 that develops com- a growth-focused investor. This shapes our sector specializations, as we target areas that are char- acterized by fundamental, secular trends that reflect a changing marketplace. But we don’t invest in either early- or late-stage financing rounds. In fact,

TA ASSOCIATES TA we rarely, if ever, invest in TA Associates managing partner Ajit Nedungadi co-heads the Core Investment Committee and heads the firm’s venture-backed businesses. European efforts out of London and is actively engaged in investments in India. Our sourcing efforts are focused exclusively on Running a meritocracy profitable, growing companies, and we favor founder- “You have to go out and make deals happen; they’re not going led or true entrepreneurial businesses that require to occur on their own,” says managing partner Ajit Nedungadi. capital to fund continued rapid growth. By Mary Kathleen Flynn This lens brings us into specific areas. For TA Associates has invested about $20 Committee and heads the firm’s Euro- example, we have a very billion in nearly 500 companies since the pean efforts out of London and is actively long history in technology, firm was founded 50 years ago in 1968. engaged in investments in India. He joined including software and a The private equity firm backs companies TA in 1999 and has more than 20 years of range of tech verticals. in five industries: technology, healthcare, experience in the private equity industry. We lean toward busi- financial services, business services and Nedungadi’s primary focus is in the tech- nesses that are driven by consumer. Headquartered in Boston, TA in- nology industry, but he has also sponsored intellectual property and vests in companies across North America, investments across the asset management, situations in which the Europe and Asia. Managing partner Ajit insurance brokerage, medical device and most important assets are Nedungadi co-heads the Core Investment healthcare services and consumer and the people who lead the

22 Mergers & Acquisitions July / August 2018 TheMiddleMarket.com

022_MAJ070818 22 7/5/2018 11:22:34 AM Q&A Q&A

business. We also prefer asset-light puter-aided design and manufactur- consumer investments. The specific companies in which cash flows can ing systems for dental restorations. industry dynamics and underlying be reinvested to fund further growth And in 2015, we invested in Belgium- theses may change, but it’s about e-commerce sectors. We versus asset-heavy businesses that based PhysIOL, which develops intra- backing exceptional people and asked Nedungadi about are less flexible in a dynamic market. ocular implants for cataract surgery. supporting their efforts to grow the TA’s investment strategy These themes also extend to The common thread across these business. in Europe and the firm’s our other sector specializations. In businesses is that they’re both intel- culture, including the focus healthcare, for instance, we’re active lectual property-driven companies. Outline TA Associates’ on proprietary deal flow. in the medical device market and Another sector is financial ser- approach across markets and specialty healthcare services. We vices. Here, we’ve traditionally found geographies. For each of the sectors look to zero in on those subsectors in compelling opportunities to support Regardless of the market, we seek TA focuses on in which innovation provides a catalyst management teams that spin out of to back entrepreneurial or founder- Europe, what is the for rapid growth. We have found that a larger company. It’s about backing led companies. We don’t want to run firm looking for in in the dental and optical segments, “people-oriented,” asset-light busi- companies. When partnering with portfolio companies? to name two areas. Amann Girrbach nesses that enjoy high margins and entrepreneurs, we recognize the busi- For our entire history, is an Austrian company that we benefit from secular trends. We also ness is their child. They’ve developed TA Associates has been backed in 2010 that develops com- actively pursue business services and the company and have a vision that a growth-focused investor. This shapes our sector specializations, as we target areas that are char- acterized by fundamental, secular trends that reflect a changing marketplace. But we don’t invest in either early- or late-stage financing rounds. In fact, we rarely, if ever, invest in venture-backed businesses. Our sourcing efforts are focused exclusively on profitable, growing companies, and we favor founder- led or true entrepreneurial businesses that require capital to fund continued rapid growth. This lens brings us into specific areas. For example, we have a very long history in technology, including software and a range of tech verticals. We lean toward businesses that are driven by intellectual property and situations in which the most important assets are the people who lead the

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we don’t want to unsettle. We’re tionships with the entrepreneurs who ships across the market, so we want investing in profitable, high-growth are bringing a new vision to their to leverage our outbound strategy. companies, where the founders have respective industries. Add-ons also drive multiple arbi- proven out the value proposition To illustrate, we met with around trage, particularly when you’re trans- of the business. We want to be “fit 3,300 companies last year, while acting at attractive valuations. And for purpose” partners. We don’t use making fewer than 20 investments. the credit markets have been very a standardized playbook; we bring While we have a very low hit rate, accommodating to these synergistic capabilities and resources to bear this deal-sourcing process provides deals. We completed more than 50 that can add value, while always us with a deep understanding around add-ons in 2017, which is a sizeable recognizing the importance of a the types of companies we want to increase over prior years. company’s culture. This is one of the back and their end markets. And I reasons we’re agnostic about control. can’t overstate the importance of How does TA foster a culture of Unlike most traditional financial this process in helping us to build excellence? sponsors, we’re comfortable working constructive, enduring relationships. There are a few very strong traits with entrepreneurs from a genuine Frequent and continual dialogue that run through our organization. minority position. And I think there generally puts us in position to One of the most important is that TA is a real skillset required to influence engage with executives at the very is a true meritocracy. It’s very genu- entrepreneurally-driven businesses onset of a deal, when a transaction is ine, but effected through a measured without impacting the culture. This first being contemplated. and impartial process. Individual has had a synergistic effect. The Our culture encourages everyone performance at the firm is tracked executives we back introduce us to across the organization to focus over a very long period and quantifi- their networks and serve as refer- on origination. At TA, you’re either able metrics eliminate the perception ences, which facilitates proprietary working a live deal or hunting for of politics. A related trait is that our dealflow and we believe that gives us the next one. We know our edge is meritocracy drives accountability. an edge. not in participating in a full auction. Everyone knows they’re responsible A deal may come 10 years after our for their own success. The average How does TA Associates’ initial meeting or after multiple CEO tenure of our partners is about 15 origination strategy play out in successions – in fact, these were years. You earn your partnership Europe? the circumstances that led to our here, and that keeps us motivated. One of the areas we’ve nurtured acquisition of Russell Investments Another factor is that TA operates a over TA’s 50-year history is our ability from London Stock Exchange Group single fund on a global basis. We’re to originate our own transactions. two years ago. When you track a all aligned around the same strat- Our philosophy is that you have company for as long as we typically egy, regardless of which geography to go out and make deals happen; do, and commit to truly understand- we’re in or on which vertical we’re they’re not going to occur on their ing a market, you recognize how a focused. That drives collaboration own. We have a very structured pro- business has evolved over time. Such across the firm. But it all starts with gram and a scaled platform in which insight is far more valuable than an entrepreneurial culture in which our firm is organized by our target any information you might glean each member of our staff has the industries. We have 24 partners, each from the pages of a massaged and latitude and leeway to achieve their of whom has built up specializations cleansed pitch book. own success within a well-defined in specific verticals. They’re sup- If there has been one change in investment strategy. This sustains a ported by an incredibly strong team our approach in recent years, it has positive flywheel. that works to identify and target been an increased focus on finding We have a culture that moti- sub-sectors that present unique op- platforms for additional M&A that vates people to take advantage of portunities for growth or disruption. can take advantage of our origina- the opportunity, and this approach We then have a very methodical tion engine. We’ve already identified resonates with the entrepreneurs we outbound strategy to develop rela- and systematically built relation- back.

24 Mergers & Acquisitions July / August 2018

024_MAJ070818 24 7/5/2018 11:22:35 AM Great Lakes Capital Connection®

• Cincinnati • Cleveland • Columbus • Detroit • Indiana • Pittsburgh • Western Michigan

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025_MAJ070818 25 7/5/2018 9:29:17 AM Snapshot

High valuations drive first quarter M&A

The overall average valuation mark for the quarter was 6.9x, a marked retreat from the torrid 8.0x average in the prior quarter.

High valuations and abundant use 8.5 of debt continued to mark completed 8.0 deal activity in the first quarter of 2018, 8.0X according to GF Data. Two hundred and 7.5 eight private equity groups and other 7.0 deal sponsors reported on 52 transac- 7.3X 6.5 7.5X tions closed in the quarter. The overall average valuation mark 6.0 6.6X 6.9X for the quarter was 6.9x, a marked re- 5.5

treat from the torrid 8.0x average in the 5.0 prior quarter. 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1

At first blush, valuations in 2018 seem Average Valuation Multiple (TEV/EBITDA) GF Data Historical Average to have retreated to pre-2017 levels. However, we gravitate to the view that the random fall of completed deals in 4Q 2017 versus 1Q skewed artificially 50% high in the first period and low in the 47.5% 40% second. Averaged together, the result is 42.9% 42.7% 42.2% 41.9% a continuation of already unprecedent- 30% ed aggregate valuations attained in the middle quarters of last year. 20% Since the start of 2017, buyout valuations have averaged 7.2x, with financial 10% quality, size, and transaction type all leading to demonstrable premiums. 0% 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 Although not shown in the chart, in 1Q Equity Percentage in Capital Structure GF Data Historical Average 2018, the “quality premium”—the reward in valuation for above-average financial performance-was 21 percent. GF Data provides proprietary data on private equity-sponsored M&A transac- Smoothing out the valuation spike tions with enterprise values of $10 million to 250 million and trailing twelve month and trough in the past two quarters, av- TEV/Adjusted Ebitda Multiples of 3x-15x. GF Data provides middle-market M&A erage equity contribution has remained professionals with valuation, leverage and deal terms benchmarks via quarterly 42 to 43%. Required equity share is high- reports and an online database. est on deals in the middle tiers of the GF Data defines the Quality Premium to include better financial performers GF Data universe, as buyers of smaller (businesses with TTM EBITDA margins and revenue growth rates both above 10 businesses benefit from more restrained percent, or one above 12 percent and the other metric at least 8 percent. Outliers valuations and buyers in the upper tiers on the high side are also excluded.) benefit from unprecedented available For more information on GF Data, please visit www.gfdata.com debt.

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which focus more on high-value activities which can profoundly change the way markets have typically operated. transactions include: Blue Belt Tech- I think that’s why you see a company Robotics developers are ripe nologies, which was acquired by Smith like Intuitive Surgical Inc. create a mar- & Nephew for $275 million, Aesynt, ket cap of $50+ billion versus compa- for investment which was acquired by Omnicell for nies that focus on automating rote and $275 million, Ottomatika, which was repetitive tasks. Led by Rich Lunak, Pittsburgh VC firm Innovation Works acquired by Delphi, and Aethon, which was acquired by ST Engineering. On a Why is Pittsburgh the birthplace has backed Bossa Nova Robotics and other startups. national level, tech giants like Google, of many robotic developers? Amazon, Uber and Ford have made Pittsburgh has unparalleled assets By Mary Kathleen Flynn high profile acquisitions of robotics for robotic startup companies. In ad- companies. The momentum will con- dition to having world-class robotics Robots, once the stuff of science tunities for middle-market dealmakers tinue to grow. talent, we are blessed with the supply fiction, have become big business. in robotics. chain, infrastructure and a growing Fewer places have been as instrumen- Why are growth-stage private community of companies unlike any tal in the development of robots as What are robots doing today, and equity firms backing robots, and other region. Pittsburgh, home to Carnegie Mellon what will they do tomorrow? what types of companies are they Carnegie Mellon University is consis- University and its Robotics Institute, As the cost of electrical-mechanical backing? tently one of the top robotics research founded in 1979. One of the companies systems has come down, computer As with many high-growth, emerg- at the forefront of the community is processing has improved, and enabling ing technologies, robotics companies Innovation Works, a venture capital technologies, like artificial intelligence, will continue to create opportunities for firm that has backed a wide away of machine learning and sensor platforms private equity investors. Robotics solu- high-tech startups, including: Bossa have advanced. Robotics solutions tions have the ability to create a dif- Nova Robotics, CivicScience, JazzHR, have become more practical and ferentiated product offering that can Wombat Security and 4Moms. Exits commonplace across many industries. help companies disrupt established have included: ModCloth (acquired by Today, robotics solutions are disrupt- markets and produce attractive returns Walmart), NoWait (acquired by Yelp) ing markets as diverse as healthcare for investors. Whether it’s enabling jobs Summer Dealmaking Conference and Vivisimo (acquired by IBM). and agriculture to transportation and to be done cheaper, faster and more ONE ON ONE DEAL MEETINGS Rich Lunak, the president and CEO manufacturing. On any given day, a accurately than ever before, or creat- of IW and a graduate of CMU, joined robot may be responsible for dispensing fundamental shifts in established the firm in 2005 after a storied career ing the medications you receive from industries, robotics solutions have the Networking as an entrepreneur and executive. He your pharmacy, distribute the pack- ability to generate strong returns and helped grow Automated Healthcare, ages you purchase online or assist a exit multiples. & M O R E ! a company that pioneered the use surgeon with the medical procedure Please join ACG New York, ACG Philadelphia and ACG Boston for the Summer of robots to dispense drugs in hospi- for a family member. With continued How does your background as a tals, from a three-person shop into a advances in the enabling technologies robotics entrepreneur affect your Dealmaking Conference - a networking event specifically created for dealmaking $65 million acquisition by McKesson and support industries, these solutions investment strategy? professionals and advisors, offering intimate and unique networking opportunities Corp. (NYSE: MCK). After the sale, will continue to proliferate by perform- My experience as a robotics en- in conjunction with high quality, relevant one-on-one dealmeetings. Lunak served as group president of ing useful activities cheaper, faster, and trepreneur running several robotics- McKesson Automation for a decade. more accurately than prior methods. enabled healthcare companies has Eventually, Francisco Partners bought As the robotics market grows, it definitely shaped my views on the The Summer Dealmaking Conference will be held in Long Branch, NJ at the Ocean McKesson Automation and renamed it will create increasing opportunities potential to build companies with last- Place Resort & Spa. Nestled between Pier Village and the Atlantic Ocean, Ocean Aesynt (pronounced ascent), and then for middle-market dealmakers. In the ing value. A common view on robotics Place is less than 60 miles from NYC and 75 miles from Philadelphia, with train Omnicell Inc. (Nasdaq: OMCL) bought Pittsburgh-area alone, Pittsburgh- technology is that it is best suited for Aesynt for $275 million in 2016. Mergers based robotics/AI startups have dirty, dull and dangerous activities. service as well as a ferry that runs from NYC to Atlantic Highlands. & Acquisitions asked Lunak to share his attracted over $325 million in invest- And while that may be the case, I get perspective on the investment oppor- ment in 2017. Some of the recent M&A most excited about those applications ACG New York | www.acgnyc.org | 212-489- 8700

28 Mergers & Acquisitions July / August 2018 TheMiddleMarket.comUntitled-1 1 6/29/2018 8:43:47 PM

028_MAJ0818 28 7/3/2018 2:34:05 PM Q&A Q&A

which focus more on high-value activi- focused on accelerating the advance- ties which can profoundly change the ment of robotics technologies and edu- way markets have typically operated. cation to the advanced manufacturing transactions include: Blue Belt Tech- I think that’s why you see a company industry. Lastly, Innovation Works, the nologies, which was acquired by Smith like Intuitive Surgical Inc. create a mar- nation’s most active early-stage robot- & Nephew for $275 million, Aesynt, ket cap of $50+ billion versus compa- ics investor (according to CB Insight), which was acquired by Omnicell for nies that focus on automating rote and helps launch Pittsburgh-area startups $275 million, Ottomatika, which was repetitive tasks. with funding, know-how and networks BOSSA NOVA ROBOTICS acquired by Delphi, and Aethon, which of other investors, mentors and indus- Bossa Nova, backed by Pittsburgh venture capital was acquired by ST Engineering. On a Why is Pittsburgh the birthplace firm Innovation Works, makes robots that are try experts. national level, tech giants like Google, of many robotic developers? currently being tested in Walmart stores, where Our program and nationally-ranked the robots scan shelves for data on out-of-stock, Amazon, Uber and Ford have made Pittsburgh has unparalleled assets misplaced and mislabeled products and check for accelerator, AlphaLab Gear, provides high profile acquisitions of robotics for robotic startup companies. In ad- incorrect pricing. design and manufacturing expertise, companies. The momentum will con- dition to having world-class robotics universities in the world. Major technol- and contacts so robotics and hardware tinue to grow. talent, we are blessed with the supply ogy firms are building out Pittsburgh- startups can get from a prototype chain, infrastructure and a growing based research and technical offices in to market quickly and effectively. Why are growth-stage private community of companies unlike any robotics. Our region has a growing number of equity firms backing robots, and other region. Pittsburgh is the home of the Ad- high-growth robotics startups and all what types of companies are they Carnegie Mellon University is consis- vanced Robotics for Manufacturing the ingredients needed to scale them backing? tently one of the top robotics research (ARM) Institute, a $250 million initiative successfully. As with many high-growth, emerging technologies, robotics companies will continue to create opportunities for private equity investors. Robotics solutions have the ability to create a dif- ferentiated product offering that can help companies disrupt established markets and produce attractive returns for investors. Whether it’s enabling jobs Summer Dealmaking Conference to be done cheaper, faster and more ONE ON ONE DEAL MEETINGS accurately than ever before, or creating fundamental shifts in established industries, robotics solutions have the Networking ability to generate strong returns and exit multiples. & M O R E !

How does your background as a Please join ACG New York, ACG Philadelphia and ACG Boston for the Summer robotics entrepreneur affect your Dealmaking Conference - a networking event specifically created for dealmaking investment strategy? professionals and advisors, offering intimate and unique networking opportunities My experience as a robotics en- in conjunction with high quality, relevant one-on-one dealmeetings. trepreneur running several robotics- enabled healthcare companies has definitely shaped my views on the The Summer Dealmaking Conference will be held in Long Branch, NJ at the Ocean potential to build companies with last- Place Resort & Spa. Nestled between Pier Village and the Atlantic Ocean, Ocean ing value. A common view on robotics Place is less than 60 miles from NYC and 75 miles from Philadelphia, with train technology is that it is best suited for dirty, dull and dangerous activities. service as well as a ferry that runs from NYC to Atlantic Highlands. And while that may be the case, I get most excited about those applications ACG New York | www.acgnyc.org | 212-489- 8700

TheMiddleMarket.comUntitled-1 1 July / August 2018 Mergers &6/29/2018 Acquisitions 8:43:47 29PM

029_MAJ0818_001 29 7/3/2018 4:58:18 PM Guest Article Guest article

witnessed Clayton, Dublier & Rice’s acquisition of Envision Healthcare and TPG’s purchase of Par Pharmaceuti- cal to name a few large private equity Why lower mid-market healthcare transactions. Perhaps most notable was TPG, WCAS and Humana’s taking M&A is poised for growth the lead on 2017’s largest healthcare private equity investment in home healthcare provider Kindred Health- PE firms raising healthcare funds and strategic buyers divesting assets are among the care in a $4.1 billion take-private deal. deal drivers in the sector. It seems home healthcare continues to see strong tailwinds with an aging By Dana Pawlicki population looking to stay in their homes. These larger deals further pro- It is without question that the pri- more consistent value for investors as stood out. mote activity lower into the middle- vate equity healthcare sector is storm- of late, with successful deals in pay- Another very active area of the market by paving the way to larger ing into 2018. Extremely robust deal ors, IT, medical devices, and general lower middle market that Stonington valuations with continued growth. activity continues from 2017’s momen- services opportunities. There remains has been involved in has been working Stonington witnessed the larger end of tum in all size levels of the market, one noted sub-sector with weakness with independent sponsors pursuing the market intersect with the mid (and ranging from the lower middle-market in deal volume, as the pharmaceutical healthcare deals. The appetite for even sometimes lower middle market) to large buyout. space continued its recent trends to direct healthcare deal flow has never on a number of roll-up transactions in Driven by healthy valuations in record low deal volume for 2017. That been stronger amongst institutional physician specialties such as derma- the public markets and funds flush said, outside of that area, there are investors, as LPs seek to look beyond tology, dental, pain management, and with new capital, Stonington Capital many reasons for continued enthusi- established private equity firms for other specialist practices. Advisors fully expects these forces asm and activity in healthcare private access to unique deal flow, and we Corporate strategic investors have to continue to drive equity. expect this to continue to be a grow- also been as active as ever in acquir- frenzied deal activity Specifically, lower- ing area over the next few years. ing competitors and new business through 2018. Health- middle market health- As healthcare private equity firms lines for strategic growth initiatives. care generally has care buyout has been continue to grow, and as healthcare In 2015, corporates divested $115 mil- returned to being the a very active space private equity sector teams at more lion of healthcare assets, which was highest returning sector with recent successful generalist firms outperform, there is double the rate of just years before. of the broader market fundraises concluding bound to be more executives seeking Speaking of UnitedHealth Group, (one only need look at in 2017, including Shore to “go it on their own.” after recently buying DaVita Medical United Health Group’s Capital, DW Healthcare Secondly, in the middle market, Group (NYSE: DVA) for $4.9 billion, share price to evidence Partners, and others. aside from traditional specialist on December 22 and the company Dana Pawlicki the sector’s recent suc- In a fundraising market, healthcare firms such as Spanos, quickly turned around to purchase cess on the large public where many smaller Barber, Jesse & Co,. Linden, Riverside, Chilean Banmedica SA (SSE: GO) for company level), and after a few years funds have struggled on their raises, MTS and DW, several larger private $2.8 billion. KKR also executed a suc- of relative softness, biotechnology has these healthcare specialists have equity generalist shops have recently cessful turnaround of former Pfizer pill bounced back in a big way. prevailed to continue to grow their created specific strategies target- manufacturer Capsugel, doubling its According to the McKinsey Global capital base. Boston consultant NEPC ing the space such as KKR’s Health money in a sale to strategic Lonza for Institute: “Healthcare has led all sec- estimated that there are now ap- Care Strategic Growth Funds. Many $5.5 billion. Corporate acquirer INC tors in total returns to shareholders; proximately “325 healthcare-only firms of these specialists firms create and Research also purchased contract with returns of 15 percent annualized across the private equity spectrum” pursue niche opportunities within researcher Inventive Health for $4.6 over the period of 2010-2015, which (although noting the vast majority of healthcare sub-sectors; growing and billion from Advent International and would suggest this is a long-term these are more venture focused). Even consolidating previously fragmented trend.” While biotechnology remains within a year of record private equity activities. the strongest sub-sector, the market fundraising ($453 billion, according With respect to the larger end Dana Pawlicki is the co-founder of Stonington Capital Advisors. outside of biotech has also created to Preqin), healthcare specialist firms of the private equity market, 2017

30 Mergers & Acquisitions July / August 2018 TheMiddleMarket.com

030_MAJ0818 30 7/3/2018 2:30:52 PM Guest Article Guest article

witnessed Clayton, Dublier & Rice’s Thomas H. Lee Partners. Finally, while healthcare chiefs surveyed said their acquisition of Envision Healthcare and not a traditional acquisition, 2018 capital needs would be higher in 2018 TPG’s purchase of Par Pharmaceuti- has already brought in an alliance vs. 2017. Along those lines, the same cal to name a few large private equity between Amazon, Warren Buffet’s survey reported that 48 percent of Why lower mid-market healthcare transactions. Perhaps most notable Berkshire Hathaway, and JP Morgan CEOs anticipated more hiring in 2018 was TPG, WCAS and Humana’s taking Chase. While early days, given the than 2017. This could represent a mas- M&A is poised for growth the lead on 2017’s largest healthcare parties involved, industry experts are sive hole to be filled by private equity private equity investment in home viewing this a potential market shift in firms. healthcare provider Kindred Health- its creation of an alignment between Skeptics are quick to correctly point PE firms raising healthcare funds and strategic buyers divesting assets are among the care in a $4.1 billion take-private deal. insurance coverage and healthcare out two clouds in an otherwise bright deal drivers in the sector. It seems home healthcare continues distribution/ access. blue sky. First, the obvious conclusion to see strong tailwinds with an aging that all of the activity noted above population looking to stay in their Revisions to the continues to drive acquisition multi- homes. These larger deals further pro- ples upwards. That said, private equity stood out. mote activity lower into the middle- Affordable Care firms are looking beyond their basic Another very active area of the market by paving the way to larger playbooks to find value. There is little lower middle market that Stonington valuations with continued growth. Act will drive new doubt for example that within the roll- has been involved in has been working Stonington witnessed the larger end of capital needs and up space that by creating platform with independent sponsors pursuing the market intersect with the mid (and companies and then buying smaller healthcare deals. The appetite for even sometimes lower middle market) new opportunities. practices continues to create a mul- direct healthcare deal flow has never on a number of roll-up transactions in tiple arbitrage between the lower and been stronger amongst institutional physician specialties such as derma- The momentum with respect to large mid to upper segments of the market. investors, as LPs seek to look beyond tology, dental, pain management, and private equity deals continues. In late PE firms are also getting cre- established private equity firms for other specialist practices. February, Cerberus-backed grocery ative by combining multiple diverse access to unique deal flow, and we Corporate strategic investors have chain Albertsons abandoned its IPO practices under the same payor expect this to continue to be a grow- also been as active as ever in acquir- plans in favor of acquiring already pub- umbrellas which create additional ing area over the next few years. ing competitors and new business lic Rite Aid. Observers believe this was value from cross-selling and customer As healthcare private equity firms lines for strategic growth initiatives. partly in response to CVS’ nearly $70 convenience. Corporate divestitures continue to grow, and as healthcare In 2015, corporates divested $115 mil- billion merger with Aetna. The interest- also provide a second hunting group private equity sector teams at more lion of healthcare assets, which was ing twist on the CVS deal in addition to where values can be less exuberant, generalist firms outperform, there is double the rate of just years before. cost savings on the prescription/ insur- recognizing these transactions can bound to be more executives seeking Speaking of UnitedHealth Group, ance reimbursement side, is Aetna’s typically take more time to source to “go it on their own.” after recently buying DaVita Medical belief that the chain retailer will be- and execute on. Secondly, while the Secondly, in the middle market, Group (NYSE: DVA) for $4.9 billion, come a gateway for additional health Affordable Care Act (ACA) looms in aside from traditional specialist on December 22 and the company insurance customers. Aetna CEO Mark the background, there seems to be healthcare firms such as Spanos, quickly turned around to purchase Bertolini stated; “Call it 10,000 new enough friction on both sides of the Barber, Jesse & Co,. Linden, Riverside, Chilean Banmedica SA (SSE: GO) for front doors to the healthcare system.” aisle, particularly around an area as MTS and DW, several larger private $2.8 billion. KKR also executed a suc- Many believe that this deal was also a sensitive as this to many Congress- equity generalist shops have recently cessful turnaround of former Pfizer pill competitive response to the Amazon/ men’s constituents to keep change created specific strategies target- manufacturer Capsugel, doubling its JP Morgan/ Berkshire Hathaway alli- from being too radical or cataclysmic. ing the space such as KKR’s Health money in a sale to strategic Lonza for ance noted above. In fact, many private equity firms Care Strategic Growth Funds. Many $5.5 billion. Corporate acquirer INC Another data point suggesting the see potential revisions to ACA as a of these specialists firms create and Research also purchased contract environment continues to bode well potential driver of new opportunities pursue niche opportunities within researcher Inventive Health for $4.6 for 2018, in a recent survey of 150 and needed capital requirements to healthcare sub-sectors; growing and billion from Advent International and CEOs by Capital One, 33 percent of fund them. consolidating previously fragmented activities. With respect to the larger end Dana Pawlicki is the co-founder of Stonington Capital Advisors. of the private equity market, 2017

TheMiddleMarket.com July / August 2018 Mergers & Acquisitions 31

031_MAJ0818 31 7/3/2018 2:30:53 PM Guest Article

10 Strategies for integrating finance departments in healthcare M&A Finance should play a leadership role in post-merger integration, rather than just handling follow-up and reporting activities.

By Warren Beck, Tracey Coyne, Jay Sutton

Effective post-merger integration is 1. Provide a full suite of have a clear understanding of its internal a critical component of virtually every comprehensive financial services and external customers’ needs, including successful mergers and acquisitions Day-to-day functions such as billing when and how information and services transaction. In the healthcare sector, and collections, accounting, payroll, and must be delivered. This becomes particu- these integration efforts typically focus accounts payable and receivable are larly important when a new organization on care delivery issues such as streamlin- important and necessary activities, but a is brought on board. ing patient access, standardizing care, post-merger finance group should look Ascertaining these needs requires eliminating duplication in clinical services, beyond the basics to develop a vision meeting with customers, surveying them, normalizing physician contracts and for fully meeting the financial needs of and collaborating with them to provide support services, and managing patient a growing organization. This broader guidance. In this way, finance can help engagement and population health, to vision encompasses issues such as strate- other departments improve their analytic name a few. gic planning, debt management and capabilities by getting the right informa- Often, however, less energy and atten- oversight, regulatory compliance, charge tion to the right person at the right time. tion are given to the integration of admin- integrity, and reimbursement. istrative functions – particularly finance – For example, when charge integrity 3. Create centralized and which can be critical to the overall success is left to physician providers, stringent standardized processes of the transaction. Rather than viewing coding conventions and billing proce- This is undoubtedly the most widely finance and accounting solely through the dures sometimes are poorly understood. recognized post-merger integration activ- prism of follow-up and reporting activities, A strong finance function can help ity. Every acquired organization has its successful M&A teams will recognize that standardize billing across newly ac- own accounting, payroll, collections, finance actually can play a leadership role quired providers. In addition to reducing accounts payable, planning, and other in guiding the post-merger integration. rejected claims and rebilling costs, this processes. Allowing diversity in these In addition to managing the tradi- practice also can help avert costly fines processes after a merger will result in tional finance functions, the CFO in a and penalties for compliance violations. inconsistent customer service models post-merger healthcare organization Finance’s objective is to provide a and a dysfunctional management ap- must juggle multiple integration priorities broad array of financial services that proach. such as improving analytic capabilities, can help optimize revenue streams and In addition to making the merged creating a highly reliable finance function, minimize risk – in addition to perform- organization more efficient, centralizing developing scalable finance and reporting ing accurate reporting and transaction and optimizing these routine functions infrastructure, improving cost efficiency, processing functions. will give the organization’s leadership mitigating regulatory and credit risks, better understanding and control over managing at-risk payments, and replac- 2. Meet internal and external the performance of its various operating legacy systems. customer needs and requirements ing units. It also benefits the internal Here are 10 useful strategies that can For the finance department to be a customers, providing greater clarity, help organize and guide this complex customer service organization and not consistency, and reliability in their day- effort: just a back-office function, it first must to-day operations.

32 Mergers & Acquisitions July / August 2018

032_MAJ0818 32 7/3/2018 2:31:18 PM ®

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reporting systems, operating as isolated, detached, 4. Develop a robust governance units do not have the infor- or resistant to help- structure and framework for sus- mation they need to run their ing the operational tained integration performance businesses. What’s more, iso- leadership team. It is important to strike the right lated, disconnected systems Operational lead- balance between centralization and con- will generate outdated or ers want to have sistency on one hand, and flexibility and incomplete information that input into manage- innovation on the other. Effective leaders must be identified, cleaned, ment and reporting will seek to build an organization that and corrected later – putting processes, so finance CROWE HORWATH LLP CROWE HORWATH does not create random risk or unneces- the finance department even Warren Beck should make a visible sary duplication but at the same time is further behind. effort to collaborate open to change when needed. with them. The goal is Senior management must drive this 7. Create a culture congruent with to identify new opportunities to provide effort, but this can happen only within the leadership vision service to internal customers – actively the framework of a strong governance Just as cultural barriers can doom the looking for new ways to help in a proac- structure that helps make sure that overall integration effort, differing visions tive manner rather than merely respond- change is implemented properly. This within the merged finance department ing to requests. structure often begins with a steering can stall the functional integration. The committee that has strong employee CFO and integration team should develop 10. Demonstrate value by creating involvement, and it includes processes a plan for breaking down cultural barriers economic benefits for performing systematic follow-through and communicating the new vision while Among all the various groups involved and periodic progress reporting based on also working to understand the culture of in a healthcare merger, the finance tangible performance indicators. the acquired organization and adapting department should be the first to set those elements found to be useful. Com- an example by creating economies of 5. Transition to a single IT platform munications should be planned, deliber- scale and generating cost savings. In When merging the finance functions ate, and frequent to create a culture that addition, though, finance also should from two organizations, the IT systems supports the leadership vision. be able to demonstrate added financial from both organizations must be capable value by contributing ideas toward rev- of communicating with each other using 8. Integrate talent as well enue generation and risk management a single source of data. Data must be ac- as systems.Invariably, both as well as offering supporting evidence cessible on a single platform – but that’s organizations will have good talent of the direct economic benefits growing not to say there must be a single vendor. A wise manager will objectively evalu- out of the merger. What’s critical is that all systems and ate talent in order to take advantage With the American healthcare functions rely on a “single source of truth.” of new skills and diversity of thought. system undergoing a sustained period In many instances, an enterprise data A focused talent retention strategy of disruption, integrated healthcare warehouse or other integration technolo- will maximize the skills and talents of operations are likely to continue their gy can make this possible across multiple employees by supporting them with tools focus on streamlining operations, IT vendors and applications. and education while allowing them the improving patient experience and freedom to do what they do best without satisfaction, and reducing duplication 6. Make financial reporting a micromanaging every aspect of their in clinical and professional services. priority – not an afterthought work. The 10 strategies listed here can help With the initial post-merger focus on merged organizations accelerate these integrating patient populations and op- 9. Involve operational leadership in operational integrations while also erating systems, establishing integrated finance integration identifying additional opportunities to and timely financial reporting often is In creating a customer service culture, generate value from their integrated postponed. But without timely financial it is important that finance not be seen finance functions.

Warren Beck is a healthcare advisory services leader with Crowe Horwath LLP. Tracey Coyne is a senior manager, and Jay Sutton is a principal.

34 Mergers & Acquisitions July / August 2018

034_MAJ0818 34 7/3/2018 2:31:20 PM KEYNOTE SPEAKER SIR RICHARD BRANSON Founder, Virgin Group

KEYNOTE SPEAKER PETER GUBER CEO, Mandalay Group Owner & Co-Managing Partner, Golden State Warriors Co-Owner, Los Angeles Dodgers

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035_MAJ070818 35 7/5/2018 9:29:19 AM M&A Scene

High prices but plenty of opportunities in manufacturing

The ACG NY Industrial Conference featured a fireside chat between Corinthian Capital’s Peter Van Raalte and Mergers & Acquisitions’ Mary Kathleen Flynn.

Dealmakers focused on the manufacturing sector gath- co-founder of Corinthian Capital. ered recently at The ACG NY Industrial Conference. The The New York firm recently closed the sale of Friedrich Air conference is part of the ACG Northeast Industry Tour, Conditioning Co. to Monomoy Capital Partners; bought East- sponsored by ACG New York, ACG Boston and ACG Philadel- ern Wholesale Fence LLC; and invested in home healthcare phia. Among the featured speakers was Peter Van Raalte, the platform Excelin Holdings. JOHN CALABRESE

36 Mergers & Acquisitions July / August 2018

036_MAJ0818 36 7/3/2018 2:33:41 PM LEADING FIGURES IN MERGERS & ACQUISITIONS

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and he is advising General Atlantic on the technology New hires and promotions sector. By Demitri Diakantonis Ken Gonzalez was hired by cybersecurity firm Night- Dragon Security as a man- Joan Binstock was hired by will focus on several subsectors aging director. In addition, private equity firm Lovell including: dairy, farming, grains NightDragon has formed a Minnick Partners as an ad- and oilseeds and food packag- strategic partnership with visor, where she is assisting ing. Momentum Cyber to provide the firm on deal and op- M&A advisory to cybersecu- erational activities across Abhik Das was hired by Munich, rity companies. all portfolio companies. Germany-based alternative Binstock spent the majority asset management firm Gold- David Graff has joined of her career as an execu- ing Capital Partners as head of Oaklins DeSilva + Phillips as tive at investment manager Joan Binstock private debt where he will be a senior advisor. He focuses Lord, Abbett & Co. responsible for the firm’s private on brand extensions, licens- debt investments. Das was most ing and retail programs Olga Bogush was hired by recently with BlueBay Asset for media and branding Schiff Hardin LLP’s New York Management. companies. Graff founded office as a partner. Most SunGate Partners in 2000. recently with Herrick Fein- Christi Davis has joined Mc- stein LLP, Bogush represents GuireWoods’ securities practice Keith Guilbault was pro- clients in tax issues related to in Pittsburgh as senior counsel. moted from COO to CEO at M&A and private equity. Davis was most recently with Mexican restaurant chain PNC Financial Group where she Qdoba. Apollo Global Man-

Jim Brady was hired by PE Olga Bogush was managing chief counsel agement LLC (NYSE: APO) firm Frazier Healthcare Part- and corporate secretary. bought Qdoba from Jack in ners as an operating partner. the Box Inc. (Nasdaq: JACK) Brady was previously an operating partner at Raúl Fernández-Briseño was hired by Mayer for $305 million in March. Marlin Equity Partners. Brown as a partner in the firm’s Mexico City office where he will serve as the leader of John Adam Kanas was hired Cary Burch was hired by LLR Partners as a M&A in the region. Most recently with White by the Carlyle Group LP senior advisor where he will help the PE firm & Case, Briseño has experience in the tele- (Nasdaq: CG) as a senior seek investments in the enterprise software communications and aviation sectors. advisor, where he will be sector. Burch was most recently the chief advising the firm on finan- innovation officer at Thomson Reuters Seth Friedman was hired by investment firm cial services issues. Kanas (Nasdaq: TRI) and held CEO and COO roles Global Bankers Capital as a managing direc- currently serves as non- at the company’s legal enterprise software tor. Previously with RLJ Credit Management, executive chairperson at company, Thomson Reuters Elite. Friedman focuses on middle-market debt BankUnited (NYSE: BKU). and borrowing. Bill Cordingley was promoted from global Terry Keating from executive sector head for animal protein to head of Mark Garrett has joined PE firm General vice president to president the Chicago office at food and agribusiness Atlantic as an advisor. Garrett is the former and CEO at Accord Finan- bank Rabobank. In his new role, Cordingley CFO at Adobe Systems Inc. (Nasdaq: ADBE) cial Inc., the asset-based

38 Mergers & Acquisitions July / August 2018

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lending and factoring unit of Accord Michael O’Brien has joined Akerman’s Stacia Schlosser Ryan has joined invest- Financial Corp. Since joining Accord in M&A and private equity practice as a ment bank Perella Weinberg Partners 2014, Keating has played a major role partner. He was previously with Vedder as a partner. Ryan was most recently in transforming the business from a Price. with Morgan Stanley (NYSE: MS) and factoring company to a broad-based she focuses on the consumer and retail commercial finance lender. Patrick Paige was named CEO at sector. Ardian-backed HDT Automotive, a Megan Kneipp was hired by lower mid- fluid-handling systems provider. Paige Bill Thompson has joined Evercore dle-market PE firm Blue Point Capital was most recently the CEO of fastener (NYSE: EVR) as a senior managing di- Partners as head of business develop- maker Acument Global Technologies. rector and co-CEO of the firm’s private ment. Kneipp was most recently the capital advisory business. Based in San vice president of busi- Steven Paget has joined Francisco, Thompson will help expand ness development and alternative investment Evercore’s existing real estate advisory investor relations at firm Angelo, Gordon services by establishing a global real CenterOak Partners. & Co. as a managing estate capital raising platform. Thomp- director and portfolio son previously held roles with LaSalle Chune Loong Lum was manager, European Advisors, Donaldson, Lufkin & Jenrette/ hired by law firm Ropes performing credit. In this Credit Suisse and Greenhill & Co. & Gray as a counsel new role, Paget will lead in Hong King. Most the build out of Angelo, David Wheat has joined Kirkland & Ellis’ recently with Skadden, Gordon’s European per- Houston office as a partner. Formerly Arps, Slate, Meagher & Megan Kneipp forming credit business with KPMG, Wheat concentrates on Flom, Lum represents Asia and China- with a focus on developing the firm’s tax matters in M&A, particularly in the focused fund sponsors in the formation, European collateralized loan obligation energy sector. structuring and operation of private platform. Paget most recently served equity funds. as a portfolio manager on the Euro- Robby Winarta was hired by the Carlyle pean leveraged finance team at PGIM Group LP (Nasdaq: CG) as a managing Kristin Mendoza has joined Kirkland Fixed Income. director. Winarta was most recently the & Ellis’ New York office as a partner. head of Indonesia investment banking Previously with Latham & Watkins, Gregg Parise was hired by PE firm at Credit Suisse. He is based in Jarkarta. Mendoza concentrates on private eq- Sweetwater Capital Partners as a man- uity and M&A in the power and energy aging partner. Parise served as a senior Dennis Zhang was hired by Raymond sectors. advisor to the firm since 2016 and he James (NYSE: RJF) as a managing focuses on sourcing and underwriting director in San Francisco. Most recently Allison Miller was hired by PE firm secondary and direct opportunities in with Stifel Financial Corp. (NYSE: SF), Arbor Investments as chief market- private, high-growth companies. where he served as head of the firm’s ing officer. She was previously the vice China’s coverage, Zhang focuses on president of marketing for the Chicago Cyrille Perard has joined Perella cross-border M&A between Chinese Cubs. Weinberg Partners as and U.S.-based busi- a managing director, nesses. Ezequiel Navar has joined JMP Group where he will be help- LLC (NYSE: JMP) as a managing direc- ing the firm expand Jeff Zhang has joined Or- tor where he will focus on the health- its coverage in France. rick’s M&A and private eq- care information technology sector. Perad previously uity practice as a partner. Navar was most recently the head of served as co-head of Most recently with King & healthcare information technology at M&A for the France, Wood Mallesons, Zhang H2C Securities where he executed M&A, Belgium and Luxem- represents Chinese state- equity and debt transactions. bourg region at Gold- owned and privately-held man Sachs (NYSE: GS). Jeff Zhang companies on M&A.

40 Mergers & Acquisitions July / August 2018

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