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CS15774B MA GCM FT Ad_7.875x10.5_MA FINAL.indd 1 6/23/2017 10:55:45 AM 002_MAJ0218 2 CS15774B (ADAMS, HASTY, MCPHERSON, WASSING) M&A MAG | CMYK | TRIM: 7.875 X 10.5” 1/8/2018 1:33:37 PM February 2018 Volume 53, Number 02

Assistant Managing Editor Demitri Diakantonis [email protected] Contents Reporter Kamaron Leach February 2018 | Volume 53 | Number 02 [email protected] Contributing Editor Danielle Fugazy [email protected]

Group Editorial Director, Banking and Capital Markets Richard Melville [email protected] VP, Capital Markets Harry Nikpour Cover Story [email protected] Senior Sales Manager Richard Grant [email protected] Adding VP, Research Dana Jackson [email protected] Insight VP, Content Operations and Creative Services Paul Vogel [email protected] Financial services Director of Creative Operations Michael Chu [email protected] companies are Art Director Nikhil Mali [email protected] clamoring for better Director of Content Operations Theresa Hambel ways to attract and [email protected] retain customers. at Associate Marketing Manager Leatha Jones [email protected] puts data and analytics in the deal spotlight.

CHIEF EXECUTIVE OFFICER Douglas J. Manoni CHIEF FINANCIAL OFFICER Robert Dennen 18 CHIEF REVENUE OFFICER Marianne Collins EVP & CHIEF CONTENT OFFICER David Longobardi CHIEF MARKETING OFFICER Matthew Yorke 14 KKR invetes in pet SVP, CONFERENCES & EVENTS John DelMauro Columns SVP, HUMAN RESOURCES Ying Wong 4 Private Equity Perspective care provider 16 Watermill sells wire producer 6 e Buyside Reproduction or electronic forwarding of this product is a violation of federal copyright law! Site licenses are available -- please call Customer Service 8 Finance Finesse (212) 803-8500 or [email protected] Guest Articles: Mergers & Acquisitions (ISSN 0026-0010) Vol. 53 No.02, is published monthly with combined issues in July/August and November/December by Q&A 24 How PE fi rms can handle an SourceMedia, Inc. One State Street Plaza, 27th Floor, New York, NY 10004. 9 What the tax bill means for underperforming investment Telephone: (212) 803-8200. Customer Service: For subscriptions, renewals, address changes and delivery middle market M&A 28 Partnering for success in the service issues contact our Customer Service department at (212) 803-8500 or email: [email protected]; or send correspondence to Customer Service- lower middle market Mergers & Acquisitions, SourceMedia, One State Street Plaza, 27th Floor, New York NY 10004. Watercooler Periodicals postage paid at New York, NY, and additional mailing offi ces. 10 PE fi rm’s catch of the day Subscriptions: Yearly subscription is $1,995; $2035 for one year in all other countries. • UPS adds Postmaster: Send address changes to: Mergers & Acquisitions / Source Media, Inc., One State Street Plaza, New York, NY 10004. For subscriptions, logistics fi rm renewals, address changes and delivery service issues contact our Customer 11 Hain Celestial Service department at (212) 803-8500 or email: [email protected]. Advertising: For information, contact Harry Nikpour at (212) 803-8638 or harry. solidifi es better- [email protected]. 31 People Moves For more information about reprints and licensing content from Mergers & for-you food Acquisitions, please visit www.SourceMediaReprints.com or contact PARS portfolio International Corp. (212) 221-9595. This publication is designed to provide accurate and authoritative information 12 Target competes in online regarding the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering fi nancial, legal, accounting, tax, or other food delivery professional service. Mergers & Acquisitions is a registered trademark used herein under license. • Apple backs © 2018 Mergers & Acquisitions and SourceMedia, Inc. All rights reserved. iPhone parts maker

February 2018 MERGERS & ACQUISITIONS 1

001_MAJ020118 1 1/9/2018 1:43:55 PM What’s going on @ TheMiddleMarket.com

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003_MAJ0218 3 1/8/2018 1:33:45 PM Columns

Private Equity Perspective Mid-market PE firms need operating partners

By Demitri Diakantonis

uxo Investment Partners’ 2017 deal turing plants. He believes his management and for shipping company M/G Trans- operational background brings a lot to the table port doesn’t just stand out because compared to most private equity firms. “When Ait is another middle market private we’re walking through a manufacturing plant, I equity firm investing in a logistics provider. The think have a background and knowledge that is firm hired an operating partner to work with the different from the financial side of the house,” target. PE firms are sitting on near record high Helminski notes. cash piles to spend on acquisitions, but they need Private equity firms are intensifying their more help than ever to close acquisitions and run searches for operating partners for existing port- companies. folio investments and to form new companies to In a competitive M&A environment, it is not seek M&A in certain sectors. For example, Clear- Private equity enough for private equity firms to win deals just lake has partnered with veteran Bill Moses to look “ on capital alone. Buyers are increasingly seeking for food and beverage deals, and Huron Capital rms are more operating partners to work and more with the businesses they acquire. looking for Auxo Investment Part- operating ners, a lower middle mar- partners for ket private equity firm in Grand Rapids, Michi- existing gan, is one case in point. portfolio In 2017, Auxo acquired investments. dry barge shipper M/G Transport Services and bought on industry veteran John Binion to serve as the company’s operating partner. “Someone

like John has enormous Auxo Investment ” direct industry experience that none of us have,” says Auxo co-founder is working with David Brunori to do the same in Jeff Helminski. M/G is based in New Orleans and the chemicals sector. operates a fleet of 250 barges and ships. “It’s probably a function of the competitive en- Helminski is a mechanical engineer by trade vironment,” Helminski says. “It’s probably more and he previously held management roles at true to our space at the end lower end of the mid- General Motors Co. (NYSE: GM) manufac- dle-market.”

4 MERGERS & ACQUISITIONS February 2018

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005_MAJ0218 5 1/8/2018 1:33:47 PM Columns

The Buyside After buying magicJack and FBR, B.Riley to continue acquisition spree

By Demitri Diakantonis

fter reaching a deal to buy Internet phone magicJack is not the only deal Los-Angeles- company magicJack and completing based B.Riley made in 2017. The firm also the acquisition of FBR in 2017, B. Ri- bought FBR & Co. (Nasdaq: FBRC), an invest- Aley is not likely done seeking deals, ac- ment banking and brokerage firm, for about $160 cording to CEO Bryant Riley. Armed with $250 million. The merger agreement resulted in a new- million in equity to fund M&A, the financial ly combined firm with an increased capital base services firm will continue to look for targets at a and “meaningful revenue and expense synergies,” reasonable valuation, says Riley. according to B. Riley. “From my perspective, our model is to find FBR, headquartered in Arlington, Virginia, is businesses that are undervalued,” Riley tells an independent investment bank that was spun Mergers & Acquisitions. magicJack Vocaltec Ltd. off from the firm’s parent company in 2007. The From my (Nasdaq: CALL) is a cloud communications newly combined company creates a small-cap in- “ company hat allows customers to make and re- vestment bank with capital raising capabilities, perspective, ceive phone calls using Internet our model broadband access. The Netanya, Israel-based company distributes is to nd magicJack devices sold by more businesses than 25,000 retail stores. As part that are of the deal, magicJack will be held by B. Riley subsidiary Principal undervalued. Investments LLC, the entity that currently owns a complementa- ry telecommunications business called United Online Inc. B. Riley Financial Inc. (Nasdaq: RILY) has agreed to pay about $143 million ” for the company. Riley says that magicJack and

United Online are a good fit for magicJack each other because the two companies share a similar customer base. B. Riley paid such as: direct lending, recapitalizations, forma- about $170 million for United, another Internet tion capital and growth capital. services provider in 2016. “If we can find busi- B. Riley typically avoids auctions, and instead, nesses that can utilize our operational skillset and finds targets through its own sources. “We have a it’s something we can all value, that’s where we really interesting platform to find things,” Riley want to be,” Riley says. points out.

6 MERGERS & ACQUISITIONS February 2018

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007_MAJ0218 7 1/8/2018 1:33:48 PM Columns

Finance Finesse CLO funds remain hot even in the winter

By Kamaron Leach

ith the level of interest investors credit fundamentals,” said Carlyle representatives are seemingly showing lenders and Justin Plouffe and Ronnie Jaber in a written state- private equity firms, collateralized ment. “With this expertise and fund structure, we Wloan obligations may indeed be believe we are well-positioned to find the best op- here to stay. Last year in 2017, CLOs were a portunities to deploy capital in this environment.” big hit as lenders benefitted from a resurgence Headquartered in Washington, D.C., the of investor interest in this type of debt funds. Carlyle Group is a global asset management CLOs managed to stage a comeback proving firm with offices across North America, South their ability to churn out favorable returns and America, Europe, the Middle East, Africa, Asia minimal defaults. and Australia. With the Carlyle US CLO 2017-4 This remains true for private equity firms like fund, Carlyle’s structured credit and CLO busi- Carlyle is the Carlyle Group (Nasdaq: CG), a firm that has ness has approximately $20.5 billion in assets “ singlehandedly kept the CLO term striking hot. under management. singlehandlely In January, Carlye raised a new credit keeping the fund, called Carlyle Structured Cred- it Fund (CSC), with approximately CLO term $800 million in committed capital. relevant, in The new CSC fund, according to the addition to firm, will invest in CLOs backed by U.S. and European senior secured other private corporate loans that are actively man- equity and aged by third parties. lending rms. The CSC fundraise comes less than a month after the investment firm closed another CLO fund with $613 million in capital commitments. The firm raised four CLO funds in 2017, which was an “active year for Carlyle in CLOs, having completed 20 Carlyle is joined by a number of firms rais- ” transactions globally,” said Linda Pace, U.S. struc- ing this type of debt fund. Antares Capital raised tured credit managing director. The resurgence its first CLO fund in May with nearly $2.1 bil- of middle-market CLO funds is the cause for a lion in commitments; Madison Capital Funding number of firms raising more funds as of late. LLC, the direct lending arm of New York Life “We believe CLOs offer attractive risk-adjust- Insurance Co., closed a $325 million fund; and ed investment opportunities for investors who Trinitas Capital Management LLC closed the understand structural complexity and underlying firm’s sixth CLO.

8 MERGERS & ACQUISITIONS February 2018

008_MAJ020118 8 1/9/2018 1:40:16 PM Columns

Finance Finesse CLO funds remain hot even in the winter

By Kamaron Leach

ith the level of interest investors credit fundamentals,” said Carlyle representatives are seemingly showing lenders and Justin Plouffe and Ronnie Jaber in a written state- private equity firms, collateralized ment. “With this expertise and fund structure, we Wloan obligations may indeed be believe we are well-positioned to find the best op- here to stay. Last year in 2017, CLOs were a portunities to deploy capital in this environment.” big hit as lenders benefitted from a resurgence Headquartered in Washington, D.C., the of investor interest in this type of debt funds. Carlyle Group is a global asset management CLOs managed to stage a comeback proving firm with offices across North America, South their ability to churn out favorable returns and America, Europe, the Middle East, Africa, Asia minimal defaults. and Australia. With the Carlyle US CLO 2017-4 This remains true for private equity firms like fund, Carlyle’s structured credit and CLO busi- Carlyle is the Carlyle Group (Nasdaq: CG), a firm that has ness has approximately $20.5 billion in assets “ singlehandedly kept the CLO term striking hot. under management. singlehandlely In January, Carlye raised a new credit keeping the fund, called Carlyle Structured Cred- Carlyle has raised several CLO funds it Fund (CSC), with approximately Due to favorable returns and minimal defaults, collateralized loan obligation funds CLO term $800 million in committed capital. have resurfaced as a lucrative investment vehicle for the private debt world. relevant, in The new CSC fund, according to the Closed an $800 million credit fund backing CLOs in 2018 firm, will invest in CLOs backed by addition to Raised a $613 million CLO in December 2017 U.S. and European senior secured other private corporate loans that are actively man- Closed a $547 million European CLO fund in August 2017 aged by third parties. equity and Raised a $613 million U.S. CLO fund in August 2017 lending rms. The CSC fundraise comes less than a month after the investment Raised $610 million for a CLO fund in June 2017

firm closed another CLO fund with Closed a $612 million CLO fund in April 2017 $613 million in capital commitments. The firm raised four CLO Source: Carlyle/Mergers & Acquisitions funds in 2017, which was an “active year for Carlyle in CLOs, having completed 20 Carlyle is joined by a number of firms rais- ” transactions globally,” said Linda Pace, U.S. struc- ing this type of debt fund. Antares Capital raised tured credit managing director. The resurgence its first CLO fund in May with nearly $2.1 bil- of middle-market CLO funds is the cause for a lion in commitments; Madison Capital Funding number of firms raising more funds as of late. LLC, the direct lending arm of New York Life “We believe CLOs offer attractive risk-adjust- Insurance Co., closed a $325 million fund; and ed investment opportunities for investors who Trinitas Capital Management LLC closed the understand structural complexity and underlying firm’s sixth CLO.

8 MERGERS & ACQUISITIONS February 2018

008_MAJ020118_001 8 1/10/2018 12:47:15 PM Q&A

What the tax bill means for the middle market Strategic buyers, especially those with global operations, will be poised to make acquisitions

By Demitri Diakantonis

n light of regulators passing the new tax re- form, several corporations stated that they will invest more in their U.S. operations. For Iexample, AT&T Inc. (NYSE: T) said it will invest $1 billion in the U.S., including giving 200 thousand of its employees a $1,000 bonus. The new tax bill will reduce the corporate tax rate from 35 percent down to 21 percent. For private equity firms, this may mean on a higher return on their investments, says Nixon I think Peabody partner Richard Langan Jr. He sees the “ pharmaceutical, manufacturing and consumer strategics, sectors benefiting the most from the tax changes. particularly in Langan shared more thoughts on the topic with Mergers & Acquisitions: the middle market, will How is the tax bill being received in the bene t from

middle market community? Nixon Peabody I think there is a lot of enthusiasm in the Richard Langan Jr. the reduction in middle market. There was a lot of uncertainty corporate taxes. this year in M&A due to political uncertainty in Washington. The bill is going to help companies Which sectors will benefit from with foreign investments. tax changes? There are some incentives that may benefit What does it mean for mid-market M&A? some industries more than others. There are a few There will be great investments by some com- areas that I can point to right now. Manufactur- panies including on infrastructure. It will cause ing companies will see some immediate write-offs ” them to make some M&A decisions particularly and an increase in their enterprise values.Those on the buyside. I think strategics, particularly in who produce manufacturing equipment for oth- the middle market, will benefit from the reduc- er manufactureres is one example. In addition, I tion in corporate taxes. This may also cause some see oil and gas, pharmaceuticals and consumer family funds to consider M&A as opposed to in- goods companies, especially those with foreign terfamily transfers. operations benefiting.

February 2018 MERGERS & ACQUISITIONS 9

009_MAJ020118 9 1/9/2018 1:43:22 PM Watercooler

R&R Trucking, competitors the Schilli Foods, a Taco Bell franchisee; the Check- compliance management firm based in Daseke buys three more Cos., Big Freight Systems and the Steel- ers/Rally’s franchisor and operator of the Washington, DC. The company provides trucking companies man Cos. dual drive-through hamburger restaurants; international trade and customs consult- According to Don Daseke, Daseke Falcon Holdings, a Church’s Chicken ing services to multinational clients in 017 continues to be a busy M&A holds less than one percent marketshare of franchisee; Fazoli’s Group, franchisor and more than 30 countries. Sandler & Travis year for Daseke Inc. (Nasdaq: the open-deck truck segment, that is val- operator of Italian fast casual restaurants; DSKE). The truck operator has ac- ued at around $133 billion. Open-decks Huddle House, franchisor of family din- 2quired Tennessee Steel Haulers & Co., the are trucks that can be loaded from the top ing restaurants; Newk’s Eatery, a fast casual Roadmaster Group and Moore Freight or side and usually transport heavy indus- restaurant business; Southern California Service. The deals are part of Daseke’s trial equipment. Pizza Co., a Pizza Hut franchisee; and strategy to grow in niche sectors through —By Demitri Diakantonis TGI Friday’s, franchisor of casual dining acquisitions. .restaurants. Tennessee Steel is based in Nashville Sentinel was the seller in one of the and was founded in 1977. The compa- more notable recent QSR transactions. ny has a strong presence in Mexico, and PE firm’s catch of In April, the PE firm sold Checker/Rally’s additional operations on the East and the day Restaurants Inc., with 850 restaurants, for Southeast coasts. Roadmast is located in $525 million, three years after acquiring Phoenix and is known for transporting entinel Capital Partners has acquired the business, to Oak Hill Capital Partners. high security cargo. Moore Freight is Captain D’s, a seafood restaurant The PE firm exited its Pizza Hut invest- headquartered in Mascot, Tennessee and chain, marking its ninth investment ment—224 franchisees in Southern Cal- mainly delivers commercial sheet glass. Sin the fast-food sector since 1996. ifornia-- in 2012. Bloomberg News Vinson & Elkins represented Daseke. New York-based Sentinel purchased Sentinel focuses on investing in lower Trade focuses exclusively on complying Captain D’s from Centre Partners, a mid- middle market companies in the U.S. and with government and industry laws and dle market private equity firm with offices Canada in aerospace and defense, busi- regulations regarding the movement of in New York and Los Angeles. Terms of ness services, consumer, distribution, food goods across borders. the deal were not disclosed. The Captain and restaurants, franchising, healthcare “UPS regularly identifies companies D’s chain has 303 company-owned restau- and industrial businesses. Centre Partners and opportunities that can accelerate our rants and 227 franchised restaurants in 21 targets middle-market investments in the growth in our core or adjacent market states. The fast-food sector, also known consumer and healthcare sectors. segments, either by bringing new or com- as quick-service restaurants or QSRs, has —By Keith Button plementary services and solutions to our outgrown the broader restaurant industry customers, or by providing deeper, spe- since 2011, according to Sentinel. cialized expertise,” a UPS spokesperson “Captain D’s holds a unique market tells Mergers & Acquisitions. “Sandler & Daseke position and was recently recognized as UPS adds logistics Travis Trade Advisory Services fits directly “We’ve added three exceptional organi- one of the top 10 brands in America for brokerage firm into that strategy, as the firm brings UPS zations to our family of operating compa- consumer loyalty,” says Sentinel senior and our customers additional depth, glob- nies focused on unique sectors with prom- partner John McCormick. “Captain D’s PS (NYSE: UPS) has acquired al expertise, and new solutions that will ising growth characteristics,” says Daseke continues to attract younger guests and Sandler & Travis Trade Adviso- augment our already strong global trade CEO Don Daseke. is the clear category leader.” Captain D’s ry Services Inc., an independent management portfolio.” Addison, Texas-based Daseke operates CEO, Phil Greifeld, says that the Nash- Uprovider of global trade compliance ser- UPS, headquartered in Atlanta, is one more than 5,200 tractors and 11 thou- ville-based chain plans to expand both vices. The merger forms an improved bro- of the global leaders in providing logistics sand flatbed trucks and trailers. Some of inside its existing footprint--in the South- kerage service business for clients to maxi- and transportation services. The buyer’s its main customers include Boeing Co. east and Midwest. mize their trade investments and minimize services include transporting packages, (NYSE: BA), Caterpillar Inc. (NYSE: Prior to the Captain D’s deal, Senti- complexity, time and cost throughout freight management, facilitating interna- CAT) and General Electric Co. (NYSE: nel had acquired eight other restaurant their international trade operations. tional trade and developing technology GE). Earlier in 2017, Daseke purchased businesses in the fast-food sector: Border Sandler & Travis Trade is a global trade in order to minimize the complexity of

10 MERGERS & ACQUISITIONS February 2018 February 2018 MERGERS & ACQUISITIONS 11

010_MAJ020118 10 1/9/2018 1:44:12 PM Foods, a Taco Bell franchisee; the Check- compliance management firm based in transportation services. ers/Rally’s franchisor and operator of the Washington, DC. The company provides Recent deals in the transportation and Hain Celestial dual drive-through hamburger restaurants; international trade and customs consult- logistics industry include: Quad-C Man- Falcon Holdings, a Church’s Chicken ing services to multinational clients in agement’s backing of AIT Worldwide solidifies better-for- franchisee; Fazoli’s Group, franchisor and more than 30 countries. Sandler & Travis Logistics; the Jordan Co.’s acquisition of you food portfolio operator of Italian fast casual restaurants; a majority stake in Odyssey Logistics & ot only does the Hain Huddle House, franchisor of family din- Technology Corp.; Platinum Equity’s pur- Celestial Group Inc.’s ing restaurants; Newk’s Eatery, a fast casual chase of aerospace logistics firm Pattonair; (Nasdaq: Hain) acquisi- restaurant business; Southern California CI Capital’s acquisition of Simplified Lo- Ntion of Clarks UK Ltd. expand the Pizza Co., a Pizza Hut franchisee; and gistics; Ridgemont Equity Partners’ pur- company’s international presence, TGI Friday’s, franchisor of casual dining chase of Worldwide Express; and TPG but also grows its better-for-you .restaurants. Capital’s investment in Transplace. food offerings. A number of food Sentinel was the seller in one of the —By Kamaron Leach conglomerates, including Hain more notable recent QSR transactions. Celestial, are looking for acquisi- In April, the PE firm sold Checker/Rally’s tions in the healthy food segment. Restaurants Inc., with 850 restaurants, for “The Clarks brand and prod- $525 million, three years after acquiring Industrial products ucts are a strategic fit with the the business, to Oak Hill Capital Partners. makers merge Hain Daniels spreads business for The PE firm exited its Pizza Hut invest- various natural sweeteners appli- ment—224 franchisees in Southern Cal- ndustrial material providers Fairmount

Bloomberg News cations to complement our health ifornia-- in 2012. Santrol Holdings Inc. (NYSE: FMSA) and wellness portfolio of brands Sentinel focuses on investing in lower Trade focuses exclusively on complying and Unimin Corp. have agreed to as consumers continue to seek to middle market companies in the U.S. and with government and industry laws and Imerge in a $170 million deal. Unimin is a reduce their sugar intake and look Canada in aerospace and defense, busi- regulations regarding the movement of subsidiary of SCR-Sibelco NV, which will for better-for-you alternatives to ness services, consumer, distribution, food goods across borders. end up own a majority stake of the com- refined sugar,” says Hain CEO and restaurants, franchising, healthcare “UPS regularly identifies companies bined company. Irwin Simon. Newport, United and industrial businesses. Centre Partners and opportunities that can accelerate our “Together we will serve our custom- Kingdom-based Clarks produces targets middle-market investments in the growth in our core or adjacent market ers more efficiently and effectively with a natural sweeteners, such as ma- consumer and healthcare sectors. segments, either by bringing new or com- broader and more diverse product offer- ple syrup, that are sold under the —By Keith Button plementary services and solutions to our ing, greater technical expertise, improved Clarks brand throughout the U.K. customers, or by providing deeper, spe- scale and geographic diversity and an Financial terms of the purchase cialized expertise,” a UPS spokesperson expanded logistics platform,” says Fair- were not disclosed. tells Mergers & Acquisitions. “Sandler & mount CEO Jenniffer Deckard, who is In 2017, New York-based Hain UPS adds logistics Travis Trade Advisory Services fits directly expected to remain in her role. The new acquired the Better Bean Co. and brokerage firm into that strategy, as the firm brings UPS company will operate a logistics division soup maker Yorkshire Proven- and our customers additional depth, glob- that will consist of 96 distribution termi- der Ltd. Hain Celestial owns the PS (NYSE: UPS) has acquired al expertise, and new solutions that will nals and a 18-unit train. In another recent Earth’s Best, Ella’s Kitchen and Sandler & Travis Trade Adviso- augment our already strong global trade industrial manufacturing deal, Norwest Garden of Eatin’ brands. ry Services Inc., an independent management portfolio.” Equity Partners has invested in Ramsey In other related deals, B&G Uprovider of global trade compliance ser- UPS, headquartered in Atlanta, is one Industries Inc., a U.S. producer of service Foods Inc.(NYSE: BGS) is buy- vices. The merger forms an improved bro- of the global leaders in providing logistics cranes and winch tools. ing Back to Nature Foods Co. and kerage service business for clients to maxi- and transportation services. The buyer’s Fairmount, located in Chesterland, Kellogg Co. (NYSE: K) has agreed mize their trade investments and minimize services include transporting packages, Ohio, distributes sand-based products for to acquire protein bar maker RX- complexity, time and cost throughout freight management, facilitating interna- the oil and gas and industrial sectors. New bar for about $600 million. their international trade operations. tional trade and developing technology Canaan-based Unimin makes coatings —By Demitri Diakantonis Sandler & Travis Trade is a global trade in order to minimize the complexity of and chemicals, serving the construction,

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industrial and energy sectors. Sibelco pro- customer orders faster and more efficient- based in Minneapolis owns approximately sensing capabilities in AirPods. duces non-metallic materials, such as clay, ly. Amazon’s recent acquisition of Whole 1,834 store fronts and Target.com. Apple’s capital investment will also al- for the same sectors. The latter is head- Foods, valued at $13.7 billion, adds an —By Kamaron Leach low Finisar to transform a 700,000 square quartered in Antwerp, Belgium. overwhelming amount of pressure to re- foot manufacturing facility based in Sher- After the deal closes, Sibelco will own tail giants such as Target to remain com- man, Texas into a high-tech VCSEL pro- 65 percent of the combined company petitive. The growing interest and sim- duction plant, creating more than 500 job while Fairmount will have 35 percent. plicity of online shopping has converted Apple backs iPhone parts opportunities. The new production facili- The merger does not include Unimin’s traditional brick-and-mortar shoppers to manufacturer ty, to be combined with Finisar’s existing high-purity quartz business, that mostly one-click buyers. To date, the growth in plant nearby in Allen, Texas, will begin serves electronics manufacturers in Asia. online customer traffic has retail giants pple Inc. (Nasdaq: AAPL) is in- shipping in the latter half of 2018. The combined company is expected to shifting its digital strategy and seeking to vesting approximately $390 mil- “VCSELs power some of the most have around $2 billion in annual revenue deliver groceries and retail items in under lion into Finisar Corp., a com- sophisticated technology we’ve ever de- and about $400 million in Ebitda. an hour. municationsA parts manufacturer. The veloped and we’re thrilled to partner with Wells Fargo Securities (NYSE: WFC) Founded in 2014, Shipt was created capital comes from the Cupertino, Cal- Finisar over the next several years to push and Jones Day are advising Fairmount. as an Internet-based grocery and retail ifornia-based tech giant’s $1 billion Ad- the boundaries of VCSEL technology and Morgan Stanley, Freshfields Bruckhaus delivery service with a network of more vanced Manufacturing Fund, a fund put Deringer and Hughes Hubbard and are than 20,000 personal shoppers. The Bir- together by Apple in support of American advising Sibelco. Barclays and BNP Parib- mingham, Alabama-based target offers manufacturers innovating and creating as are also advising Sibelco. scheduled and same-day delivery services more jobs. —By Demitri Diakantonis from your local store direct to a customer’s door whether at home, the office, on vaca- tion, or to friends and family. The target’s service will enhance Target’s digital ful- Target competes in online fillment capabilities, bringing its delivery food delivery service to nearly half of Target stores by early 2018. For majority of Target stores n an effort to ramp up its fulfillment and all major markets, the service will be and delivery capabilities, Target Corp. available before the 2018 holiday season. (NYSE: TGT) has agreed to purchase “We laid out an ambitious strategic IShipt Inc. for approximately $550 million agenda in early 2017, which included a

in cash. The deal announced Wednesday focus on giving our guests a number of brings same-day delivery services to cus- convenient ways to shop with Target, tomers across the U.S. whether it’s ordering online and picking Apple up in one of our stores, driving up to pick up an order, or taking advantage of Finisar, headquartered in Sunnyvale, services like our new Restock program,” California, manufactures optical sub- states Target chief operating officer John systems and other components for data Mulligan. “With Shipt’s network of lo- communication and telecommunica- cal shoppers and their current market tion applications. The deal announced penetration, we will move from days to Wednesday will help increase the tar- hours, dramatically accelerating our abili- get’s research and development efforts ty to bring affordable same-day delivery to and production of vertical-cavity sur- Shipt guests across the country.” face-emitting lasers (VCSELs). VCSELs The Shipt deal comes at an interest- As part of the deal, Shipt will operate are used to power some of Apple’s latest ing-yet-expected time, as grocery store as a subsidiary of Target and continue to features, including Face ID, Animoji, chains and retailers are hoping to fulfill run its business independently. Target, Portrait mode selfies and the proximity

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based in Minneapolis owns approximately sensing capabilities in AirPods. the applications they enable,” states Apple and development, glass processing and 1,834 store fronts and Target.com. Apple’s capital investment will also al- chief operating officer Jeff Williams. capital equipment needs. —By Kamaron Leach low Finisar to transform a 700,000 square Hiring, capital equipment planning —By Kamaron Leach foot manufacturing facility based in Sher- and infrastructure upgrades have already man, Texas into a high-tech VCSEL pro- begun at the Sherman facility. One hun- duction plant, creating more than 500 job dred percent of the VCSELs Apple buys Apple backs iPhone parts opportunities. The new production facili- from Finisar will be made in Texas. The M&A spurs in utilities manufacturer ty, to be combined with Finisar’s existing backing of Finisar comes only two days with Sun Capital exit plant nearby in Allen, Texas, will begin after Apple announced its acquisition of pple Inc. (Nasdaq: AAPL) is in- shipping in the latter half of 2018. Shazam, a music identification service s the year comes to a close, Sun vesting approximately $390 mil- “VCSELs power some of the most and mobile application. In May, Apple Capital Partners Inc. has agreed to lion into Finisar Corp., a com- sophisticated technology we’ve ever de- said Corning Incorporated had been sell Aclara Technologies LLC, pro- municationsA parts manufacturer. The veloped and we’re thrilled to partner with awarded the Advanced Manufacturing viderA of smart infrastructure technology, capital comes from the Cupertino, Cal- Finisar over the next several years to push Fund’s first award, with $200 million to Hubbell Power Systems Inc. The deal is ifornia-based tech giant’s $1 billion Ad- the boundaries of VCSEL technology and invested to support the target’s research valued at approximately $1.1 billion. vanced Manufacturing Fund, a fund put together by Apple in support of American manufacturers innovating and creating more jobs.

Finisar, headquartered in Sunnyvale, California, manufactures optical sub- systems and other components for data communication and telecommunica- tion applications. The deal announced Wednesday will help increase the target’s research and development efforts and production of vertical-cavity sur- face-emitting lasers (VCSELs). VCSELs are used to power some of Apple’s latest features, including Face ID, Animoji, Portrait mode selfies and the proximity

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Aclara supplies smart meters and a va- than $9.2 billion in capital under man- tween $30 million and $350 million in folio. Jefferies LLC is acting as financial riety of other field devices used to manage agement and has invested in more than revenue. The firm, which focuses on the advisor to PetVet, while Weil Gotshal & and power utility services. The St. Lou- 300 companies across a variety of indus- construction, automotive and industrial Manges LLP is serving as legal advisor. is-based target also provides advanced me- tries, including: consumer products and sectors, recently closed its third fund. Ear- Simpson Thacher & Bartlett LLP is serv- tering infrastructure, software, and related services, food and beverage, industrial, lier in 2017, IOP has made an investment ing as legal counsel to KKR, while Jeffe- services to more than 800 water, gas and packaging, chemicals, building products, in foam maker Creative Foam. ries and KKR Capital Markets have com- electric utilities. The agreement comes as automotive, and retail. Maker of home goods are benefiting mitted to providing debt financing for the deal activity in the power and utilities sec- Sun Capital targets companies with from trends in the real estate market, in- transaction. tor presented a strong total deal value in between $50 million and $500 million in cluding increases in the purchases of new “We are excited to partner with PetVet the third quarter of 2017, one of the high- sales, but also targets companies with up homes. Related deals include: Z Capital and its affiliated veterinarians to accelerate est quarterly deal values since Q3 2016, to $1.5 billion in revenues. The firm pre- Partners’ purchase of fireplace manufac- the company’s track record of organic and according to a recent deal insights study viously sold memory foam manufacturer turer Twin-Star International Inc.; Hook- acquisitive growth,” states KKR represen- by PricewaterhouseCoopers LLP. Innocor Inc. and gas store brands Admiral er Furniture Corp.’s (Nasdaq: HOFT) ac- tative Max Lin. The buyer, Hubbell Power Systems, Petroleum Co. and Lemmen Oil Co. quisition of Home Meridian International Established in 2016, L Catterton is a subsidiary of Hubbell Inc. (NYSE: —By Kamaron Leach Inc.; and Mattress Firm Holding Corp.’s came to form through the combination HUBB). Aclara was formed by Sun Capi- (Nasdaq: MFRM) completed merger for tal as an independent business when it was rival Sleepy’s. acquired by the PE firm in 2014 from a —By Demitri Diakantonis corporate parent. The Columbia, South IOP-backed Alexandria Carolina-based buyer is purchasing Aclara buys rival following four add-on acquisitions from carve-out deals. ood products manufacturer Pets: a sector PE firms Alexandria Moulding Inc. has love to invest in acquired rival House of Fara. TheW buyer is backed by Industrial Oppor- rivate investment firm KKR & tunity Partners. Co. (NYSE: KKR) has agreed to House of Fara, based in Laporte, In- acquire PetVet Care Centers LLC diana, produces standard and decorative Pfor an undisclosed amount. PetVet was hardwood mouldings. Alexandria also previously owned by L Catterton and makes mouldings and other hardwood Ontario Teachers’ Pension Plan.PetVet materials for the North American housing operates general practice and veterinary market. The two companies had a work- hospitals for companion animals. The ing partnership for more than a decade. target, headquartered in Westport, Con- Adobe Stock IOP invested in Alexandria in 2016. necticut, offers a variety of veterinary ser- “During our investment period, we “We believe the acquisition of House vices including preventative and primary were able to invest in and improve the of Fara will further strengthen Alexan- care to emergency critical care and sur- business while also quadrupling EBIT- dria’s North American manufacturing ca- geries. PetVet works with specialists and DA,” according to a Sun Capital spokes- pabilities and is a unique opportunity to general veterinarians through a network person. “Development of new products combine two companies that have worked of 125 locally-branded hospitals across and capabilities increased Aclara’s address- together for many years,” says Alexandria 22 states. able market five-fold, and resulted in a chairman and IOP operating principal KKR is a New York-based private eq- robust backlog of contracted sales of ap- Dave Mackin. McDermott Will & Emery uity firm that manages a variety of invest- proximately $1 billion.” represented IOP and Alexandria. ments such as energy, infrastructure, real Sun Capital, founded in 1995, is a IOP is an Evanston, Illinois-based estate, credit strategies and hedge funds. global private equity firm based in Boca middle market PE firm that invests up to Earlier in December, the firm added in- Raton, Florida. The PE firm has more $50 million in businesses that have be- dustrial tools maker Hyperion to its port-

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tween $30 million and $350 million in folio. Jefferies LLC is acting as financial er-focused private equity firm Catterton. revenue. The firm, which focuses on the advisor to PetVet, while Weil Gotshal & The consumer-focused private equity firm construction, automotive and industrial Manges LLP is serving as legal advisor. has managed more than $14 billion in eq- sectors, recently closed its third fund. Ear- Simpson Thacher & Bartlett LLP is serv- uity capital across six fund strategies. The lier in 2017, IOP has made an investment ing as legal counsel to KKR, while Jeffe- firm is based in Greenwich, Connecticut. in foam maker Creative Foam. ries and KKR Capital Markets have com- Dealmakers expect the wave of pet-re- Maker of home goods are benefiting mitted to providing debt financing for the lated M&A to continue, as consumers from trends in the real estate market, in- transaction. favor pet products that reflect the same cluding increases in the purchases of new “We are excited to partner with PetVet standards used for people. Mars Inc. homes. Related deals include: Z Capital and its affiliated veterinarians to accelerate agreed to buy animal hospital chain VCA; Partners’ purchase of fireplace manufac- the company’s track record of organic and Tractor Supply Co. (Nasdaq: TSCO) pur- turer Twin-Star International Inc.; Hook- acquisitive growth,” states KKR represen- Adobe Stock chased pet food maker Petsense LLC; In er Furniture Corp.’s (Nasdaq: HOFT) ac- tative Max Lin. of LVMH Moet Hennessy Louis Vuitton 2015, pet brands Worldwise and Quaker quisition of Home Meridian International Established in 2016, L Catterton SE’s private equity group L Capital and its Pet Group merged to acquire more. Inc.; and Mattress Firm Holding Corp.’s came to form through the combination real estate investment unit with consum- —By Kamaron Leach (Nasdaq: MFRM) completed merger for rival Sleepy’s. —By Demitri Diakantonis

Pets: a sector PE firms love to invest in rivate investment firm KKR & Co. (NYSE: KKR) has agreed to acquire PetVet Care Centers LLC Pfor an undisclosed amount. PetVet was previously owned by L Catterton and Ontario Teachers’ Pension Plan.PetVet operates general practice and veterinary hospitals for companion animals. The target, headquartered in Westport, Con- necticut, offers a variety of veterinary services including preventative and primary care to emergency critical care and sur- geries. PetVet works with specialists and general veterinarians through a network of 125 locally-branded hospitals across 22 states. KKR is a New York-based private equity firm that manages a variety of investments such as energy, infrastructure, real estate, credit strategies and hedge funds. Earlier in December, the firm added industrial tools maker Hyperion to its port-

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the specialty chemicals, materials and in- to upgrade C&M’s production facility, GTCR sprinkles on gredients industry,” according to GTCR. equipment, and introduced a new man- Flavor Producers Nicolais, GTCR’s partner in Ceba-Tech, agement team. The acquisition of C&M complements Winchester’s TCR has made its first acquisi- product line by adding ca- tion through its new Ceba-Tech ble manufacturing capabil- Specialty Solutions portfo- ities. “The C&M of today Glio company: a majority investment in is quite different from the Flavor Producers Inc., provider of flavors firm we originally acquired, and extracts. and we have been proud Chicago-based GTCR formed Ce- partners through their stra- ba-Tech in January as a partnership with tegic journey,” states Water- Charles Nicolais, the former CEO of a mill Group partner Timo- specialty ingredients provider for the food thy Eburne. “As a result of

and beverage industries. Flavor Producers, Flavor Producers Watermill’s strategy devel- also known as FPI, serves more than 500 opment and implementa- customers globally in foods, beverages and had founded and built his previous com- tion process, C&M evolved from a family nutraceuticals—dietary supplements such pany, SensoryEffects, through acquisitions owned job shop in an aging facility serv- as vitamins and minerals. and organically before selling it. ing increasingly commoditized end mar- “FPI has an excellent customer-centric GTCR made the investment in FPI kets into a professional, tightly run oper- approach to developing unique flavors, from its $5.25 billion GTCR Fund XII, ation in a modern facility with a unique and we believe they bring proprietary which closed its fundraising in October. position in custom wire and cable.” capabilities and extraordinary responsive- —By Keith Button Watermill Group, based in Lexington, ness,” says Sean Cunningham, GTCR Massachusetts, targets companies with managing director. “We look forward to annual revenues of $50 million to $500 investing additional capital to support million in the areas of manufacturing, both organic initiatives and strategic fol- Watermill sells wire value-added distribution and business low-on acquisitions.” manufacturer services. The firm’s portfolio includes fas- Terms of the FPI deal were not dis- tening manufacturer Cooper & Turner, closed. Cunningham describes the deal as inchester Interconnect Corp., and metal parts provider Experi-Metal a partnership with FPI’s existing owners, a portfolio company of pri- Inc.. Watermill and C&M were repre- the Harris family, led by CEO Jeff Harris. vate equity firm Snow Phipps sented by financial advisor Sperry, Mitch- FPI describes the deal as a recapitaliza- Group,W has bought wire and cable dis- ell & Co., while K&L Gates LLP served tion through a majority investment from tributor C&M Corporation from the as legal advisor. Ceba-Tech. FPI, based in Valencia, Cal- Watermill Group. As the manufacturing Founded in 1941, Winchester Inter- ifornia, remains a stand-alone business, industry has evolved in respect to its relat- connect also designs and develops inter- retaining its name, employees, facilities ed processes, strategic buyers and private connect technology, including: circuit and other assets. The company, founded equity firms have found the sector to be boards, radio frequency and power con- in 1981, focuses on organic and natural ripe for middle-market deals. nectors, multi-pin connectors, and cable products, with three facilities and research Dayville, Connecticut-based C&M and electromechanical assemblies. The and development groups in Valencia, Cin- designs wires and cables, coil cords, and buyer is headquartered in Middlebury, cinnati and Linden, New Jersey, as well as cable assembly components for clients Connecticut with additional distribution “an extensive library of proprietary fla- in the medical device, industrial auto- facilities in Connecticut, Massachusetts, vors,” according to GTCR. mation, aerospace and military markets. South Carolina, Illinois, Mexico, China The goal of St. Louis-based Ceba-Tech Since acquiring the target nine years ago and Malaysia. is to “build a market-leading platform in in 2008, the Watermill Group has helped —By Kamaron Leach

16 MERGERS & ACQUISITIONS February 2018

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Financial services companies are clamoring for better ways to attract and retain customers

That puts data and analytics in the deal spotlight

018_MAJ020118 18 1/9/2018 1:39:46 PM By Demitri Diakantonis

n a world where gaining, retaining and understanding data on customer behavior is increasingly diﬃ cult, Idetailed information is more important than ever. Data providers for retailers are in great demand, and they have Financial services companies are clamoring become valuable acquisition targets, particularly among for better ways to attract and retain customers strategic buyers. For instance, Sutherland Global Services Inc. has purchased venture capital-backed data analytics ﬁ rm Nuevora to strengthen its digital services division. e deal allows for customers to use predictive insights to That puts data and analytics in the deal spotlight monetize their data assets.

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But it isn’t just retailers that are looking for keeping a stake in Dealogic, while Euromon- “Data has always been Morningstar’s sweet data providers to help them improve their busi- ey—the European financial publisher-- is selling spot, and we look forward to working with Pitch- nesses. Deal activity is robust in the financial its 15.5 percent stake for about $135 million. Book to help investors and advisers better under- services space as well, with investment banks and Carlyle and Euromoney invested in Dealogic in stand and navigate this evolving area of the mar- other financial organizations needing custom in- 2014. ket,” said Kunal Kapoor, formation. “We are excited to partner with ION and will Morningstar president, at “Data is more valuable today in certain situa- benefit from the strength of their platforms and the time of the deal. “Both tions. People want to make more sustainable deci- their established network of relationships with fi- Morningstar and PitchBook sions based on analytics,” says Ken Schiciano, TA nancial institutions and corporations,” says Tom share the goal of bringing People want Associates managing director. Fleming, Dealogic CEO. transparency to the in- “ Dealmakers expect most deals to come from “Together we will be able to accelerate the vestment landscape, and to make more strategic buyers. One recent notable deal in the digitization and automation of capital markets PitchBook is in a great po- data sector was ION Investment Group acquir- and introduce innovations to how financial in- sition to continue its strong sustainable ing a majority stake in analytics provider Dealogic stitutions, investors and issuers conduct their growth trajectory as private decisions from the Carlyle Group LP (Nasdaq: CG) and business,” says Andrea Pignataro, ION CEO. markets and private com- Euromoney. Dealmakers often rely on Dealogic’s Dublin-based ION provides market trading soft- panies are areas of rapidly based on data to indentify potential M&A opportunities. ware to banks and other financial firms. UBS ad- growing investor interest.” analytics. “I don’t think data is that exciting to private vised ION and is providing financing. JPMorgan Morningstar, headquar- equity. They build a mouse trap that allows stra- Chase & Co. (NYSE: JPM) is advising Dealogic. tered in Chicago, originally invested $1.2 million tegic buyers to build a bigger mouse trap for data in PitchBook in a Series A round in September providers,” says Ajay Asija, B. Riley FBR senior Morningstar purchases 2009 and another $10.0 million in a Series B in managing director. “How do you monetize the 2. PitchBook January 2016, amassing a 20 percent stake before value of customers and the information you have? In December 2016, Morningstar Inc. (Nasdaq: the deal was announced. ” The timing is important because you have compa- MORN) acquired the 80 percent of PitchBook “As investors increasingly broaden their hori- nies focusing on it.” Data Inc. that it did not already own. The $180 zons beyond traditional public markets and in- Here are seven recent deals featuring strategic million transaction expanded Morningstar’s deal vestments, the multi-asset capabilities Morning- buyers that have been snatching up financial data research into private companies, since Morning- star is building will become even more valuable,” providers: said John Gabbert, PitchBook CEO, in 2016. ION acquires stake Markit adds Symphony- 1. in Dealogic 3. backed CoreOne ION Investment Group’s acquisi- Financial information services company IHS tion of a majority stake in Dealogic Markit (Nasdaq: MRKT) bought CoreOne Tech- underscores the extent to which nologies from Symphony Technology Group for financial research companies have $200 million in 2015. The acquisition expanded become attractive to buyers. Markit’s services into prime brokerage services. “Dealogic has a tremendous New York-based CoreOne provides regulatory set of core data,” says Schiciano reporting and other data management to hedge of TA Associates. “Ion will be able funds, investment banks and wealth managers. to refresh the technology.” Based STG formed CoreOne in 2008 when the Palo in New York, Dealogic provides Alto, California-based private equity firm bought M&A and other financial analytics Morningstar financial data services company Netik from the to financial services firms globally including each star mainly focuses on public companies. Seat- Bank of New York Mellon Corp (NYSE: BK). of the world’s top 50 investment banks. Dealogic’s tle-based PitchBook, founded in 2007, delivers “I think there’s more interest, more talk, more main competitors include Bloomberg. private capital market data on private equity and people looking at it. All these businesses have a Carlyle and Dealogic’s management team are M&A, covering the full deal lifecycle. unique angle,” says Steve Pierson, president of

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keeping a stake in Dealogic, while Euromon- “Data has always been Morningstar’s sweet Lovell Minnick Partners. Lovell Minnick is a fi- ey—the European financial publisher-- is selling spot, and we look forward to working with Pitch- nancial services-focused private equity firm that its 15.5 percent stake for about $135 million. Book to help investors and advisers better under- invests up to $100 million in equity. Carlyle and Euromoney invested in Dealogic in stand and navigate this evolving area of the mar- “CoreOne is a great fit for Markit. Their ser- 2014. ket,” said Kunal Kapoor, “We are excited to partner with ION and will Morningstar president, at benefit from the strength of their platforms and the time of the deal. “Both their established network of relationships with fi- Morningstar and PitchBook nancial institutions and corporations,” says Tom share the goal of bringing Fleming, Dealogic CEO. transparency to the in- “Together we will be able to accelerate the vestment landscape, and digitization and automation of capital markets PitchBook is in a great po- and introduce innovations to how financial in- sition to continue its strong stitutions, investors and issuers conduct their growth trajectory as private business,” says Andrea Pignataro, ION CEO. markets and private com- Dublin-based ION provides market trading soft- panies are areas of rapidly ware to banks and other financial firms. UBS ad- growing investor interest.” vised ION and is providing financing. JPMorgan Morningstar, headquar- IHS Markit Chase & Co. (NYSE: JPM) is advising Dealogic. tered in Chicago, originally invested $1.2 million vices will strengthen our offerings and will allow Private markets in PitchBook in a Series A round in September us to better serve our customers,” said Lance Ug- “ and private Morningstar purchases 2009 and another $10.0 million in a Series B in gla, Markit CEO, when the deal was announced. companies 2. PitchBook January 2016, amassing a 20 percent stake before “The transaction is consistent with our long-term In December 2016, Morningstar Inc. (Nasdaq: the deal was announced. strategy to accelerate organic growth through ac- are areas MORN) acquired the 80 percent of PitchBook “As investors increasingly broaden their hori- quisitions.” of rapidly Data Inc. that it did not already own. The $180 zons beyond traditional public markets and in- CoreOne was not the only acquisition that million transaction expanded Morningstar’s deal vestments, the multi-asset capabilities Morning- London-based Markit made in 2015. In July growing research into private companies, since Morning- star is building will become even more valuable,” 2015, Markit completed the purchase of trade investor said John Gabbert, PitchBook CEO, in 2016. securities software firm Mosaic for undisclosed interest. terms and in March 2015, Markit said it would Markit adds Symphony- buy the Halifax House Index from Lloyds Bank- 3. backed CoreOne ing Group for undisclosed terms. Financial information services company IHS Markit (Nasdaq: MRKT) bought CoreOne Tech- Broadridge strengthens nologies from Symphony Technology Group for 4. data services $200 million in 2015. The acquisition expanded Broadridge Financial Solutions Inc. (NYSE: BR) ” Markit’s services into prime brokerage services. agreed to acquire Morningstar Inc.’s 15(c) board New York-based CoreOne provides regulatory consulting services business for undisclosed terms. reporting and other data management to hedge The acquisition will strengthen Broadridge’s abili- funds, investment banks and wealth managers. ty to provide verifiable data to mutual fund boards STG formed CoreOne in 2008 when the Palo of directors to help them fulfill their governance Alto, California-based private equity firm bought responsibilities. The consulting services business financial data services company Netik from the provides materials to the boards of directors and star mainly focuses on public companies. Seat- Bank of New York Mellon Corp (NYSE: BK). executive teams of mutual funds to assist them tle-based PitchBook, founded in 2007, delivers “I think there’s more interest, more talk, more in reviewing and approving fee agreements with private capital market data on private equity and people looking at it. All these businesses have a each of their investment advisers. M&A, covering the full deal lifecycle. unique angle,” says Steve Pierson, president of “The expanded breadth and depth of our da-

20 MERGERS & ACQUISITIONS February 2018 February 2018 MERGERS & ACQUISITIONS 21

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ta-driven solutions will continue to enhance the Nasdaq’s technology expertise, leading data and value we provide to our investment management software products, and global distribution. We’ve clients and set the standard for the financial ser- grown this business at a 12% annual growth rate vices industry,” says Dan Cwenar, Broadridge’s head of buyside data and analytics. Lake Success, New York-based Broad- ridge provides data and The investment analytics services to in- “ surers, retail bankers and management community is wealth managers. “Morningstar is relying sharpening its focus on increasingly on delivering its fund data and analytics to as many independent users as possible,” says data and Scott Burns, head of data and research products at Thomson Reuters

analytics to B;loomberg News Morningstar. “With this drive their key transaction, Broadridge’s 15(c) consultants and since 2013, and together, we expect to produce GS), JPMorgan Chase & Co. (NYSE: JPM) and business client base can now utilize Morningstar’s indus- new and expanded opportunities for our clients State Street. Avox matches, enriches and main- decisions. try-standard data and calculations to help fund by combining our proprietary capabilities with tains legal entity reference data for its clients. boards fulfill their fiduciary responsibilities to Nasdaq’s core information services offerings.” “Clarient and Avox have made a significant shareholders.” eVestment is not the only significant acqui- impact addressing the industry’s client reference sition Nasdaq made in 2017. The company also data and lifecycle management requirements, Nasdaq grows bought London-based Sybenetix. The target uses reducing both cost and risk for our clients,” says 5. buyside services surveillance technology to analyze the behavior of Steve Pulley, Clarient CEO. Nasdaq Inc. (Nasdaq: NDAQ) acquired analytics traders in an effort to prevent market abuse. ” provider eVestment Alliance LLC for $705 million. The acquisition will advance Nasdaq’s global Thomson Reuters buys information services business. 6. two data companies Atlanta-based eVestment has a database for Thomson Reuters bought two technology com- both traditional and alternative investors that panies in 2017 that specialize in know-your-cus- helps them make investment decisions. Its clients tomer (KYC) and reference data, as part of an include 92 percent of the top asset managers such ongoing M&A strategy to expand its data services as Morgan Stanley. for financial institutions. “The investment management community The news and information company acquired is relying increasingly on independent data and Clarient, a client reference data platform, and advanced analytics to drive their key business de- Avox, a supplier of legal entity data on financial cisions, including asset allocation and investment entities globally, both from the Depository Trust choices,” says Adena Friedman, Nasdaq CEO. & Clearing Corp. Financial terms were not dis- “Our leadership team is excited to join Nas- closed. daq,” says Jim Minnick, eVestment co-founder. Clarient was founded by the DTCC with the “We believe the combined organization will allow participation of Barclays, Bank of New York Mel- us to grow our core business while tapping into lon, Credit Suisse, Goldman Sachs & Co. (NYSE: Adobe Stock

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022_MAJ020118 22 1/9/2018 1:39:53 PM Cover Story

Nasdaq’s technology expertise, leading data and The deals come as the increasing de- software products, and global distribution. We’ve mands by regulators for transparency grown this business at a 12% annual growth rate in financial transactions have spurred the creation in recent years of industry KYC registries, designed to reduce compliance costs for banks and duplicative paperwork for clients. VeriskVerisk powers powers up up 7. energyenergy information information Data analytics provider Verisk Ana- lytics Inc. (Nasdaq: VRSK) reached a deal in November 2017 to acquire Boston-based PowerAdvocate for up to $280 million to expand into energy research. “The acquisition will expand Verisk’s existing offerings to the energy sector Data providers by adding PowerAdvocate’s proprietary Thomson Reuters “ become more spend data and cost models. These since 2013, and together, we expect to produce GS), JPMorgan Chase & Co. (NYSE: JPM) and enhanced offerings will provide our customers valuable for new and expanded opportunities for our clients State Street. Avox matches, enriches and main- with unique insight to increase profitability,” says corporations by combining our proprietary capabilities with tains legal entity reference data for its clients. Scott Stephenson, CEO of Jersey City, New Jer- Nasdaq’s core information services offerings.” “Clarient and Avox have made a significant sey-based Verisk. PowerAdvocate offers informa- and nancial eVestment is not the only significant acqui- impact addressing the industry’s client reference tion and insights into cost saving opportunities rms, they sition Nasdaq made in 2017. The company also data and lifecycle management requirements, for customers by analyzing spending and cost will not likely bought London-based Sybenetix. The target uses reducing both cost and risk for our clients,” says data obtained from transactions across services, surveillance technology to analyze the behavior of Steve Pulley, Clarient CEO. materials and equipment categories in the energy make juicy traders in an effort to prevent market abuse. industry. The company’s investments for data is designed to see if private equity Thomson Reuters buys capital is being used effi- 6. two data companies ciently. rms. Thomson Reuters bought two technology com- As data providers be- panies in 2017 that specialize in know-your-cus- come more valuable for tomer (KYC) and reference data, as part of an corporations and financial ongoing M&A strategy to expand its data services firms, they will not likely for financial institutions. make juicy investments The news and information company acquired for private equity firms. “It ” Clarient, a client reference data platform, and is a tough spot. You have Avox, a supplier of legal entity data on financial to be in the right spot at entities globally, both from the Depository Trust the right time. You have to & Clearing Corp. Financial terms were not dis- have a unique niche,” says closed. Steve Pierson. “I think it’s Clarient was founded by the DTCC with the going to be a tough sector participation of Barclays, Bank of New York Mel- for private equity.” lon, Credit Suisse, Goldman Sachs & Co. (NYSE: Adobe Stock

22 MERGERS & ACQUISITIONS February 2018 February 2018 MERGERS & ACQUISITIONS 23

023_MAJ020118 23 1/9/2018 1:39:57 PM Guest Article

4 things private equity firms can do when faced with an underperforming investment Aligning your team and use the data and tools at your disposal will help.

By Chris Wright

usinesses fail for any number of rea- sons. A company could be decades old with a track record of healthy Bprofit margins before taking a sudden downturn; conversely, distressed investments can easily pivot with the proper guidance. Par- ticularly when it comes to private equity invest- If you’ve been ments, it seems one thing rarely endures: the “ status quo. tracking the According to the Harvard Business Review, an right data estimated 70 percent to 90 percent of all acqui- all along, sitions fail to achieve their anticipated strategic you’ll be able and financial objectives. Fortunately, this doesn’t have to be the case, if you take the necessary steps to identify to align your team and use the data and tools problems at your disposal. Here are 4 steps that can turn earlier. around an underperforming investment: Oaklyn Consulting 1. Identify company leaders Chris Wright ake a look at the company leadership and Tassess who is onboard with new ownership and wants to move the company forward — and 2. Be transparent ” who isn’t. Gather input from those already on- nce you have a plan in place, be 100 percent board as well as any detractors, and develop a way Otransparent — not just with managers, but forward based on common ground. You’ll need with the entire team, if possible. Communication buy-in from everyone, as both investors and man- about the company should be straightforward agement must be in alignment about company and shared in a supportive, caring environment. objectives for them to have a shot at success. After Bad news and unpleasant realities are never easy all, investors only have so much operational ca- to discuss openly, but it’s necessary to have those pacity. So, build the plan together. difficult conversations so that everyone under-

24 MERGERS & ACQUISITIONS February 2018

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025_MAJ0218Full_Page_Ad_Nov_FINAL.indd 25 2 11/28/20171/8/2018 1:33:52 5:09:14 PM PM Guest Article

stands what’s happening at every stage. The whole the decision-making burden — when you aren’t team needs to understand what’s at stake and operating on your gut alone, it’s much easier to common goals must be established before all par- pull the trigger on big, albeit needed, decisions. ties can begin to move in the same direction with the appropriate sense of urgency. 4. Do sweat the details or professional investors to realize the returns 3. Make use of available data Fthey seek, a great deal needs to happen ake sure to track all sales, operational and between the point of acquisition and the point Mother key metrics for the company. Inves- of exit. Troubles with integration, management Troubles with tors always enter into an acquisition with a clear turnover, lackluster sales, or any number of other “ investment thesis, but rarely does everything go problems could arise that take the company off integration, management according to plan. The biggest impediment to out- course, so pay close attention to budgets and sized returns is time, so if you’ve been tracking the trends and err on the side of action. turnover, or right data all along, you’ll be able to identify prob- If you take the time to align your leadership lackluster sales, could arise that take the company off course. ” Adobe Stock

lems earlier, allowing you to make any necessary and let the numbers be your guide, an underper- changes to get back on track without losing too forming investment doesn’t have to remain so. much time or going too far down the wrong path. And when available data or team bandwidth are Even the most logical of investment theses is lacking, don’t be afraid to bring in outside coun- likely to fail, so don’t be stubborn. If the numbers sel for help. Make these four steps a priority and are telling you to pivot, then pivot. If they’re telling you’ll be well on your way to turning a distressed you that customers want something different, investment into one that drives outsized returns. change your product. And if they’re telling you that an underperforming investment has turned Chris Wright is a principal at Oaklyn Consulting, which into a failed investment, unfortunately a tough helps small and middle market companies with corporate decision awaits. Let the data bear the brunt of financial strategy, mergers, acquisitions and capital raising.

26 MERGERS & ACQUISITIONS February 2018

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Partnering for success in the lower middle market Private equity rms need the industry expertise of operating executives for their portfolio companies.

By Michael Pfeffer and Phil Johnson

t’s no secret that more and more family- and founder-run businesses in the low- Ier middle-market companies look to private equity capital to finance their growth strategies. In addition to capital, howev- er, these companies often lack access to seasoned industry Founder-owned executives with the right lead- “ ership skills and experience to businesses drive and support this growth. have a hard At the same time, many family- and founder-owned busi- time nding Post Capital Partners Post Capital Partners nesses have a hard time find- Michael Pfeffer Phil Johnson outside talent to ing and attracting the outside help take their talent they need to help take their company to the next level. Some private eq- also have the chance to become a true owner of company to the uity firms look to address this issue by dropping a business. next level. in operating executives after the deal has closed to supplement existing management. Creating wealth opportunities An alternative approach that we have found et’s look at the advantages of this approach to be successful is for the PE firm to partner with Lfrom the executive’s perspective: an industry executive before even identifying the First, many senior managers in any given in- acquisition target and to pro-actively search for dustry have not had the opportunity to create investment opportunities together. This collabo- significant personal wealth. Locked into a sala- ” ration can create two key benefits. By partnering ry-plus-bonus structure, often with no, or mini- with an operating executive up-front, the spon- mal, equity, they can do well financially, but not sor can leverage the talents of an experienced se- create the long-term wealth they desire. nior executive within a target industry as part of Second, many of these executives are truly tal- due diligence and evaluation, which helps them ented managers with the entrepreneurial vision make better investment decisions. For the op- and drive to execute compelling investment strat- erating executive, they have the opportunity to egies. What they lack is a partner that can help to not only be a senior operator in a business, but make that vision a reality.

28 MERGERS & ACQUISITIONS February 2018

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So, what are the tangible benefits to executives in integrate into the acquisition’s management team, partnering with a private equity firm to find deals, leading it forward with the vision and drive that develop an acquisition strategy, and grow the com- first attracted the PE firm to him in the first place. panies they acquire together? Those benefits include: • A greater likelihood of acquiring a business Finding success in specialty chemicals than if they pursued an acquisition search on hat was certainly the case in the successful their own. Tcollaboration between Post Capital, which • Access to the resources and relationships (e.g. has an exclusive focus on the lower middle market investment bankers, industry consultants, but is a generalist in its investment strategy, with lenders) of a PE firm focused on the lower Phil Johnson, who spent nearly 25 years as an ex- Partnering with middle-market. ecutive in the specialty chemicals industry. “ • The instant credibility of having a financial After being introduced to Phil, Post Capital set an executive partner with ready access to capital. up an exclusive partnership with him and com- with deep • A mutual and exclusive commitment to menced on a proactive acquisition search. working together to proactively search for Based on his significant experience in the in- connections acquisitions within the executive’s industry or dustry, Phil identified the water treatment seg- within a target expertise. ment as one with a robust universe of potential industry can • The support of a private equity firm’s market- investment opportunities and growth potential. ing program to assist in identifying acquisi- After working together and identifying mul- create a tion opportunities tiple investment opportunities, BHS Special- signi cant • And with it, a significant wealth creation ty Chemicals was selected as the acquisition of opportunity. choice. In July 2010, the investment was made competitive and Phil became CEO and part owner of BHS. advantage. The right partner is important Under Phil’s leadership, BHS’ revenues grew 75 here are also significant advantages to the PE percent and gross profit expanded by nearly 70 Tpartner in taking this approach. percent as the company moved into more val- First, it provides access to an executive with a ue-added, direct-to-customer segments of special- compelling investment thesis that is grounded in ty chemical production and technical service. specific experience and industry knowledge. At When the company was sold to DuBois ” that point, finding the appropriate acquisition Chemicals in June 2017, Phil remained in a se- target to meet an executive’s investment thesis nior management position. becomes a proactive and collaborative process be- While there are enormous opportunities tween the two partners. for PE firms in the lower middle market, the Second, partnering with an executive with sector itself is highly fragmented. Any com- deep connections and networks within a target petitive advantage gained by the sponsor in industry can create a significant competitive ad- identifying acquisition targets, negotiating and vantage that may avoid broad auction deals. The completing the acquisition and then success- lower middle market is increasingly competitive, fully managing the company for growth (and and as a result, an innovative approach to identi- eventual sale) can have a direct and positive fying and acquiring companies in proprietary or impact on investment returns. less competitive transactions can be vital. For the executive, this approach to investing Third, the executive can sharpen the PE part- in the lower middle-market can create ownership ner’s understanding of the opportunities and opportunities that might not otherwise exist as a challenges that a company may face, providing typical operating partner. valuable insight during due diligence and in developing the growth plan post-closing. Mr. Pfeffer co-founded Post Capital Partners in 2004 and And finally, in pursuing a successful bid, the PE has more than 25 years of private equity and M&A expe- sponsor has in hand a true partner who can then rience. Phil Johnson serves as president of Dixie Chemical.

30 MERGERS & ACQUISITIONS February 2018

030_MAJ020118 30 1/9/2018 1:41:22 PM People

New Hires and Promotions By Kamaron Leach

The Halifax Group has expanded its team Since joining the firm in 2010, Bozzelli by three. has advised Livingstone’s media, technology and security clients on sell-side and Allie Atwood has joined the private eq- buy-side M&A transactions. uity firm as a vice president based in Washington, D.C. Previously an assistant Ryan Buckley has also been named as a vice president at Nationstar Mortgage, partner by Livingstone. Most recently a Atwood is responsible for originating and managing director since joining the firm evaluating investments. in 2007, Buckley has approximately 12 years of M&A, capital raising and restruc- David Calder was also hired by the Halifax turing experience. Peter Clare Group as a vice president responsible for sourcing and monitoring investments. Karl Freimuth has been promoted from Calder joins from PE firm Tower Arch managing director to Livingstone as well. Capital as a vice president, and will now Freimuth joined the advisory firm in 2007 be based in Halifax’s office in the nation’s and is co-head of Livingstone’s U.S. in- capital. dustrial practice. Freimuth has more than 14 years of experience advising middle- Davis Hostetter has joined the Halifax market M&A transactions, capital raises Group as a vice president based in Dallas. and restructurings. Previously an investment analyst at Hay- man Capital, Hostetter is responsible for David Burcham has joined Los Angeles- identifying and executing investments. based private equity firm LightBay Capital as a principal. Most recently a managing Amie Benedetto has joined law firm director Levine Leichtman Capital Part- Alston & Bird LLP as counsel based in At- ners, Burcham is responsible for sourcing lanta. Previously serving as senior counsel and analyzing new investments. at Proprium Capital Partners, Benedetto Peter Hlavin represents financial institutions and fund The Carlyle Group (NYSE: CG) has made sponsors on commercial and compliance numerous changes to its executive team matters. effective January 1.

Brian Boyle was hired by Raymond James Based in Washington, D.C., Peter Clare Financial (NYSE: RJF) as a managing di- has been promoted from head of Carlyle’s rector in the consumer investment bank- global market strategies segment to co- ing division. Boyle joins Raymond James chief investment officer alongside current focused on the food and beverage sector CIO William Conway Jr. Clare has served with experience from PriceWaterHouseC- in a variety of leadership positions since oopers and Lehman brothers. joining the private equity firm in 1992.

Livingstone Partners, a middle-market Kewsong Lee is joining Carlyle’s execu- M&A advisory firm, has announced mul- tive leadership team as co-chief executive tiple promotions in Chicago. officer after joining the firm in 2013. Based in New York and Washington, Andy Bozzelli was promoted from man- D.C., Lee most recently served as dep- aging director to partner at Livingstone. uty chief investment officer where he Shamafa Khan

February 2018 MERGERS & ACQUISITIONS 31

031_MAJ020118 31 1/9/2018 1:43:03 PM People

led efforts to build the firm’s private eq- brings more than 20 years of investment uity strategy. banking and advisory experience from Barclays plc (NYSE: BCS) and UBS Secu- Alongside Kewsong Lee, Glenn Youngkin rities (NYSE: UBS). is also joining Carlyle’s executive leadership team as co-CEO after nearly 23 Cowen Inc. (Nasdaq: COWN) has ap- years with the firm. Prior to his new pointed two to its leadership team and role, Youngkin served as Carlyle’s presi- promoted two of its exeuctives. dent and chief operating officer based in Washington, D.C. Previously serving as Cowen’s head of equities, Dan Charney has been promoted Kewsong Lee Peter Hlavin has joined advisory firm to co-president alongside Larry Wiese- Profit Enhancement Solutions as a manag- neck. In his new role, Charney spearheads ing director based in Madison, Wisconsin. the firm’s equities, prime brokerage, and Hlavin previously led the business devel- securities lending divisions. opment efforts at consulting firm TriVista. In his new role, Hlavin focuses on increas- Miguel Roman has joined Cowen investing profitable growth for PE firms and ment banking team as managing director corporations. based in New York. Roman joins from RBC Capital Markets LLC where he Cary Ho was hired by CVC Credit Part- served as co-head of the U.S. loan capital ners as global head of collateralized loan markets team. originations. Based in New York, Ho joins CVC from Nomura Securities Interna- Jeffrey Soloman has been promoted tional Inc. where he worked in a similar from president to the next chief executive role heading up the firm’s credit structur- officer of Cowen, succeeding the compa- ing efforts. ny’s founder Peter Cohen effective. Cohen will remain the company’s chairman. Firdaus Pohowalla Alice Huang has joined Morgan Lewis & Bockius LLP as a funds partner based in Larry Wieseneck has been appointed Hong Kong. Previously a senior tax man- to co-president of Cowen alongside Dan ager at Deloitte LLP, Huang counsels U.S. Charney. Previously the chief executive and Asia-based fund sponsors. officer at Roundtable Investment Part- ners, Wieseneck joins with experience in Shamafa Khan has joined New York- leveraged finance and debt capital mar- based Crayhill Capital Management as a kets. Cowen’s investment banking, capi- managing director. Previously a director tal markets and credit divisions report to in Barings’ global business development Wieseneck. group, Khan now serves as head of investor relations as Crayhill seeks to expand its Amita Schultes was hired by Agility, private credit business. the outsourced chief investment officer business of Perella Weinberg Partners, as Firdaus Pohowalla was hired by a managing director based in New York. Cascadia Capital as a Seattle-based man- Most recently a partner at Colonial Con- aging director leading the firm’s mid- sulting, in her new role Schultes works Miguel Roman dle-market industry group. Pohowalla with U.S. endowments and foundations.

32 MERGERS & ACQUISITIONS February 2018

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