THEMIDDLEMARKET.COM MARCH 2020 A look at how fi ve of the biggest tech companies probe new terrain through early-stage investments CV1_MAJ0320.indd 1 2/24/20 4:16 PM Gain way. We designed our M&A Escrow experience to be a straight line from start to finish. With our comprehensive Deal Dashboard, streamlined KYC and account opening, and high-touch service through a single point of contact, try a better way on your next deal. Learn more at srsacquiom.com 0C2_MAJ0320 2 2/24/2020 11:54:58 AM Contents March 2020 | VOL. 55 | NO. 3 Cover Story 16 Fresh Terrain A look at how five of the biggest tech companies explore new territory through early-stage investments. Features 24 Viral impact How the coronavirus is affecting M&A and private equity. 27 Top investment banks Houlihan Lokey leads list based on volume of PE-backed U.S. deals 30 Top private equity firms Audax ranks first in U.S. deals. Private Equity Perspective 14 Record year for fundraising Blackstone’s $26 billion fund marked the largest buyout fund ever raised. The Buyside 15 Taking a new path XPO Logistics is selling assets and has Watercooler hired a new CFO to lead the process. 6 10 Guest article Climate change draws PE Future of auto 33 KKR raises first global impact fund to BorgWarner acquires Delphi to Women on board target clean water. position for auto industry shift. Gender diversity on corporate boards is good for performance and for 8 12 shareholders. Protecting businesses Why investors like steaks Advent and Crosspoint buy Smith & Wollensky owner purchases cybersecurity firm Forescout. Strega to form new hospitality group. Data 35 9 12 Completed deals Healthy capital Duff & Phelps changes hands CVC Capital, KKR and Olympus Simple Mills backer Vestar closes Stone Point, Further Global acquire the Partners were among notable buyers new fund. financial services firm. in January. TheMiddleMarket.com March 2020 Mergers & Acquisitions 1 001_MAJ0320 1 2/24/2020 6:22:35 PM Inside Word March 2020 | VOL. 55 | NO. 3 Alexa, play “Rocketman” The voice assistant has sold 200 million devices and TheMiddleMarket.com launched a corporate venture capital fund 1 STATE STREET PLAZA, 27TH FLOOR NEW YORK, NY 10004-1505 • (212) 803-8200 EDITOR-IN-CHIEF Mary Kathleen Flynn MANAGING EDITOR Like many of today’s technology giants, Ama- Demitri Diakantonis zon.com Inc. (Nasdaq: AMZN) came from humble CONTRIBUTING EDITORS Keith Button, Danielle Fugazy beginnings, as a startup in a garage. It’s said that in GROUP EDITORIAL DIRECTOR, BANKING AND CAPITAL MARKETS the early days of the company, founder Jeff Bezos Richard Melville and his wife couldn’t run a vacuum cleaner or hair dryer in their house without blowing a fuse, due to EXECUTIVE DIRECTOR, CONTENT OPERATIONS AND CREATIVE SERVICES the power drain from the company’s servers. It may Michael Chu SR. ART DIRECTOR be a bit fanciful, but I can’t help wondering if that Nick Perkins domestic inconvenience planted the seed for the VICE PRESIDENT, CAPITAL MARKETS smart-home technology that would one day blossom Harry Nikpour (212) 803-8638 SENIOR MARKETING MANAGER into Amazon’s Echo smart speaker and Alexa voice assistant. Jamie Billington Alexa has reached dizzying heights in popularity over the last year. In 212-803-6099 January 2019, Amazon announced it had sold 100 million Alexa-powered CHIEF EXECUTIVE OFFICER ........................Gemma Postlethwaite devices. By January 2020, that number had doubled. Smart-home engage- CHIEF FINANCIAL OFFICER .......................................Debra Mason ment with Alexa nearly doubled, too, with people using the voice assistant for CHIEF STRATEGY OFFICER ...........................................Jeff Mancini smart-home controls hundreds of millions of times every week. CHIEF CUSTOMER OFFICER ........................................Dave Colford Within Amazon, Alexa is the also focal point for much activity. The tech- CHIEF CONTENT OFFICER ...........................................David Evans nology even has its own venture capital fund. The Alexa Fund invests up to VP, PEOPLE & CULTURE ....................................................Lee Gavin $200 million in early-stage voice technology companies. It focuses on hard- ware products both inside and outside the home, businesses that deliver new LICENSING AND REUSE OF CONTENT: Contact our official partner, Wright’s Media, about available services to devices enabled by Alexa and companies that can contribute to usages, license and reprint fees, and award seal artwork at [email protected] or (877) 652-5295 for more the science behind voice technology. information. Please note that Wright’s Media is the only authorized company that we’ve partnered with for Arizent Many of today’s big tech companies are engaging in corporate venture materials. capital (CVC), perhaps taking a page from their own histories. Bezos, for ex- CUSTOMER SERVICE ample, began raising about $1 million from around 20 angel investors in 1995, [email protected] or (212) 803-8500 then raised an $8 million Series A from Kleiner Perkins in 1996 and then took Mergers & Acquisitions Vol. 55/No. 3 (ISSN 0026-0010) is Amazon public in 1997. published monthly with combined issues in July/August and November/December by Arizent, One State Street Plaza, The end goal for startups backed by CVC may more likely be an M&A deal, 27th Floor, New York, NY 10004-1505. Yearly subscription is $1,995; $2035 for one year in all other countries. Periodical rather than an IPO. That’s one potential benefit of CVC. If the company doing postage paid at New York, NY and U.S. additional mailing offices. POSTMASTER: Send address changes to Mergers the investing likes how the startup develops, the investor is in a great position & Acquisitions / Arizent, One State Street Plaza, New York, NY 10004. For subscriptions, renewals, address changes to snatch it up. and delivery service issues contact our Customer Service department at (212) 803-8500 or email: [email protected]. Check out our cover story, where we explore how Amazon and other tech This publication is designed to provide accurate and authoritative information regarding the subject matter giants are using CVC in tandem with their R&D and M&A efforts. M&A covered. It is sold with the understanding that the publisher is not engaged in rendering financial, legal, accounting, tax, – Mary Kathleen Flynn or other professional service. Mergers & Acquisitions is a registered trademark used herein under license. ©2020 Arizent and Mergers & Acquisitions. All rights reserved. 2 Mergers & Acquisitions March 2020 002_MAJ0320 2 2/24/2020 4:37:19 PM You manage the deal. We’ll manage the escrow. When establishing an escrow account, you need a solid and reliable inancial West Coast partner. For nearly a century, MUFG Union Bank, N.A., has provided timely and Dean Levitt, Director 4157055020 accurate corporate trust services. We understand the complexities of escrow and do everything possible to make transactions worry-free. East Coast and Midwest Nils Dahl, Director 6467671048 20 years of industry experience means our corporate trust managers provide quick, e icient, and customized service for our global clients. We can open Asia and Latin America Rafael Diaz, Director your escrow account in days and start providing timely payments and accurate 6464522014 reporting, allowing you to drive your business forward. Learn more at mufgamericas.com/corporatetrust Global Banking & Finance Review Award Winner 2012, 2013, 2014, 2016, and 2018 MUFG Union Bank, N.A. A member of MUFG, a global inancial group ©2020 Mitsubishi UFJ Financial Group, Inc. All rights reserved. The MUFG logo and name is a service mark of Mitsubishi UFJ Financial Group, Inc., and is used by MUFG Union Bank, N.A., with permission. Member FDIC. 003_MAJ0320 3 2/24/2020 11:54:58 AM What’s going on @TheMiddleMarket.com www.themiddlemarket.com Conversations Opinion Data What’s ahead Inclusion Weekly roundups We conducted interviews with 8 invest- Having a more diverse workforce and Check our website every Friday for PE ment bankers and other M&A advisors. board of directors leads to a greater fundraising scorecard and the Weekly Some said the first half of the year will diversity of ideas. But it’s not just wrap. Recent deals mentioned include be robust, while others said the un- greater diversity of ideas which leads Morgan Stanley’s purchase of E*Trade certainty may have a negative impact to innovation; greater board diversity and Franklin Resources’ acquisition of throughout 2020. also sets the tone for a more inclusive Legg Mason. workplace culture. 4 Mergers & Acquisitions March 2020 004_MAJ0320 4 2/24/2020 4:41:18 PM 005_MAJ0320 5 2/24/2020 11:54:58 AM Watercooler BLOOMBERG NEWS Climate change draws PE KKR raises first global impact fund to target clean water By Demitri Diakantonis and Mary Kathleen Flynn KKR (NYSE: KKR) has raised $1.3 “We are thrilled to see our inves- energy is becoming “one of the most billion for its global impact fund. tors’ shared enthusiasm for the tre- active sectors in infrastructure,” David The fund is “dedicated to investment mendous opportunity we see ahead Giordano, global head of BlackRock opportunities in companies whose for KKR Global Impact and will build renewable power, told Bloomberg core business models provide com- on this to help set the new standard News. It comes, he said, “as global mercial solutions to an environmental across investing, value creation and power generation shifts from two- or social challenge,” the firm says. measuring success in the space,” says thirds fossil fuels to two-thirds renew- The fund will target companies in the Alisa Amarosa Wood, KKR partner ables over the next few decades.” lower middle-market that contribute and head of KKR’s private market Jeff Bezos is also committing to towards the United Nations Sustain- products group. investing in climate change.