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TheMiddleMarket.com June 2019 Mergers & Acquisitions 1

June 2019 | VOL. 54 | NO. 6Contents

White hot marketPE firms and corporations compete fiercely for high-quality targets, which means baby boomer business owners are getting top dollar. Eight advisors offer insights on today’s dealflow.

Q&As: Eight advisors weigh in Paul Aversano Alvarez & MarsalCole Bader Stifel FinancialKaren Davies Huntington National BankJ.R. Doolos KeyBanc Capital Markets Andrew Jessen William BlairDerek Lewis Harris WilliamsPeter Lombard Piper Jaffray & Co.Christopher Stradling Lincoln International

18

6

Stifel doubles technology practice The acquisition of Mooreland Partners enhances Silicon Valley presence.

7

PE firms sip on juice deals Butterfly Equity buys juice producer Bolthouse Farms from Campbell.

8 Audax invests in customer satisfaction

Audax invested in Astute,

a provider of consumer data man-agement software.

9

Hitachi expands U.S. robotics presence

Hitachi is buying robots manufacturer JR Automation from Crestview.

10

Two new funds for Shore Capital

Shore Capital has raised its third healthcare fund along with its first food and beverage fund.

13

Arsenal attracts new investors

The industrials and healthcare- focused middle-market PE firm raises fifth fund.

Cover Story

Feature28

Dealmaker’s guide to service providers From fund administrators to valua-tion services, from networking groups to VDRs, the latest tools and services help make dealmaking easier.

People Moves

38

New hires and promotions Derek Schoettle joins Great Hill Part-ners. Sean Gallary and Craig Schor-tzmann form Stonyrock Partners. Tess Sprechman joins AE Industrial Partners.

Private Equity Perspective16Future tech Looking forward, the next five yearsof M&A activity will be fueled by a whole new set of developments. As one wave of technological innovation crests, another is forming.

The Buyside17Showing love for pets At least two-thirds of U.S. homes have at least one pet, and people are spending more money on their animals than ever, driving M&A across the entire sector.

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2 Mergers & Acquisitions June 2019

What’s the state of dealmaking in 2019? What’s the mood of the middle market? Is a recession likely this year? How will this year stack up against last year, a record-breaking period for M&A? What should buyers and sellers do?

To answer these questions, Mergers & Acquisitions turned to eight leading advisors, many of whom are investment bankers. In this issue’s cover story, you’ll

find assessments and advice from:

Paul Aversano, Alvarez & MarsalCole Bader, StifelKaren Davies, Huntington National BankJ.R. Doolos, KeyBanc Capital Markets Andrew Jessen, William BlairDerek Lewis, Harris WilliamsPeter Lombard, Piper Jaffray & Co.Christopher Stradling, Lincoln International

For the most part, their forecasts for M&A in 2019 remain bullish. They point to a lot of cash that must be deployed by strategic buyers and private equity firms alike; a healthy U.S. economy; and low interest rates.

Their advice? Expect intense competition for high-quality targets, espe-cially for technology providers. Understand that sellers are in the driver’s seat. Buyers should invest in targets with recurring business models and limited cy-clical exposure. Fertile sectors include: technology, business services, health-care, consumer and manufacturing. Everyone should look to close deals promptly, while conditions remain favorable. And everyone should prepare for an eventual slowdown, more likely in 2020 than in 2019. M&A

– Mary Kathleen Flynn

Inside Word

Eight leading advisors share their insights on dealflow and provide advice for buyers and sellers

What lies ahead?

June 2019 | VOL. 54 | NO. 6

TheMiddleMarket.com

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Mergers & Acquisitions Vol. 54/No. 6 (ISSN 0026-0010) is published monthly with combined issues in July/August and November/December by SourceMedia, One State Street Plaza, 27th Floor, New York, NY 10004-1505. Yearly subscription is $1,995; $2035 for one year in all other countries. Periodical postage paid at New York, NY and U.S. additional mailing offices. POSTMASTER: Send address changes to Mergers & Acquisitions / SourceMedia, One State Street Plaza, New York, NY 10004. For subscriptions, renewals, address changes and delivery service issues contact our Customer Service department at (212) 803-8500 or email: [email protected]. This publication is designed to provide accurate and authoritative information regarding the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering financial, legal, accounting, tax, or other professional service. Mergers & Acquisitions is a registered trademark used herein under license. © 2019 Mergers & Acquisitions and SourceMedia, Inc. All rights reserved.

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Big data, SaaS drive deals“Healthcare IT is the largest cottage in-dustry in the world,” says Sam Hendler, who leads healthcare IT deals at Harris Williams, in an interview. “The opportu-nity in healthcare IT is compelling.”

Conversations

Arsenal closes new fund Arsenal Capital Partners has closed its fifth fund at $2.36 billion. The middle-market PE firm focuses on the industri-als and healthcare sectors in busi-nesses that have up to $500 million in enterprise value.

News

36 women deal pros are on the listMergers & Acquisitions has named the 2019 Most Influential Women in Mid-Market M&A. Pelham S2K’s Venita Fields, Kayne Anderson’s Nishita Cum-mings and Kainos Capital’s Sarah Brad-ley are among 36 featured dealmakers.

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TheMiddleMarket.com6 Mergers & Acquisitions June 2019

Stifel Financial Corp. (NYSE: SF) is buying technology-focused M&A advisory firm Mooreland Partners. Mooreland was founded in 2003, and completed more than 250 middle-market M&A and capital-raising trans-actions. After the deal closes, Moore-land managing partner Patrick Seely will become the co-head of Stifel’s technology investment banking group, which has completed more than 300 deals, representing more than $100 billion in value, over the last 20 years.

“Technology is a sector that has

been, and continues to be, a corner-stone of Stifel’s investment bank-ing platform,” says Brad Raymond, global head of investment banking at Stifel. “Through this combination, we are doubling the size of our overall technology practice and significantly enhancing our presence in Europe and Silicon Valley.”

Technology permeates many of today’s private equity deals, and buyers are hot on the trail of innova-tions that will drive sustainable value to customers and make companies

more efficient, more effective and less expensive to run. Among the develop-ments appealing to investors are: arti-ficial intelligence, data management, data virtualization, digital marketing, healthcare IT, industrial automation, the Internet of Things, machine-to-machine learning, payment processing and Software-as-a-Service. Stifel is ranked among the most active M&A investment banks in 2018, based on the volume of completed private-equity-backed deals, according to PitchBook.

By Demitri Diakantonis and Mary Kathleen Flynn

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Stifel doubles technology practiceThe acquisition of Mooreland Partners enhances Silicon Valley presence

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PE firms sip on juice deals

Butterfly acquires Bolthouse Farms from Campbell Soup

Butterfly Equity is buying Bolthouse Farms from Campbell Soup Co. (NYSE: CPB), a producer of carrots, juices and salad dressings, for $510 million. The purchase price is less than one third of the $1.5 billion Campbell paid for the target in 2012. Bolthouse’s performance has struggled under Camp-bell’s ownership, being plagued with poor harvest crops and drink recalls.

Campbell hired Goldman Sachs and Centerview Partners to sell its Campbell International and Campbell Fresh busi-nesses, including the Arnott’s, Bolthouse Farms and Garden

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more efficient, more effective and less expensive to run. Among the develop-ments appealing to investors are: arti-ficial intelligence, data management, data virtualization, digital marketing, healthcare IT, industrial automation, the Internet of Things, machine-to-machine learning, payment processing and Software-as-a-Service. Stifel is ranked among the most active M&A investment banks in 2018, based on the volume of completed private-equity-backed deals, according to PitchBook.

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Stifel doubles technology practiceThe acquisition of Mooreland Partners enhances Silicon Valley presence

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PE firms sip on juice deals

Butterfly acquires Bolthouse Farms from Campbell Soup

Butterfly Equity is buying Bolthouse Farms from Campbell Soup Co. (NYSE: CPB), a producer of carrots, juices and salad dressings, for $510 million. The purchase price is less than one third of the $1.5 billion Campbell paid for the target in 2012. Bolthouse’s performance has struggled under Camp-bell’s ownership, being plagued with poor harvest crops and drink recalls.

Campbell hired Goldman Sachs and Centerview Partners to sell its Campbell International and Campbell Fresh busi-nesses, including the Arnott’s, Bolthouse Farms and Garden

Fresh Gourmet brands. The company has been reviewing operations since the abrupt retirement of CEO Denise Mor-rison in 2018. “The sale of Bolthouse Farms supports our strategy to focus on our two core North American businesses, Campbell Snacks and Campbell Meals and Beverages, where we have iconic brands and strong market positions,” says Campbell CEO Mark Clouse.

Butterfly is a Los Angeles-based food and beverage and consumer-focused private equity firm. In 2019, the PE firm announced plans to merge better-for-you restaurant chains Lemonade Restaurant Group and Modern Market Eatery. Advisors to Campbell include: Goldman Sachs (NYSE: GS), Centerview Partners and Weil Gotshal & Manges LLP. The legal advisor to Butterfly is Kirkland & Ellis.

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Hard Rock gambles on Cincinnati

Dan Gilbert’s Jack Entertainment sells casino, racetrack

Global casino and hotel operator Hard Rock International is collaborating with VICI Properties to buy Jack Cincinnati Casino and Turfway Park from Dan Gilbert’s Jack Entertain-ment for $780 million. Through the joint purchase, Hard Rock is acquiring the operating assets of the casino, rebranding it Hard Rock Casino Cincinnati, while VICI owns the land and real estate. The deal expands Hard Rock’s presence in Ohio.

“Hard Rock has been the number one operator in Ohio since opening in the greater Cleveland market in 2013,” said Jim Allen, chairman and CEO of Hard Rock International. “And now, we look forward to introducing our unique brand of casino entertainment to Cincinnati. On behalf of the 40,000 Hard Rock team members worldwide, I am pleased to welcome the more than 1,000 Jack Cincinnati employees into the Hard Rock family.”

Said Jack Entertainment CEO Matt Cullen: “We viewed the gaming industry as a catalyst for economic development in our local communities. After ten years, hundreds of millions of dollars of investment developing Jack Cincinnati Casino from the ground up, and establishing a strong customer focused culture, we have successfully positioned Jack Cincin-nati Casino for further future success.”

Jack Entertainment is a gaming and hospitality company that owns properties in Cincinnati, Cleveland and Detroit

under the Jack brand, along with the Horseshoe Baltimore and Kentucky Turfway Park. In 2018, Jack agreed to sell the Greektown Casino-Hotel in Detroit to Penn National Gam-ing Inc. (Nasdaq: Penn). Gilbert is the founder of lending and financial services company Quicken Loans Inc. He is also the majority owner of the NBA’s Cleveland Cavaliers.

Advisors to Jack on the current deal include: Credit Suisse Securities, Deutsche Bank Securities and Paul, Weiss, Rifkind, Wharton & Garrison LLP. Advisors to Hard Rock include: Jones Day and Fox Rothschild.

Audax invests in customer satisfaction Astute’s clients include Delta Air Lines

Audax Private Equity, one of the most active private equity firms in the U.S., has invested in Astute Inc., a provider of artificial intelligence-driven customer engagement, digital self-service, and consumer data management software, for undisclosed terms. Astute’s customers include B&G Foods Inc. (NYSE: BGS), The Cheesecake Factory Inc. (Nasdaq: CAKE) and Delta Air Lines Inc. (NYSE: DAL). In 2018, Astute acquired Wilke Global, a provider of consumer relations software.

“Astute’s software assists the world’s largest consumer brands in capturing and analyzing insights to improve cus-tomer engagement and satisfaction,” said Geoffrey Rehnert, co-CEO, Audax Group. “There are exciting growth oppor-tunities on the horizon for Astute, as they continue to grow organically and through strategic acquisitions, both foreign and domestic.”

Audax Private Equity, based in Boston and San Francisco, takes a buy-and-build investment approach, partnering with established companies to create larger entities through acquisitions and organic growth. The firm has invested more than $5 billion in 120 platform investments and 750 add-on acquisitions. The firm is part of Audax Group, which ranked ranked No. 2, in a list of the top U.S. private equity firms of 2018, based on volume of completed deals, according to PitchBook.

Lazard acted as exclusive financial advisor, and Perkins Coie LLP served as legal counsel to Astute; and Ropes & Gray LLP served as counsel to Audax.

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Hitachi expands in U.S. robotics Demand for robot-based automation intensifies

Japenese technology company Hitachi is buying robots manufacturer JR Automation Technologies from Crest-view Partners for about $1.4 billion. JR Automation builds production lines and logistics systems using industrial robots for the aerospace, automotive, con-sumer and food and beverage indus-tries. The acquisition expands Hitachi’s presence in the U.S. robotics sector.

Advances in robotic technology are making it possible to complete more complex tasks at higher speeds and with improved outcomes. In the manu-facturing and logistics fields, there has been a growing demand for automa-tion because of decreased working age populations, intensifying global compe-tition, and further quality improvement requirements to prevent significant product recalls,” according to a Hitachi release. “As a result, the global robot-based automation market continues to expand, with a high average growth rate exceeding 10 percent per year.”

“With our combined capabilities, Hi-tachi and JR will be a uniquely qualified global leader in next generation smart manufacturing,” says JR Automation CEO Bryan Jones. Advisors to the sell-ers include: Goldman Sachs (NYSE: GS), BofA Merrill Lynch and Gibson Dunn & Crutcher LLP. Advisors to Hitachi include: Mitsubishi UFJ Morgan Stanley Securities and Allen & Overy.

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under the Jack brand, along with the Horseshoe Baltimore and Kentucky Turfway Park. In 2018, Jack agreed to sell the Greektown Casino-Hotel in Detroit to Penn National Gam-ing Inc. (Nasdaq: Penn). Gilbert is the founder of lending and financial services company Quicken Loans Inc. He is also the majority owner of the NBA’s Cleveland Cavaliers.

Advisors to Jack on the current deal include: Credit Suisse Securities, Deutsche Bank Securities and Paul, Weiss, Rifkind, Wharton & Garrison LLP. Advisors to Hard Rock include: Jones Day and Fox Rothschild.

Audax invests in customer satisfaction Astute’s clients include Delta Air Lines

Audax Private Equity, one of the most active private equity firms in the U.S., has invested in Astute Inc., a provider of artificial intelligence-driven customer engagement, digital self-service, and consumer data management software, for undisclosed terms. Astute’s customers include B&G Foods Inc. (NYSE: BGS), The Cheesecake Factory Inc. (Nasdaq: CAKE) and Delta Air Lines Inc. (NYSE: DAL). In 2018, Astute acquired Wilke Global, a provider of consumer relations software.

“Astute’s software assists the world’s largest consumer brands in capturing and analyzing insights to improve cus-tomer engagement and satisfaction,” said Geoffrey Rehnert, co-CEO, Audax Group. “There are exciting growth oppor-tunities on the horizon for Astute, as they continue to grow organically and through strategic acquisitions, both foreign and domestic.”

Audax Private Equity, based in Boston and San Francisco, takes a buy-and-build investment approach, partnering with established companies to create larger entities through acquisitions and organic growth. The firm has invested more than $5 billion in 120 platform investments and 750 add-on acquisitions. The firm is part of Audax Group, which ranked ranked No. 2, in a list of the top U.S. private equity firms of 2018, based on volume of completed deals, according to PitchBook.

Lazard acted as exclusive financial advisor, and Perkins Coie LLP served as legal counsel to Astute; and Ropes & Gray LLP served as counsel to Audax.

Hitachi expands in U.S. robotics Demand for robot-based automation intensifies

Japenese technology company Hitachi is buying robots manufacturer JR Automation Technologies from Crest-view Partners for about $1.4 billion. JR Automation builds production lines and logistics systems using industrial robots for the aerospace, automotive, con-sumer and food and beverage indus-tries. The acquisition expands Hitachi’s presence in the U.S. robotics sector.

Advances in robotic technology are making it possible to complete more complex tasks at higher speeds and with improved outcomes. In the manu-facturing and logistics fields, there has been a growing demand for automa-tion because of decreased working age populations, intensifying global compe-tition, and further quality improvement requirements to prevent significant product recalls,” according to a Hitachi release. “As a result, the global robot-based automation market continues to expand, with a high average growth rate exceeding 10 percent per year.”

“With our combined capabilities, Hi-tachi and JR will be a uniquely qualified global leader in next generation smart manufacturing,” says JR Automation CEO Bryan Jones. Advisors to the sell-ers include: Goldman Sachs (NYSE: GS), BofA Merrill Lynch and Gibson Dunn & Crutcher LLP. Advisors to Hitachi include: Mitsubishi UFJ Morgan Stanley Securities and Allen & Overy.

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Why Investors and PE firmslove logistics ATL Partners, which focuses on the transportation sector, raises second fund

ATL Partners has raised its second fund at $575 million. The PE firm, which focuses on the aerospace, logistics and transportation sectors, now has $1.6 billion under manage-ment. ATL has already made two investments out of its second fund in logistics companies Pilot Freight Services and Rock-It-Cargo. ATL invests up to $750 million in equity in businsses that have up to $2.5 billion in enterprise value.

“ATL will continue to leverage its deep sector expertise and industry experience to execute investments that are positioned to benefit from the secular growth trends in our focus sectors,” says chief executive officer Frank Nash. Nash, who is a former managing director at MidOcean Partners, co-founded ATL in 2014.

Mid-market PE firms are actively seeking logistics deals. LLR Partners has invested in Magaya Corp., a warehouse, cargo and supply chain management software provider. The target helps automate and improve business operations for freight forwarders, third-party logistics providers, wholesalers and distributors.

AE Industrial Partners has acquired a majority stake in Alpine Air Express, a logistics and transportation company that focuses on regional air cargo services. Alpine has a fleet of aircrafts. AEI says demand for air transportation is being driven by increasing shipments and cargo in the U.S.

Two new funds for Shore Capital Partners

Vet clinics and food packagers among the targets for the PE firm

Shore Capital Partners, a private equity firm that focuses on the healthcare and food and beverage sectors, has raised two new funds. The PE firm raised its third healthcare fund at $293 million. In addition, Shore Capital raised its first food and beverage fund at $148 million.

The healthcare fund will invest in mircrocap businesses that have up to $100 million in revenue, including animal health-care. In 2017, Shore Capital invested in Midwest Veterinary Partners, which owns the Lake Huron Veterinary Clinic in Michigan. The veterinary market is ripe for consolidation be-cause there is an aging population of veterinarians who want to sell out of their practices and an increasing number of new veterinarians with high student debt and an increased desire to work as veterinarians, but not necessarily do the adminis-trative work of owning a practice.

Shore Capital’s food and beverage fund will invest in busi-nesses that are involved in manufacturing, distribution and packaging. “Having the ability to expand our expertise and knowledge into the food and beverage space while simultane-ously continuing our original healthcare-focused strategy is an attractive opportunity for our limited partners and firm as whole,” says Shore Capital founder Justin Ishbia. particularly within a number of niche sectors.” Kirkland & Ellisadvised Shore Capital on the fundraise.

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Copper manufacturers merge Wieland-Werke buys Global Brass, Copper Holdings

Wieland-Werke AG has agreed to buy Global Brass and Copper Holdings Inc. (NYSE: BRSS) in a $962.8 million deal. Wieland is a nearly 200-year-old, family-owned global technology company in the brass and copper industry. Wieland is acquiring all of the outstanding shares of GBC in an all-cash transaction. GBC shareholders will receive $44.00 per share in cash representing a 27 percent premium to GBC’s closing price, as of April 9. The transaction is expected to close in the second half of 2019 and is subject to regulatory approvals.

“The transaction brings together two highly complementary companies with diverse product offerings across copper and copper alloy strip and sheet, rod, foil, wire, tube and fabricated compo-nents, serving a wide variety of indus-tries and creates a truly unique global leader in the red metals industry ideally suited to create customer value in North America, Europe and Asia,” according to Weiland.

“The combination of these two complementary leaders will allow us to more efficiently serve our customers now and well into the future,” adds GBC CEO John Wasz.

Advising GBC are: J.P. Morgan Securities LLC and Fried, Frank, Harris, Shriver & Jacobson LLP. Serving as legal counsel to Weiland is Ropes and Gray LLP.

010_MAJ0619 10 5/6/2019 11:01:46 AM

Two new funds for Shore Capital Partners

Vet clinics and food packagers among the targets for the PE firm

Shore Capital Partners, a private equity firm that focuses on the healthcare and food and beverage sectors, has raised two new funds. The PE firm raised its third healthcare fund at $293 million. In addition, Shore Capital raised its first food and beverage fund at $148 million.

The healthcare fund will invest in mircrocap businesses that have up to $100 million in revenue, including animal health-care. In 2017, Shore Capital invested in Midwest Veterinary Partners, which owns the Lake Huron Veterinary Clinic in Michigan. The veterinary market is ripe for consolidation be-cause there is an aging population of veterinarians who want to sell out of their practices and an increasing number of new veterinarians with high student debt and an increased desire to work as veterinarians, but not necessarily do the adminis-trative work of owning a practice.

Shore Capital’s food and beverage fund will invest in busi-nesses that are involved in manufacturing, distribution and packaging. “Having the ability to expand our expertise and knowledge into the food and beverage space while simultane-ously continuing our original healthcare-focused strategy is an attractive opportunity for our limited partners and firm as whole,” says Shore Capital founder Justin Ishbia. particularly within a number of niche sectors.” Kirkland & Ellisadvised Shore Capital on the fundraise.

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Copper manufacturers merge Wieland-Werke buys Global Brass, Copper Holdings

Wieland-Werke AG has agreed to buy Global Brass and Copper Holdings Inc. (NYSE: BRSS) in a $962.8 million deal. Wieland is a nearly 200-year-old, family-owned global technology company in the brass and copper industry. Wieland is acquiring all of the outstanding shares of GBC in an all-cash transaction. GBC shareholders will receive $44.00 per share in cash representing a 27 percent premium to GBC’s closing price, as of April 9. The transaction is expected to close in the second half of 2019 and is subject to regulatory approvals.

“The transaction brings together two highly complementary companies with diverse product offerings across copper and copper alloy strip and sheet, rod, foil, wire, tube and fabricated compo-nents, serving a wide variety of indus-tries and creates a truly unique global leader in the red metals industry ideally suited to create customer value in North America, Europe and Asia,” according to Weiland.

“The combination of these two complementary leaders will allow us to more efficiently serve our customers now and well into the future,” adds GBC CEO John Wasz.

Advising GBC are: J.P. Morgan Securities LLC and Fried, Frank, Harris, Shriver & Jacobson LLP. Serving as legal counsel to Weiland is Ropes and Gray LLP.

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Wynnchurch buys “hardscaping” maker

Alliance makes sand installation to build commercial and residential patios

Wynnchurch Capital has purchased Alliance Designer Products, a maker of sand installation for commercial and residential “hardscaping” projects. Hardscaping involves structured features used in landscape architecture, such as concrete paths or walls.

“Wynnchurch invests in market leading businesses which possess a customer-centric focus on product and service excellence,” says Wynnchuch managing partner Frank Hayes. Adds Alliance senior vice president Jack Tutino: “We are thrilled about our new partnership with Wynnchurch and are excited to continue to serve our Alliance customers around the globe.”

Wynnchurch is a middle-market private equity firm in Rosemont, Illinois. The firm was founded in 1999 by former GE Capital executive John Hatherly and manages about $2.2 billion in capital. Wynnchurch is investing from its fourth fund, which has $1.3 billion in capital.

In January, Wynnchurch acquired Boss Industries, a manu-facturer of rotary screw air technology. Other recent Wyn-nchurch investments include: Infra Pipe Solutions, a maker of high density pipes; uniform services company Logistik Unicorp Inc.; engineering systems maker Critical Process Systems Group; and Team Car Care, a vehicle maintenance services company.

Former Blackstone and Carlyle execs form StonyrockJefferies backs new middle-market investment firm

Leucadia Asset Management, an arm of Jefferies Financial Group Inc., is backing a new investment firm led by former Blackstone Group LP and Carlyle Group LP executives that will buy stakes in middle-market private equity, real estate, infrastructure, hedge fund, private credit and venture capital company, reports Bloomberg News.

Stonyrock Partners LP, based in New York, is led by man-aging partner Craig Schortzmann and partner Sean Gal-lary, former managing directors at Blackstone and Carlyle’s AlpInvest Partners, respectively. The two previously worked together at Asset Management Finance, or AMF, a Credit Suisse Group AG affiliate that focused on buying and selling slices of investment managers. Stonyrock is seeking $750 mil-lion to $1 billion for its debut fund, which will be a permanent capital vehicle, according to Bloomberg.

Stonyrock’s “seeks to address the growing demand from alternative managers to bring in outside capital to execute on a range of strategic priorities,” according to the firm.

“As we have watched the alternative asset management industry mature, we believe there is an attractive and sus-tainable opportunity to partner with leading middle market alternative asset managers as they prepare for the next stage of their life-cycle and face the opportunities that lie ahead,” says Gallary.

Sustainable living investor North Castle stays active The firm sold Jenny Craig, and raises seventh fund

North Castle Partners has raised its seventh fund at $400 million. The fund was raised in less than five months. North Castle closed its sixth fund in 2016 at $300 million.

The PE firm, founded in 1997, focuses on businesses that promote healthy, active and sustainable living. North Castle recently completed the sale of weight loss company Jenny Craig to H.I.G. Capital. North Castle acquired Jenny Craig from Nestlé in 2013. The firm combined Jenny Craig with Curves International, which North Castle had acquired in 2012, “to create a one-of-a kind wellness company that offers consumers an array of diet and fitness tools to meet their individual needs.”

The firm also invested in: veterinary group Encore Vet Group; Indian food brand Maya Kaimal Foods; VitaCup Inc., a maker of coffee and tea products that are infused with vitamins; and ski resort Windham Mountain Resort.

“We believe that our investors appreciate the ‘Full Poten-tial Partnerships’ we strive to create with our CEOs and their management teams and our ‘Value & Values’ approach as we work with our portfolio companies, the communities we serve and our investors,” says North Castle founder Chip Baird.

Some of North Castle’s other investmets include: Barry’s Bootcamp, Sprout Organics, SmartyPants, HydroMassage.

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Wynnchurch buys “hardscaping” maker

Alliance makes sand installation to build commercial and residential patios

Wynnchurch Capital has purchased Alliance Designer Products, a maker of sand installation for commercial and residential “hardscaping” projects. Hardscaping involves structured features used in landscape architecture, such as concrete paths or walls.

“Wynnchurch invests in market leading businesses which possess a customer-centric focus on product and service excellence,” says Wynnchuch managing partner Frank Hayes. Adds Alliance senior vice president Jack Tutino: “We are thrilled about our new partnership with Wynnchurch and are excited to continue to serve our Alliance customers around the globe.”

Wynnchurch is a middle-market private equity firm in Rosemont, Illinois. The firm was founded in 1999 by former GE Capital executive John Hatherly and manages about $2.2 billion in capital. Wynnchurch is investing from its fourth fund, which has $1.3 billion in capital.

In January, Wynnchurch acquired Boss Industries, a manu-facturer of rotary screw air technology. Other recent Wyn-nchurch investments include: Infra Pipe Solutions, a maker of high density pipes; uniform services company Logistik Unicorp Inc.; engineering systems maker Critical Process Systems Group; and Team Car Care, a vehicle maintenance services company.

Carlyle, SoftBank back Ampere Computing

The startup makes microprocessors for the cloud

Ampere Computing, a microprocessor maker that says it is “designing the future of hyperscale cloud and edge com-puting,” has raised a new round of funding, led by existing investor The Carlyle Group (NASDAQ: CG) and including participation from new investor Arm, a subsidiary of Soft-Bank Group. This marks the second major investment round for Ampere, which was launched in 2017.

Ampere’s custom-designed processors are purpose-built for large-scale public and private cloud environments, says the company. “Born in and built for the cloud with a modern architecture, Ampere gives customers the freedom to accel-erate the delivery of the most memory-intensive applications such as artificial intelligence, big data, machine learning and databases in the cloud,” according to the company.

Ampere is led by chairman and CEO Renee James, who founded the company. Previously, James had a lengthy ca-reer with Intel Corp., where she was the president of the com-pany until her departure in 2016. James is a current operating executive at Carlyle.

Founded in 1990, Arm quietly grew into the U.K.’s largest listed tech company before SoftBank’s $32 billion takeover, according to Bloomberg News. It designs chips that are licensed to the world’s largest technology companies.

Sustainable living investor North Castle stays active The firm sold Jenny Craig, and raises seventh fund

North Castle Partners has raised its seventh fund at $400 million. The fund was raised in less than five months. North Castle closed its sixth fund in 2016 at $300 million.

The PE firm, founded in 1997, focuses on businesses that promote healthy, active and sustainable living. North Castle recently completed the sale of weight loss company Jenny Craig to H.I.G. Capital. North Castle acquired Jenny Craig from Nestlé in 2013. The firm combined Jenny Craig with Curves International, which North Castle had acquired in 2012, “to create a one-of-a kind wellness company that offers consumers an array of diet and fitness tools to meet their individual needs.”

The firm also invested in: veterinary group Encore Vet Group; Indian food brand Maya Kaimal Foods; VitaCup Inc., a maker of coffee and tea products that are infused with vitamins; and ski resort Windham Mountain Resort.

“We believe that our investors appreciate the ‘Full Poten-tial Partnerships’ we strive to create with our CEOs and their management teams and our ‘Value & Values’ approach as we work with our portfolio companies, the communities we serve and our investors,” says North Castle founder Chip Baird.

Some of North Castle’s other investmets include: Barry’s Bootcamp, Sprout Organics, SmartyPants, HydroMassage.

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Rising demand for pet health

Elanco acquires Aratana to expand animal health business

Elanco Animal Health (NYSE: ELAN) is buying pet thera-peutics company Aratana Therapeutics (Nasdaq: PETX) for up to $245 million. The deal is structurered as a stock-for-stock transaction.

Aratana develops medicine for dogs and cats. The company makes Galliprant tablets, which is used to treat osteoarthritis in pets. The deal will allow Elanco to integrate the Aratana portfolio of pet therapeutics into their com-panion animal therapeutics business, including a pipeline of therapeutic candidates and two marketed products. Demand for pet care products is being driven pet owners increasingly treating pets as part of their families.

“As a newly independent, premier animal health company, we believe that Elanco would help expand our portfolio with their substantial resources and presence within the com-panion animal segment,” says Aratana CEO Craig Tooman. Advisors to Aratana include: Barclays and Latham & Wat-kins. Advisors to Elanco include: Jefferies and Bryan Cave Leighton.

“We look forward to putting greater energy behind these brands with our increased share of voice in the field and leveraging Aratana’s strong presence in the specialty market to capitalize on new opportunities.” adds Elanco CEO Jeff Simmons.

Arsenal attracts new investors

The industrials and healthcare-focused PE firm raises fifth fund

Arsenal Capital Partners has closed its fifth fund at $2.36 billion. The middle-market PE firm focuses on the industrials and healthcare sectors in businesses that have up to $500 million in enterprise value. Arsenal’s last fund in 2016 closed at $1.3 billion.

“We are delighted that through this recent fundraise, we also were able to initiate new relationships with a number of blue-chip investors, diversifying our global investor base and fortifying our institution for years to come,” says Arsenal co-founder Terry Mullen. Earlier in 2019, Arsenal sold Elite Comfort Solutions to Leggett & Platt for $1.25 billion.

In 2018, Arsenal-backed Meridian completed the ac-quisitions of Epoxy Technology and Adhesives Technology Corp. Also in 2018, Arsenal-backed Carolina Color acquired Chroma Color. The firm’s investor base for its latest fund consists of 58 percent of capital coming from the U.S., 33 percent from Europe and the balance from Middle East, Asia and Australasia. Some of its notable investors include: The Regents of the University of California, California State Teachers’ Retirement System, affiliates of APG Asset Man-agement, Minnesota State Board of Investment, and PKA AIP A/S. Arsenal has raised $5.3 billion since it was founded in 2000. Kirkland & Ellis served as Arsenal’s legal advisor. M&A

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Future tech

By Mary Kathleen Flynn

The next wave of technological innovation involves smart cities, the Internet of Things and edge computing

Private Equity Perspective

Tech dominates dealmaking. The tech-nology, media and telecom, or TMT, sector accounted for about 40 percent of total private equity deal volume and one-third of total capital invested by PE firms over the last five years, according to EY Private Equity.

Looking forward, the next five years of M&A activity will be fueled by a whole new set of developments. As one wave of tech-nological innovation crests, another is form-ing. “With themes such as cloud computing and mobility now mainstream, PE firms are focusing on the next wave of disruption — technologies such as artificial intelligence and machine learning, robotic process automation (RPA), Internet of Things (IoT), robotics, drones, blockchain, augmented reality and virtual reality,” finds the April

edition of EY’s quarterly PE Pulse report. While some of these emerging technolo-

gies have not generated significant volumes of investment activity yet, they represent compelling opportunities for private equity firms. One technology the EY report says has begun to gain traction and cause dis-ruption is IoT. To date, investment in IoT has been selective, and primarily focused on the enabling infrastructure and more mature segments, such as real estate, smart cities, smart homes, agriculture and logistics.

However, as the deployment of 5G technology begins to accelerate, advanced IoT applications will represent significant opportunities for PE investors in emerging segments, such as connected vehicles, con-nected health and connected industrials, says EY. And while currently most invest-

ment has focused on op-portunities in the developed markets, the rapidly grow-ing Asia-Pacific market will offer opportunities as well. As IoT proliferates, demand for reliable connectivity will increase dramatically, lead-ing to micro-data centers and related technology, including edge computing.

Edge computing al-lows data produced by IoT devices to be processed closer to where it is created, instead of sending it across long routes to data centers or clouds, according to Network World. Doing this computing closer to the edge of the network lets organizations analyze im-portant data in near real-time, which is essential for many industries, including manufacturing, healthcare, telecommunications and finance.

Edge computing models are attractive to PE firms, EY points out. “The long-term, locked-in contracts offer a measure of protec-tion against the macro cycle, and many have investment profiles similar to more traditional infra-structure plays, such as toll roads and ports. And growth in the sector means PE firms have the potential to deploy large amounts of capital in the space to capture current and future trends.” M&A

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The Buyside

Showing love for pets

By Demitri Diakantonis

People are increasingly treating pets like family members, creating demand for pet health products and services

At least two-thirds of U.S. homes have at least one pet, and people are spending more money on their pets than ever, driving M&A across the entire pet care sec-tor. In 2019, Elanco

Animal Health (NYSE: ELAN) announced plans to buy pet therapeutics company Aratana Therapeutics (Nasdaq: PETX) for up to $245 million. Aratana develops medicine for dogs and cats. The company makes Galliprant tablets, to treat osteoarthritis in pets. The deal will allow Elanco to integrate the Aratana portfolio of pet therapeutics into their companion animal therapeutics business, including a pipeline of therapeutic candidates and two marketed products. “As a newly independent, premier animal health company, we believe that Elanco would help expand our portfolio with their substantial resources and presence within the compan-ion animal segment,” says Aratana CEO Craig Tooman.

It is not just strategic buyers that are active in dealmaking in the pet industry. PE firms that focus on animal care are raising new funds. Shore Capital Partners has raised its third healthcare fund at $293 million in 2019. The fund will invest in mircrocap businesses that have up to $100 million in revenue, including animal healthcare. In 2017,

Shore Capital invested in Midwest Veteri-nary Partners, which owns the Lake Huron Veterinary Clinic in Michigan. The veterinary market is ripe for consolidation because there is an aging population of veterinarians who want to sell out of their practices and an increasing number of new veterinarians with high student debt and an increased desire to work as veterinarians, but not necessarily do the administrative work of owning a practice.

The U.S. pet insurance sector is fragment-ed. According to consumer financial services firm Synchrony (NYSE: SYF), the pet health insurance industry is expected to double by 2022. In 2019, Synchrony acquired pet

health insurance company Pets Best. The target offers health, wellness and per-sonal care credit products that can be used to pay for a variety of healthcare ex-penses including veterinary care. As the cost of pet care increases, pet owners are increasingly seeking better access to care. The acquisi-tion will expand Synchrony’s CareCredit platform, and will allow CareCredit to offer more payment options for veterinarians and pet own-ers. “More people are includ-ing pets as part of their fam-ily,” says CareCredit CEO Beto Casellas. “With Pets Best, we now have unique insight into the fast-growing pet health insurance market and can offer pet owners more choices for their pet’s care.” M&A

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SELLER’sEDGE

The year may have gotten off to a bit of a slow start com-pared with a record-breaking 2018, but investment bankers and other advisors interviewed by Mergers & Acquisitions say they are very busy, and their forecasts for M&A in 2019 remain bullish. They point to a lot of cash that must be deployed by strategic buyers and private equity firms alike; a healthy U.S. economy; and low interest rates. Competition for high-quality targets has never been more intense, especially for technolo-gy providers, they report, which means sellers are command-ing high prices. It all adds up to a seller’s market.

A certain mood of urgency prevails, as dealmakers seek to close deals quickly, while conditions remain favorable. The advisors interviewed for this story say they don’t see signs of

PE firms and corporations compete fiercely for high-quality targets, which means baby boomer business owners are getting top dollar. Urgency is the mood of the day, as everyone tries to close deals now, while the going is still good, say investment bankers and other advisors

SELLER’sEDGE




By Mary Kathleen Flynn

018_MAJ0619 18 5/6/2019 11:16:59 AM

SELLER’sEDGE



an impending recession; however they are closely monitor-ing bellwethers, including corporate earnings, wage pressure, global supply chains and slowdowns abroad. They are recom-mending that clients be prepared for an economic slowdown in the next two years.

Specialization is the name of the game, and investment bankers advise clients to seek targets with business-model stability, limited cyclical exposure and a recurring revenue business model. Technology, business services, healthcare, consumer and manufacturing are among the most promising sectors.

Here are Q&As with eight prominent advisors.


SELLER’sEDGE




By Mary Kathleen Flynn Photography by Jeff Sciortino

019_MAJ0619 19 5/6/2019 11:17:01 AM


What is your outlook for middle-market M&A in 2019?

Overall deal activity in the first quar-ter was certainly choppier than in 2018. Geopolitical worries over a possible trade war in Asia and the lack of resolu-tion to Brexit in Europe tempered senti-ment internationally. In North America, however, activity remained strong, as the stock market rallied back from its December lows. We expect middle market M&A to be particularly strong in 2019, especially in North America. Deal-making should benefit from continued strength in the U.S. economy, historically attractive interest rates, and spon-sors flush with capital. If we’re able to navigate the global uncertainty around Brexit and Asian supply chains, this is shaping up as another very strong year.

Do you expect an economic downturn? Assuming no geopolitical shocks in

the U.S. or beyond, we expect to see positive, but more muted, economic growth in 2019. Employment, consumer confidence and business sentiment are at or near record highs. We are, though, mindful of potential headwinds

Cover story: It’s a seller’s game


While still robust relative to historical levels, first quarter deal flow was gener-ally down in terms of both volume and value, especially in sponsor-backed transactions. The majority of our clients attribute this to high valuation levels and intense competition for deals.

In general, I am bullish when it comes to M&A in 2019. The U.S. economy is fairly healthy; there is a tremendous amount of capital/dry-powder needing to be deployed; and interest rates are still at historically low levels and look like they will stay that way through the remainder of the year. Economically, I think we are at or close to the peak in the cycle, but I think in either a good or bad economy, middle-market M&A will continue to be robust.

Do you expect an economic downturn? A downturn will happen at some

point – just a question of when. Barring any unforeseen shock to the global economy, I would anticipate the U.S. economy to continue at current levels with consensus being 2.5-3 percent

GDP growth. We are advising our clients to maintain pricing discipline on their deals as well as be very thor-ough and address up front their value creations plans for the business post-transaction.

How is the lending environment affecting deals?

The lending market appears to continue to be healthy – almost too healthy – as both commercial lenders and alternative financing sources con-tinue to compete for deal financing.

What opportunities and challenges do buyers face?

The biggest opportunities for buyers tend to be in certain industry sectors where we are seeing a lot of activity, such as healthcare and technology.

Challenges include: valuation, com-petition for deals, pressure to deploy capital, pressure to exit investments, technological disruption and digital transformation – just to name a few!

What opportunities and challenges do sellers face?

Not many challenges. I do believe it is a seller’s market, as the M&A process in the U.S. is extremely efficient. Biggest challenge I see is managing the com-petitive process, given the amount of capital out there chasing deals, as well as overly-aggressive buyers looking to transact. I believe it is a prime time to be a seller, given the amount of dry powder in the market, the pressure to deploy capital, and historically record-high valuation levels.

Which sectors and which types of deals are most promising?

Buy and build strategies seem to be coming back into favor; technological dis-ruption and digital transformation driving both consolidation and divestitures; indus-tries such as healthcare and technology.

Paul Aversano, Managing Director, Alvarez & Marsal Cole Bader, Managing Director, Stifel Financial

Close to peakWhatever happens to the economy, middle-market M&A will continue to be robust, predicts Paul Aversano

Plethora of good assetsSellers need to focus on having pristine capital structures, clean operations and transparency, advises Cole Bader

“It’s a prime time to be a seller, given the amount of dry powder, the pressure to deploy capital and record-high valuation levels.”

020_MAJ0619 20 5/6/2019 11:17:05 AM



Overall deal activity in the first quar-ter was certainly choppier than in 2018. Geopolitical worries over a possible trade war in Asia and the lack of resolu-tion to Brexit in Europe tempered senti-ment internationally. In North America, however, activity remained strong, as the stock market rallied back from its December lows. We expect middle market M&A to be particularly strong in 2019, especially in North America. Deal-making should benefit from continued strength in the U.S. economy, historically attractive interest rates, and spon-sors flush with capital. If we’re able to navigate the global uncertainty around Brexit and Asian supply chains, this is shaping up as another very strong year.

Do you expect an economic downturn? Assuming no geopolitical shocks in

the U.S. or beyond, we expect to see positive, but more muted, economic growth in 2019. Employment, consumer confidence and business sentiment are at or near record highs. We are, though, mindful of potential headwinds

to watch, including wage pressure, uncertain global supply chains and more pronounced slowdowns abroad. A potential corporate earnings slowdown would also be problematic. As equity markets have strengthened and debt markets continue to offer attractive lending terms and rates, we are advising clients that now is an opportune time to raise capital, which bodes well for M&A.


Banks and non-bank lenders are being very aggressive, both in terms of leverage and terms that makes it particularly attractive for sponsors to execute middle-market transactions using that leverage. The competition from sponsors, combined with strategic buyers with healthy balance sheets, is creating favorable valuations for sellers.


There’s a plethora of good assets out there, for both stand-alone platforms and add-on opportunities. Entrepre-neurs have been creating great com-

panies over the last 20 years and they are still bearing fruit. In terms of chal-lenges, there’s increased competition for purchasing assets from both strategic buyers and PE firms. That frothiness is creating relatively high valuations.


It’s still a seller’s market with intense competition for deals and significant transaction capital available. This com-bination is driving up multiples/valua-tions. That being said, buyers continue to be rigorous and disciplined in their diligence processes. If they find anything troublesome, they are quick to reduce their offered price. Sellers need to focus on having pristine capital structures, clean operations, and transparency on future revenues and profitability.


Technology continues to be one of the largest sectors within M&A. The cycle of the last 20-plus years of venture capital and PE capital, paired with innovative entrepreneurs, has created a huge number of very attractive and innovative companies.

In a number of spaces, particularly in software and the Internet, we believe there will be a long runway of great transactions and outcomes for sellers for a while.

Challenges include: valuation, com-petition for deals, pressure to deploy capital, pressure to exit investments, technological disruption and digital transformation – just to name a few!


Not many challenges. I do believe it is a seller’s market, as the M&A process in the U.S. is extremely efficient. Biggest challenge I see is managing the com-petitive process, given the amount of capital out there chasing deals, as well as overly-aggressive buyers looking to transact. I believe it is a prime time to be a seller, given the amount of dry powder in the market, the pressure to deploy capital, and historically record-high valuation levels.


Buy and build strategies seem to be coming back into favor; technological dis-ruption and digital transformation driving both consolidation and divestitures; indus-tries such as healthcare and technology.

Cole Bader, Managing Director, Stifel Financial

Close to peakWhatever happens to the economy, middle-market M&A will continue to be robust, predicts Paul Aversano

Plethora of good assetsSellers need to focus on having pristine capital structures, clean operations and transparency, advises Cole Bader

“We’re mindful of potential headwinds to watch, including wage pressure, uncertain global supply chains and more pronounced slowdowns abroad.”

021_MAJ0619 21 5/6/2019 11:17:08 AM



Our pitch activity continues to be very active in line with 2018 volumes, which is a good predictor for 2019 M&A deal vol-ume. Private equity and corporate buyers remain very aggressive.

The private equity fundraising en-vironment has been great, with many firms raising new and larger funds. This large inflow of capital will fuel continued investment activity. The middle market has also seen increased buy-out activity by larger private funds who tradition-ally focused on multi-billion dollar transactions but are now also acquiring high growth middle-market platforms. Furthermore, there has been an activ-ity uptick in family office and direct LP investing. This broad base of investor ap-petite, combined with a strong economy and company performance, has created an attractive environment for sellers.

Do you expect an economic downturn? We do not see any signs of an eco-

nomic slowdown or downturn in 2019. However, the sensitivity of both investors and lenders to a possible cycle has in-


With more than $1 trillion of private equity dry powder and strong balance sheets of the corporates due in part to tax reform in 2018, investors are clam-oring for high-quality assets, and there is an urgency to deploy capital in the form of acquisitions. Our general view is that 2019 will remain a very active year for M&A, comparable to 2018. The back half of the year shows positive indicators for continued M&A volume across all sectors. Mid-markets and corporates continue to demonstrate revenue and Ebitda growth, albeit at a slower growth clip than 2018. The general underpinnings of the economy are favorable: positive GDP expansion, low interest rates and significant avail-ability to liquidity in the capital markets and ready access to credit.

Do you expect an economic downturn?

We are suggesting to our clients and borrowers to be generally prepared for an economic slowdown in the coming two years. While there is no certainty

to this, we are advising clients now to manage all forms of risk in prepara-tion: interest rate risk, commodity input fluctuation risk and exogenous market shock risks inclusive of trade. We are also discussing with our middle-market Midwest-based privately held busi-nesses that there is urgency to consider transition and succession planning and time the market for potential sale ac-cordingly. There is a significant amount of wealth transfer that will be occurring with Baby Boomer-owned privately held businesses in the coming years. Private equity has significant interest in these businesses. Mid-market business-es considering a sale should consider it now as there is ready and waiting PE dry powder to support acquisitions. Sales that occur now will still allow room for organic growth pre-cycle. If sellers do not act now, they will likely need to ride out the cycle and gamble on future valuations post cycle.


Access to capital markets and credit remains robust. Interest rates are low,

and high-quality assets are in demand for lending investors. The lending market is very competitive for high-quality as-sets, which translates to borrower-friend-ly structures at this point in the cycle.


Uncertainty with trade deal in China, tariffs, commodity fluctuations or an increase in interest rates could provide hesitation in investing in some sub sectors. Investing in cyclicals, such as automotive or building products, will be undertaken with caution.


Mid-market sellers have opportunity to transition wealth or take chips off the table now in a robust M&A market that could provide what may be peak valuations prior to a cycle. Pre-sale due diligence, such as quality of earnings and market study evaluation is impera-tive to understanding buyers’ interests and investment thesis, and maximize valuation to provide the cleanest and most timely execution. If sellers plan to remain on board and roll over equity, evaluate and pick your partners wisely.


Healthcare, tech and business ser-vices are the most active with attrac-tive valuations for sellers. Fragmented industries across all sectors provide attractive opportunities for buy and build investors.


Transferring wealthPrivate equity has significant interest in Baby Boomer-owned privately held businesses, explains Karen Davies

Inflow of capitalPitch activity is high, which bodes well for M&A, says Andrew Jessen

“Pre-sale due diligence is imperative to understanding buyers’ interests and investment thesis.”

Karen Davies, Managing Director, Huntington National Bank Andrew Jessen, Managing Director, William Blair

022_MAJ0619 22 5/6/2019 11:17:13 AM



Our pitch activity continues to be very active in line with 2018 volumes, which is a good predictor for 2019 M&A deal vol-ume. Private equity and corporate buyers remain very aggressive.

The private equity fundraising en-vironment has been great, with many firms raising new and larger funds. This large inflow of capital will fuel continued investment activity. The middle market has also seen increased buy-out activity by larger private funds who tradition-ally focused on multi-billion dollar transactions but are now also acquiring high growth middle-market platforms. Furthermore, there has been an activ-ity uptick in family office and direct LP investing. This broad base of investor ap-petite, combined with a strong economy and company performance, has created an attractive environment for sellers.

Do you expect an economic downturn? We do not see any signs of an eco-

nomic slowdown or downturn in 2019. However, the sensitivity of both investors and lenders to a possible cycle has in-

creased. We are advising clients to focus their growth investments on customer and market segments that are more recession-resilient and less discretionary. We are also advising clients to prioritize infrastructure and resource investments in areas like technology that increase productivity and create more variable and flexible costs. This way, companies can minimize both the revenue and profit impact of a potential downturn, which makes them stronger, and more valuable businesses.


The middle-market lending environ-ment remains healthy, due to significant committed capital within the direct lend-ing community. However, the market has begun to bifurcate, with challenging and/

or cyclical credits seeing increased scru-tiny as lenders exhibit caution regarding the current (late) stage of economic cy-cle. This dynamic is particularly true with respect to junior debt, as lenders increas-ingly shy away from such positions in favor of first dollar (senior or unitranche) structures. On the flip side, lender ap-petite for attractive, non-cyclical credits remains robust, which continues to drive attractive leverage and terms, and com-mensurate M&A valuation multiples.


Middle-market investing is more com-petitive than ever. The increased amount of funds to invest, domestic and interna-tional strategic buyer engagement, larger PE funds “playing down” and an influx of alternative investors has made it more difficult to win a sale process.


Sale processes are moving much faster, so the amount of pre-process preparation has meaningfully increased. This includes diligence preparation, data analysis, and third-party reports, such as quality-of-earnings and industry studies. These activities take time and require more upfront expenses prior to a sale. Also, buyers have become wary of sales processes and are more selective. This makes it challenging to get time and attention of buyers. These activities have increased the amount of time and atten-tion management teams spend on a sale process versus running their businesses.


We are seeing strong, sustained activ-ity across our core market segments in technology, healthcare, consumer, services and industrials.

and high-quality assets are in demand for lending investors. The lending market is very competitive for high-quality as-sets, which translates to borrower-friend-ly structures at this point in the cycle.


Uncertainty with trade deal in China, tariffs, commodity fluctuations or an increase in interest rates could provide hesitation in investing in some sub sectors. Investing in cyclicals, such as automotive or building products, will be undertaken with caution.


Mid-market sellers have opportunity to transition wealth or take chips off the table now in a robust M&A market that could provide what may be peak valuations prior to a cycle. Pre-sale due diligence, such as quality of earnings and market study evaluation is impera-tive to understanding buyers’ interests and investment thesis, and maximize valuation to provide the cleanest and most timely execution. If sellers plan to remain on board and roll over equity, evaluate and pick your partners wisely.


Healthcare, tech and business ser-vices are the most active with attrac-tive valuations for sellers. Fragmented industries across all sectors provide attractive opportunities for buy and build investors.

Inflow of capitalPitch activity is high, which bodes well for M&A, says Andrew Jessen

“Pre-sale due diligence is imperative to understanding buyers’ interests and investment thesis.”

“The privateequity fundraising environment has been great, with many firms raising new and larger funds.”

Andrew Jessen, Managing Director, William Blair

023_MAJ0619 23 5/6/2019 11:17:16 AM



Sellers are eager to take advan-tage of an M&A market that’s having a long run. Buyers are building reces-sion scenarios into their models, and bankers are managing deal quality closely, avoiding weaker assets. 2018 was a great year for M&A activity, and I expect 2019 to remain strong.


With each passing great year in M&A, probabilistically, the economic winds have to shift at some point, motivating sellers to explore their options now, rather than wait. We are working with clients to think about the impact of a recession on their projection models. We work to ac-celerate and de-risk the sale process and front-end load as much buyer due diligence as practical, with seller Quality of Earnings and often market studies. Deal quality at this stage in the cycle becomes ever more critical, as buyers analyze how targets might perform in a downturn.


We have seen robust levels of activity to date in 2019, similar to what we expe-rienced in 2018, and continue to see our backlog grow. Despite M&A volume mar-ket wide trending slightly down over the last few quarters and the volatility in the public markets in January, high-quality companies are still attracting a lot of at-tention from strategic and private equity investors. There is a significant amount of dry powder among private equity groups and cash on corporate balance sheets to be invested, and the pressure to deploy capital should keep valuations near all-time highs.

Do you expect an economic downturn? We’ve been in a very long upcycle

and people keep looking for the turn, but there aren’t signs of it happening yet. The data shows that debt isn’t over extended, unemployment is very low, and compa-nies are performing well. The outlook for M&A activity remains positive, due to slowing opportunities for pure organic growth, as well as high demand among strategics and private equity to put capi-

tal to work. Quality businesses, especially those who have a history of performing well during recession, will continue to be very attractive assets. If there is a downturn, we are anticipating it to be a shallow recession and the M&A markets should remain largely insulated because of the amount of available capital.


The lending markets are very strong, which is setting a floor for valuations. Robust leverage levels in M&A deals, supported primarily by non-bank lenders in the middle market, should continue to keep valuations high. These alternative lenders are hyper-focused on serving the private equity community and sponsor-backed deals. The current state of the leverage markets is equaling the playing

field between private equity and strate-gics. For strategics, the bond market is strong, and debt continues to be cheap.


We have seen an interesting dynamic in the buyer landscape recently, primarily due to the imbalance in supply of high-quality deals coming to market and the high demand among strategics and pri-vate equity groups. S&P aggregate cash positions (excluding financial companies) have hovered near $1.5 trillion over the last few years, and PE dry powder is hov-ering over $1 trillion, creating immense competition in the market. With this in mind, investors should be aggressively pursuing assets of interest and, at Harris Williams, we are keeping an open dialog with investors across the board.


Sellers have a unique opportunity in today’s market, given where we are in the cycle and the pressure for investors to deploy capital. The competition in the market and the available capital are keeping valuations at near all-time highs. While buyers are willing to pay premium valuations, they are requiring increasing levels of data from the sellers in order to support those valuations. Therefore, com-panies which have tracked and organized data with a sale in mind are in a much better spot than those that have not.


At Harris Williams, all 10 of our Industry Groups have been very active. Businesses, regardless of industry, who have a history of performing well across economic cycles are very attractive as-sets in today’s market.

Imbalance in supply and demandWhile buyers are willing to pay premium prices, they also require more data from sellers, reports Derek Lewis

“Quality businesses, especially those who have a history of performing well during recession, will be very attractive assets.”

Recession scenariosSellers should do a lot of heavy lifting up front to prepare for an exit, advises Peter Lombard

Derek Lewis, Managing Director, Harris Williams Peter Lombard, Managing Director, Piper Jaffray & Co.


024_MAJ0619 24 5/6/2019 11:17:19 AM



Sellers are eager to take advan-tage of an M&A market that’s having a long run. Buyers are building reces-sion scenarios into their models, and bankers are managing deal quality closely, avoiding weaker assets. 2018 was a great year for M&A activity, and I expect 2019 to remain strong.


With each passing great year in M&A, probabilistically, the economic winds have to shift at some point, motivating sellers to explore their options now, rather than wait. We are working with clients to think about the impact of a recession on their projection models. We work to ac-celerate and de-risk the sale process and front-end load as much buyer due diligence as practical, with seller Quality of Earnings and often market studies. Deal quality at this stage in the cycle becomes ever more critical, as buyers analyze how targets might perform in a downturn.


Volumes for middle market loan issuance were down on a year-over-year and quarter-over-quarter basis in 1Q19, due to a lack of high-quality deals and light pipelines. Lenders still have a great deal of dry powder and are still willing to be aggressive on good credits. However, lenders are beginning to take a more cautious underwriting approach and are less likely to stretch on highly cyclical businesses given where we stand in the current cycle. In 1Q19 middle market M&A financings were down from both 4Q18 and 1Q18 by about 30% and about 35%, respectively.


It is a really competitive M&A mar-ket. To prevail in competitive auctions, buyers need to be disci-plined and focus on where they have conviction around an investment the-sis, and then be smart and efficient around risk allocation to present the seller with a package that convinc-ingly can get to a closing efficiently and quickly.


Companies that are growing in a capital-efficient manner will com-mand higher multiples than those that aren’t. This is obvious but criti-cal, as the cycle matures, and buyers focus on the strength and resilience of the business. Sellers are well ad-vised to do a lot of heavy lifting up-front to prepare for exit. The tradeoff sellers make is that the impact of negative surprises – or minor devia-tions from advertised performance – can be profound. The flip side of that reality is that tracking at or above performance enables optimal outcomes. Sellers need to think hard about what performance they want to be graded on during the process.


Technological disruption across verticals continues to be a key theme, which points to the technology sector being a persistent focus for both strategic and financial buyers.

Corporate divestitures also con-tinue to be attractive targets for PE and other strategic buyers, as com-panies increasingly manage like PE owners and focus on optimizing core businesses and shed others.

field between private equity and strate-gics. For strategics, the bond market is strong, and debt continues to be cheap.


We have seen an interesting dynamic in the buyer landscape recently, primarily due to the imbalance in supply of high-quality deals coming to market and the high demand among strategics and pri-vate equity groups. S&P aggregate cash positions (excluding financial companies) have hovered near $1.5 trillion over the last few years, and PE dry powder is hov-ering over $1 trillion, creating immense competition in the market. With this in mind, investors should be aggressively pursuing assets of interest and, at Harris Williams, we are keeping an open dialog with investors across the board.


Sellers have a unique opportunity in today’s market, given where we are in the cycle and the pressure for investors to deploy capital. The competition in the market and the available capital are keeping valuations at near all-time highs. While buyers are willing to pay premium valuations, they are requiring increasing levels of data from the sellers in order to support those valuations. Therefore, com-panies which have tracked and organized data with a sale in mind are in a much better spot than those that have not.


At Harris Williams, all 10 of our Industry Groups have been very active. Businesses, regardless of industry, who have a history of performing well across economic cycles are very attractive as-sets in today’s market.

“The economic winds have to shift at some point, motivating sellers to explore their options now, rather than wait.”

Recession scenariosSellers should do a lot of heavy lifting up front to prepare for an exit, advises Peter Lombard

Peter Lombard, Managing Director, Piper Jaffray & Co.

025_MAJ0619 25 5/6/2019 11:17:22 AM



Compared with 2018, 2019 started slowly, but activity has picked up significantly in March and April. We expect momentum to continue through year’s end. In 2018, new tax code and tariff legislation were hot topics. In 2019, the market is watching for legislative changes that may have long-term impacts, but the focus has been more granular – on company- and industry-specific fundamentals. Although 2019 started slowly, we expect mid-year transaction momentum to continue into the fourth quarter but believe the year will end relatively flat year-over-year. Given the backlog of sell-side mandates throughout the industry, we expect the number of deals to increase quarter over quarter in the second and third quarters, which will lead to a spike of deal closings during the back half of the year.

Do you expect an economic downturn? We do not anticipate a downturn

within the next 12 months. With the Fed planning to stabilize rates for the remainder of the year, we expect the


We’re anticipating strong growth for 2019. We have M&A bankers with deep expertise in a variety of industries and what’s great about that – beyond being able to serve clients – is that if there is a cyclicality impact to one, others are likely not feeling that pressure. The mid market is powering the global economy – our middle market index continues to prove out that the private markets are providing more stability and sustained performance than the public markets.

Do you expect an economic downturn? I don’t see a major correction hap-

pening in 2019. Companies overall continue to perform well. Low unemploy-ment, rising wages and low inflation are all driving strong consumer confidence and spending. That said, it seems rea-sonable that sometime in 2020, we will see a modest economic correction.


The market is still pretty aggressive. Debt multiples are still 1 or 2 turns ahead

of historic norms. Interest rates are still low. And there remains an over-abun-dance of debt capital available, so the supply/demand curves continue to favor potential borrowers.


On the deal side, competition for A-quality assets has never been greater. This is driving not only higher prices, but abbreviated sale and due diligence processes as well. In many cases, the winning buyers try to jump ahead of a sale process and perform third-party due diligence in advance of any formal bid. This is both a challenge and an opportu-nity. Winning investors need more than ever to specialize in certain sectors such

that they can quickly and confidently select and pursue the best assets. On the operational side, companies that will thrive in the future economy will be very adept at harnessing the power of rapid technology while staying on the cutting edge of evolving consumer preferences.


White hot market - M&A sellers today benefit from very strong M&A market that is likely to last through and beyond 2019. Slow growth – while the economy is performing well it is still only growing at low single digit rates. This means that only a small portion of companies will be able to consistently grow at double digit rates. Those that can, will certainly gather significant interest from acquir-ers. Valuation asymmetry between buyer and sellers – with valuations creep-ing ever higher, sellers often develop unrealistic valuation expectations for themselves. At the same time, buyers get uneasy at such high valuations and then fixate on downside risk. The combination of these two dynamics is, in some cases, creating artificial value gaps between buyers and sellers.


Specialize, specialize, specialize. With heavy competition, successful inves-tors will have to form and continue to enhance specific areas of expertise.

The days of generalist investors using only financial engineering to drive 25%+ IRRs are long gone. Rather, those that thrive in the current market will have powerful insights in choosing the right investments and will provide significant operating value to their investments post-closing.

Hot marketStiff competition means buyers should specialize in specific areas of expertise, urges Christopher Stradling

Unique meritsThe biggest challenge for sellers is standing out in a crowded M&A market, says J.R. Doolos

Christopher Stradling, Managing Director, Lincoln International J.R. Doolos, Director, KeyBanc Capital Markets

“The winning buyers try to jump ahead of a sale process and perform third-party due diligence in advance of any formal bid.”


026_MAJ0619 26 5/6/2019 11:17:25 AM



Compared with 2018, 2019 started slowly, but activity has picked up significantly in March and April. We expect momentum to continue through year’s end. In 2018, new tax code and tariff legislation were hot topics. In 2019, the market is watching for legislative changes that may have long-term impacts, but the focus has been more granular – on company- and industry-specific fundamentals. Although 2019 started slowly, we expect mid-year transaction momentum to continue into the fourth quarter but believe the year will end relatively flat year-over-year. Given the backlog of sell-side mandates throughout the industry, we expect the number of deals to increase quarter over quarter in the second and third quarters, which will lead to a spike of deal closings during the back half of the year.

Do you expect an economic downturn? We do not anticipate a downturn

within the next 12 months. With the Fed planning to stabilize rates for the remainder of the year, we expect the

leverage markets to remain healthy and corporate earnings to continue to grow while jobs are added to the economy and disposable income increases – all of which support growth in the equity market and M&A activity.


Leverage levels remain strong but below the peak levels of 2017. Traditional lenders are focused on potential cyclical impacts and risks unique to each busi-ness they review. They have a keen focus on a company’s variable cost structure and performance during the last reces-sion. Direct lenders continue to find creative ways to reach higher leverage

levels. Yet most PEbuyers are not opting to take maximum leverage. They are taking a conservative approach to allow for credit availability to fund capital investments or future acquisitions.


The biggest challenge for buyers is competition for high-quality assets. Financial and strategic buyers are mainly looking for the same charac-teristics in targets – an opportunity for growth, diversification and sustainability. With record levels of private equity dry powder and cash on company balance sheets, investors are looking for M&A as a main vehicle for growth. In a com-petitive process, this can push buyers to valuations that put the targeted return on that asset at risk.


The biggest challenge for sellers is standing out in a crowded M&A mar-ket. Most companies have experienced meaningful growth during the past decade, and there continues to be a plethora of companies available in the market. Buyers are quick to make deci-sions about what is worth spending their time to pursue at a value that makes sense. It is critical for companies to be prepared for a sale process and convey the unique merits of their business to potential buyers early in the process.


The sectors that offer the most opportunities are those with inherent business-model stability and limited cyclical exposure. The most coveted assets are necessary business services, regardless of economic conditions, and manufacturing, that have a visible, recurring customer base centered on nondiscretionary spending. M&A

that they can quickly and confidently select and pursue the best assets. On the operational side, companies that will thrive in the future economy will be very adept at harnessing the power of rapid technology while staying on the cutting edge of evolving consumer preferences.


White hot market - M&A sellers today benefit from very strong M&A market that is likely to last through and beyond 2019. Slow growth – while the economy is performing well it is still only growing at low single digit rates. This means that only a small portion of companies will be able to consistently grow at double digit rates. Those that can, will certainly gather significant interest from acquir-ers. Valuation asymmetry between buyer and sellers – with valuations creep-ing ever higher, sellers often develop unrealistic valuation expectations for themselves. At the same time, buyers get uneasy at such high valuations and then fixate on downside risk. The combination of these two dynamics is, in some cases, creating artificial value gaps between buyers and sellers.


Specialize, specialize, specialize. With heavy competition, successful inves-tors will have to form and continue to enhance specific areas of expertise.

The days of generalist investors using only financial engineering to drive 25%+ IRRs are long gone. Rather, those that thrive in the current market will have powerful insights in choosing the right investments and will provide significant operating value to their investments post-closing.

Unique meritsThe biggest challenge for sellers is standing out in a crowded M&A market, says J.R. Doolos

J.R. Doolos, Director, KeyBanc Capital Markets

“The most coveted assets are necessary business services that have a visible, recurring customer base centered on non-discretionary spending.”

027_MAJ0619 27 5/6/2019 11:17:28 AM

From fund administrators to valuation services, from networking groups to VDRs, here are the latest tools and

services to help make dealmaking easier and better

Dealmaker’s guide to service providers

028_MAJ0619 28 5/6/2019 11:10:55 AM

From fund administrators to valuation services, from networking groups to VDRs, here are the latest tools and

services to help make dealmaking easier and better

By Danielle Fugazy

Dealmaker’s guide to service providers

As dealmakers continue to transact at a very rapid pace, many companies have cropped up to help make the transaction process more efficient. Products and services that give dealmakers the upper hand are highly sought after, however there are so many today it can be hard to pinpoint the right

companies to work with. With this in mind, Mergers & Acquisitions looked at many of the tools offered to dealmakers today. Here’s our updated annual look at the tools transac-tion professionals count on to help them source and close deals.

029_MAJ0619 29 5/6/2019 11:11:07 AM


No private equity firm sets out to build a giant back office, but over time, as funds and firms grow, back-office fund administration processes can take on lives of their own. “A lot of firms start off small, and they have a small back office, but the next thing you know, they have a big operation,” says Robert Woosley, national practice leader at Frazier & Deeter accounting firm. “They never raised a fund with the intention of becoming experts in fund admin-istration, that’s not what they want to do.” The firm’s subsidiary, FD Fund Administration, offers fund administra-tion services to private equity firms and real estate firms.

“There are so many compliance re-quirements now and pressure from the limited partners for reporting, it’s driv-ing the whole industry to move forward and think more seriously about fund

Think Gartner meets Angie’s List, and there lies BluWave. The idea for BluWave grew over a 20-year span, while Sean Mooney was working as a partner in a private equity firm and saw a void in the market as the industry be-came increasingly competitive. “When I started in the industry, we would buy low, do one or two things, and sell high. Now PE firms have to buy high and do 10 to 20 things to create enough value to sell higher.” Mooney founded BluWave to help private equity firms and their portfolio companies to more confidently and effectively utilize ser-vice providers for diligence and value creation.

“Private equity funds have no choice today but to leverage third parties as force multipliers. They no longer have the time or room to full-time hire their

way out of problems,” he says. “How-ever, at the same time it’s really hard to know who’s good and even harder to hold service providers accountable. That’s where we come in. We’re the expert of experts.” In the past, private equity firms may have tried to forego the expense of outside help, but today, the industry has matured, and virtually all PE firms are bringing in assistance.

BluWave helps connect private equity firms and their portfolio compa-

nies with everything from finding niche due-diligence experts and executives to value-creation initiatives, with the idea that being able to quickly pinpoint the right help will ultimately save compa-nies time and money while producing better results. It then gathers objective data on outcomes from its more than 250 private equity fund clients to help hold service providers accountable for their results.

“The challenge is that the needs of private equity funds are so varied it’s hard for them to know all the resources before they need it,” Mooney says. “And as soon as a PE fund has a project, the requirements are different enough each time that really expensive PE profes-sionals then have to start Googling and boil the ocean. Instead of doing these craft searches, PE deal and operations teams call us because we already know the best-fit resource for the job and free them to focus on more strate-gic priorities. Given our background, we intimately understand the unique standards of PE and help make things easier for them.”

Private equity firms such as Pritzker Group, Hidden Harbor Capital, Cressey & Company, Inverness Graham, Gen-star, Pamlico and Blue Mountain Capi-tal have used BluWave’s services.

“One of the biggest things that can bog down a sales process is when in-terested parties discover aspects of the business that are different than those represented in offering materials,” says Mooney. “To avoid this, it is well worth the time and money to do diligence on yourself. Hiring quality of earnings advisors, tax advisors, and even market sizing, competitive landscaping, and IT consultants to do pre-diligence will give you much more confidence going into a process that you won’t encounter a surprise that could impact time and value.”

Finding the right providers BluWave acts like an Angie’s List for private equity firms

Outsourcing the back office Fund administrators free up private equity firms to focus on investing

Robert Woosley, Frazier & DeeterSean Mooney, BluWave

Dealmaker’s Guide

“Private equity funds have no choice today but to leverage third parties as force multipliers.”

030_MAJ0619 30 5/6/2019 11:11:11 AM


No private equity firm sets out to build a giant back office, but over time, as funds and firms grow, back-office fund administration processes can take on lives of their own. “A lot of firms start off small, and they have a small back office, but the next thing you know, they have a big operation,” says Robert Woosley, national practice leader at Frazier & Deeter accounting firm. “They never raised a fund with the intention of becoming experts in fund admin-istration, that’s not what they want to do.” The firm’s subsidiary, FD Fund Administration, offers fund administra-tion services to private equity firms and real estate firms.

“There are so many compliance re-quirements now and pressure from the limited partners for reporting, it’s driv-ing the whole industry to move forward and think more seriously about fund

administration.” Woosley says.Woosley says fund administration

was a natural extension of Frazier & Deeter’s certified public accountant capabilities. The firm had a strong relationship with a multi-billion-dollar private equity firm that had its own back office handling investor services, accounting, audits and valuations. In 2013, FD Fund Administration hired a few of those employees from the firm and worked with them side by side. The test was successful, and the new

practice line was born.Today, FD Fund Administration pro-

vides back-office fund administration for many well-known firms, including Hamilton Lane and real estate firm Lubert Adler. To give clients a seamless interaction, FD and Frazier & Deeter’s tax division work together. “We have sophisticated tax strategies in house that really sets us apart from the competition,” Woosley says. “You don’t want a fund administrator that doesn’t understand all the issues that private equity firms are dealing with. We are a one-stop shop, instead of having five vendors who don’t communicate with each other.”

Since FD Fund Administration started operations in 2013, the firm has tripled its private

equity assets under administration to more than $30 billion.

“We knew there was a need for this,” Woosley says. “A lot of firms start off small, build strong reputations and grow. They create their own back office, but that’s not their sweet spot. Their sweet spot is finding deals, creating value and putting investors’ capital to work….We understand administration is not their core, but it is required more frequently.”

Using a third-party fund administra-tor is becoming more acceptable to limited partners who are looking for a higher level of transparency. Hedge funds are required to have third-party administrators. While it’s not a require-ment for private equity firms, each year more PE firms shift to a third-party model.

Working with a third-party fund ad-ministrator is a more logical choice, not only because of transparency demands from limited partners, but because of the complexity of regulations and today’s ever-emerging investment strategies, Woosley says. “Private equity firms real-ize they should focus on what they do best and leave this to the experts.”

nies with everything from finding niche due-diligence experts and executives to value-creation initiatives, with the idea that being able to quickly pinpoint the right help will ultimately save compa-nies time and money while producing better results. It then gathers objective data on outcomes from its more than 250 private equity fund clients to help hold service providers accountable for their results.

“The challenge is that the needs of private equity funds are so varied it’s hard for them to know all the resources before they need it,” Mooney says. “And as soon as a PE fund has a project, the requirements are different enough each time that really expensive PE profes-sionals then have to start Googling and boil the ocean. Instead of doing these craft searches, PE deal and operations teams call us because we already know the best-fit resource for the job and free them to focus on more strate-gic priorities. Given our background, we intimately understand the unique standards of PE and help make things easier for them.”

Private equity firms such as Pritzker Group, Hidden Harbor Capital, Cressey & Company, Inverness Graham, Gen-star, Pamlico and Blue Mountain Capi-tal have used BluWave’s services.

“One of the biggest things that can bog down a sales process is when in-terested parties discover aspects of the business that are different than those represented in offering materials,” says Mooney. “To avoid this, it is well worth the time and money to do diligence on yourself. Hiring quality of earnings advisors, tax advisors, and even market sizing, competitive landscaping, and IT consultants to do pre-diligence will give you much more confidence going into a process that you won’t encounter a surprise that could impact time and value.”

Outsourcing the back office Fund administrators free up private equity firms to focus on investing

Robert Woosley, Frazier & Deeter

Dealmaker’s Guide

“There are so many compliance requirements now and pressure from the LPs.”

031_MAJ0619 31 5/6/2019 11:11:12 AM


With nine U.S. offices and nearing its 45th year in business, Valuation Research Corp., known as VRC, calls itself one of the largest and oldest business valuation firms in the U.S.

“Our focus is on delivering independent valuation and advisory services—our pro-fessionals live and breathe their practice areas—and because we aren’t part of an accounting firm or investment bank, our clients truly benefit from that deep expertise,” says Jeff Miller, VRC manag-ing director. “The level of trust in our work product also aligns us, almost embeds us actually, into the deal team at our corporate, private equity and PE portfo-lio company clients. They know we can handle every valuation need throughout the life cycle of the investment, and they know it will stand up to auditor and inves-tor scrutiny.”

The need for independent valuation services has no signs of a plateau be-cause audit and limited partner scrutiny shows no evidence of leveling off, Miller says. “PE fund managers are relying more heavily on a third-party valuation firm for the purpose of managing investor report-ing requirements that must be completed on a periodic basis,” he says. “Inves-tors expect transparency into valuation estimates including info on methodolo-gies, key market inputs, valuation models and accurate markets for performance measurements.” Miller also notes this is pressing for limited partners and as-set managers that focus on non-traded, illiquid assets, which can be difficult to value and can have a material impact on reported figures.

A slew of services don’t fit neatly into well-defined categories, but they shouldn’t be dismissed, because they can be very important for dealmak-ers. Axial doesn’t fit squarely in a category: It takes a hybrid online/offline approach, offering online deal management and deal sourcing along with offline elements like events.

The company’s online deal plat-form allows buyers and investors to source deals within specific criteria across financials, geography, key-words and more than 20,000 verticals and sub-sectors.

“There is no ability to ‘post’ or ‘list’ a deal publicly on Axial,” says Peter Lehrman founder and CEO of the New York-based company. “This has led to Axial being a trusted resource for investment bankers, resulting in higher-quality member deal activity

over the last 12 months.”Axial is exclusively focused on

lower middle market, change of control, debt, minority equity and co-investment transactions involving companies with $5 million to $150 million in revenue and $500,000 to $20 million in Ebitda. Top sectors of deal flow activity include industrial services, business services, Software as a Service, healthcare information technology, distribution and logistics, and manufacturing.

Axial has brought more than 3,400 investment bankers and advisory firms into the fold, including Stephens, KPMG, 41 North Partners, Allegiance Capital, Copper Run Capital, Cap-stone Headwaters, Hilliard Lyons and Roth Capital. Other information ser-vices include Sutton Place Strategies, which focuses on deal sourcing.

Peter Lehrman, Axial

Online networks fuel deal flow Axial connects buyers and sellers who share the same deal goals

Valuation services are vital VRC is one of the largest valuation firms in the U.S.

Virtual data rooms, or VDRs, are now as much a part of the M&A industry as auction processes. The virtual data room software niche should continue to grow as businesses continue to become more comfortable using online services, and as they transition away from physi-cal data forms, according to research firm Ibis. Virtual data room revenue has grown 9.4 percent over the past five years to reach $920 million in 2018, up from $800 million in 2017. In the same timeframe, the number of businesses has grown by 7.2 percent and the number of employees has grown by 6.1 percent, according to Intralinks, the research firm.

More than 20 years ago, Intralinks pioneered the virtual data room, which changed how M&A deals are done. Matthew Wells, senior director of strat-egy and product marketing with the company, says they remain committed

Matthew Wells, Intralinks

VDRs have become ubiquitousIntralinks pioneered virtual data rooms

Dealmaker’s Guide

032_MAJ0619_001 32 5/6/2019 12:33:56 PM


With nine U.S. offices and nearing its 45th year in business, Valuation Research Corp., known as VRC, calls itself one of the largest and oldest business valuation firms in the U.S.

“Our focus is on delivering independent valuation and advisory services—our pro-fessionals live and breathe their practice areas—and because we aren’t part of an accounting firm or investment bank, our clients truly benefit from that deep expertise,” says Jeff Miller, VRC manag-ing director. “The level of trust in our work product also aligns us, almost embeds us actually, into the deal team at our corporate, private equity and PE portfo-lio company clients. They know we can handle every valuation need throughout the life cycle of the investment, and they know it will stand up to auditor and inves-tor scrutiny.”

The need for independent valuation services has no signs of a plateau be-cause audit and limited partner scrutiny shows no evidence of leveling off, Miller says. “PE fund managers are relying more heavily on a third-party valuation firm for the purpose of managing investor report-ing requirements that must be completed on a periodic basis,” he says. “Inves-tors expect transparency into valuation estimates including info on methodolo-gies, key market inputs, valuation models and accurate markets for performance measurements.” Miller also notes this is pressing for limited partners and as-set managers that focus on non-traded, illiquid assets, which can be difficult to value and can have a material impact on reported figures.

Valuation services are vital VRC is one of the largest valuation firms in the U.S.

Technology provides new and inno-vative techniques to help chief financial officers do their jobs more effectively and more accurately, yet many CFOs are not taking advantage of it.

“It’s unfortunate, but private equity firms usually find two or three key things to prioritize at portfolio com-panies and back office support isn’t always on that list,” says Gavin Backos, principal, technology and management consulting at RSM US. “But most CFOs have the same issues and there are tools to alleviate some of the burden.”

Many accounting firms known for their due diligence on private equity deals have expanded their offerings to include sizing up back-office technol-ogy offerings that private equity firms and portfolio companies could benefit from. Not all private equity firms take advantage of the new offerings, but their interest is increasing. “We do have more firms coming to us to help them because there are only so many things they can focus on, and they are starting to recognize this is important.” says Backos.

For several years, RSM has been helping private equity firms assess their current situation, then making recom-mendations and implementing new technology.

“What if you can give your CFO the tools to close their books in a timely manner and feel confident that they have accurate information?” Backos asks. “With the right technology and process you can.”

Virtual data rooms, or VDRs, are now as much a part of the M&A industry as auction processes. The virtual data room software niche should continue to grow as businesses continue to become more comfortable using online services, and as they transition away from physi-cal data forms, according to research firm Ibis. Virtual data room revenue has grown 9.4 percent over the past five years to reach $920 million in 2018, up from $800 million in 2017. In the same timeframe, the number of businesses has grown by 7.2 percent and the number of employees has grown by 6.1 percent, according to the research firm.

More than 20 years ago, Intralinks pioneered the virtual data room, which changed how M&A deals are done. Matthew Wells, senior director of strat-egy and product marketing with the company, says they remain committed to improving the M&A process through

technology and innovation. Intralinks focuses on security, Wells

says. “We are hosting the most sensitive and confidential data for some of the largest companies in the world, so we have a strong focus on security,” he says, adding that the company is also committed to adding efficiency and speed during the transaction process.

Matthew Wells, Intralinks

VDRs have become ubiquitousIntralinks pioneered virtual data rooms

Growing back-office techRSM helps PE firms assess new technology

Dealmaker’s Guide

“We are hosting the most sensitive and confidential data for some of the largest companies in the world.”

033_MAJ0619 33 6/4/2019 12:00:54 PM


Networking with the right people can go a long way. And as the M&A industry has grown over the years, organizations supporting the industry have also grown substantially.

These organizations not only provide networking opportunities, but a sense of community, and in some cases, a national voice for the M&A and private equity industries.

That is the case with the American Investment Council, or AIC. Founded in 2007 as the Private Equity Council, the Washington, D.C.-based organization lobbies on behalf of the private equity industry. But AIC is just one of many organizations M&A and private equity professionals belong to today. The Association for Corporate Growth has become a go-to networking organiza-tion for middle-market M&A profes-sionals. Although the association was founded in the 1950s, it wasn’t until the

late 1990s that the association started focusing its efforts on the private equity community. Today, the association offers guidance on compliance issues, provides a job source network and works with AIC to lobby on behalf of the middle-market M&A industry.

Newer associations are focusing more on different groups within private equity. Exponent, which launched in 2018, focuses on bringing together

women in the PE ecosystem to provide meaningful interactions and strong content.

“Our goal for Exponent is for women in finance to collaborate, to connect,and to pool our knowledge and experience,” says Amy Weisman, one of the founders of Exponent and director of business development at Sterling Investment Partners. “Our mis-sion is to act as a trusted organization and a platform for the exchange of information and the closing of deals. In today’s PE environment, there is a gender tipping point as more women hold senior decisionmaking positions in the industry. Exponent gives momen-tum to this change. Our events have an exponential effect for our attendees by accelerating and solidifying these relationships. To say the least, it is very exciting.”

Weisman says that as the PE mar-ketplace has gotten more crowded, and deal flow development more reliant on technology, making personal connec-tions has been more difficult. Invest-ment professionals are inundated with requests and information.

“Technology is a good way to create efficiencies, but this must not replace person-to-person connections,” Weis-man says. “Networking events leverage our time by bringing together profes-sionals to facilitate interaction and communication with many relevant people. The personal touch remains critical, because it creates an environ-ment of trust and understanding.”

Exponent is gearing up for its An-nual Exchange, which brings together 200 women dealmakers for a focused day of robust content and network-ing. In 2019, the event will take place at Second in New York, on July 11. The Exchange provides attendees with opportunities to establish new connec-tions, and absorb relevant knowledge from industry leaders.

Amy Weisman, Sterling Investment Partners

Groups deliver connectionsEvents hosted by organizations provide efficient networking opportunities

The number of data providers has grown substantially over the years. Venture Economics, now known as Thomson Reuters Corp. (NYSE: TRI), used to be the only formidable game in town, but today the industry has a wide variety of data providers.

They are targeting narrow, tightly defined categories of customers ac-cording to size, geography and other relevant criteria.

Some of the most popular data pro-viders are Dealogic, PitchBook, Preqin and Thomson Reuters, all of which are constantly trying to gain market share.

Despite the growth in data providers, the managers of GF Data Resources LLC still felt there wasn’t enough data available on the lower-middle market. In 2006, the company started collect-ing data on deal values from private equity groups and selling it to other PE groups, investment banks and others in

Graeme Frazier, GF Data

Data sources offer metricsGF Data, PitchBook, Preqin, Thomson Reuters serve the middle market

Dealmaker’s Guide

“Our goal for Exponent is for women in finance to collaborate, to connect, and to pool our knowledge and experience.”

034_MAJ0619 34 5/6/2019 11:11:20 AM


women in the PE ecosystem to provide meaningful interactions and strong content.

“Our goal for Exponent is for women in finance to collaborate, to connect,and to pool our knowledge and experience,” says Amy Weisman, one of the founders of Exponent and director of business development at Sterling Investment Partners. “Our mis-sion is to act as a trusted organization and a platform for the exchange of information and the closing of deals. In today’s PE environment, there is a gender tipping point as more women hold senior decisionmaking positions in the industry. Exponent gives momen-tum to this change. Our events have an exponential effect for our attendees by accelerating and solidifying these relationships. To say the least, it is very exciting.”

Weisman says that as the PE mar-ketplace has gotten more crowded, and deal flow development more reliant on technology, making personal connec-tions has been more difficult. Invest-ment professionals are inundated with requests and information.

“Technology is a good way to create efficiencies, but this must not replace person-to-person connections,” Weis-man says. “Networking events leverage our time by bringing together profes-sionals to facilitate interaction and communication with many relevant people. The personal touch remains critical, because it creates an environ-ment of trust and understanding.”

Exponent is gearing up for its An-nual Exchange, which brings together 200 women dealmakers for a focused day of robust content and network-ing. In 2019, the event will take place at Second in New York, on July 11. The Exchange provides attendees with opportunities to establish new connec-tions, and absorb relevant knowledge from industry leaders.

The number of data providers has grown substantially over the years. Venture Economics, now known as Thomson Reuters Corp. (NYSE: TRI), used to be the only formidable game in town, but today the industry has a wide variety of data providers.

They are targeting narrow, tightly defined categories of customers ac-cording to size, geography and other relevant criteria.

Some of the most popular data pro-viders are Dealogic, PitchBook, Preqin and Thomson Reuters, all of which are constantly trying to gain market share.

Despite the growth in data providers, the managers of GF Data Resources LLC still felt there wasn’t enough data available on the lower-middle market. In 2006, the company started collect-ing data on deal values from private equity groups and selling it to other PE groups, investment banks and others in

the middle market. Specializing in private-equity-

sponsored transactions with enterprise values of $10 million to $250 million, GF Data has provided benchmark historic data for firms to value their portfolio companies based on fair value ac-counting standards.

However, many dealmakers are also increasingly using the data of GF Data and other providers to guide the valua-tion expectations of sellers.

“There was so little data available for deals in the $10 million to $250 million enterprise value range, which is why we launched the firm,” says Graeme Frazier, a partner in GF Data of Conshohocken, Pennsylvania.

“Today, we find business owners will say they had a friend that sold for a high multiple and then they expect the same. The reality is this is a one-time event for most of these folks and they

need perspective on what drives valu-ations. Buyers use the data to show the sellers examples of what deals sold for and why.”

Investment bankers and private equity firms are particularly interested in this issue because usually they have to set sellers’ expectations. The data allows them to show the seller similar companies and explain why the com-pany was valued as it was. “Instead of calling the baby ugly, you are showing the sellers real examples of deals that

are similar to theirs that have closed. It really helps define expectations,” says Frazier.

In addition to helping to set deal prices and showing market trends, the data can help the involved parties understand the entire capital structure, including the debt and sub-debt in the deal.

Frazier is also the founder of Private Capital Research LLC , an investment and consulting organization. Prior to PCR, he was the director of research for the Private Capital Group of Berwind Financial Group LP, a subsidiary of the Berwind Corp.

Drawing from a broad base of operational and investment experience, Frazier also directed the process that provided both proprietary and op-portunistic deal flow for the Leveraged Acquisitions Group.

Graeme Frazier, GF Data

Data sources offer metricsGF Data, PitchBook, Preqin, Thomson Reuters serve the middle market

Dealmaker’s Guide

“Business owners will say they had a friend that sold for a high multiple, and then they expect the same.”

035_MAJ0619 35 5/6/2019 11:11:21 AM


Back in 2009, Nick Leopard set out on a mission to prove that there was a better way to work in finance – and more specifically, a better way to unlock value potential in private equity portfolio companies. He founded pri-vate equity consultancy firm Accordion to work alongside sponsor manage-ment teams and focus exclusively on the office of the chief financial officer.

Before launching Accordion, Leop-ard was part of the investment team of a $200 million ¬¬mezzanine debt fund, BHC Interim Funding LP, which focuses on short-term investments in compa-nies with $50 million to $500 million of revenue. Prior to BHC, he was a member of the FIG Investment Banking Department of Bear, Stearns & Co. LLC. He began his career at CapitalSource Finance (NYSE: CSE), where he focused on securing and analyzing senior and subordinated debt opportunities. Dur-ing his time at CapitalSource, Nick

built and maintained more than 300 relationships with private equity funds, senior lenders, and investment banks.

Under Leopard’s leadership, Ac-cordion has to serve more than 150 PE firms and their portfolio companies. The roster of clients is impressive. The firm’s website includes a long list of large PE firms, such as the Blackstone Group LP (NYSE: BX), the Carlyle Group LP (Nasdaq: CG) and KKR & Co. (NYSE: KKR), as well as middle-market firms, such as HGGC, the Riverside Co. and TA Associates.

PE-backed CFOs will have the best chance at fostering partnerships with PE sponsors by “proactively and collec-tively mapping business goals, com-municating candidly and frequently, consistently tracking against targets, and translating data into actionable insights to drive the business forward,” Leopard wrote in a recent guest article in Mergers & Acquisitions.

Nick Leopard, Accordion

Serving the CFO Accordion boasts an impressive roster of PE clients

Dealmaker’s Guide

As private equity firms look for investments, many firms are more frequently turning to providers of hu-man capital solutions as a source of help. Human capital management or HCM consultants can help private equity firms conduct due diligence on employees at the portfolio level prior to a deal closing as well as help portfolio companies with human capital needs after close.

“HCM consultants give private equity firms an advantage when they are engaged early on,” says Jason Favreau, vice president of strategic partnership with ADP, a large provider of human re-sources, payroll and benefits solutions. “New owners are able to hit the ground running because they will have a better understanding of the human capital aspect of the company and can make necessary changes to be successful.”

While human capital expertise can be most helpful before the transaction is complete, HCM solutions vary and HCM consultants can be helpful during various times over the life of ownership. An HCM consultant can assess what the needs are— whether it’s a human resource function or a benefits solu-tion—and execute a plan. “There’s no question that happy employees help companies thrive. Things like benefits and payroll play a vital role in keeping employees excited to come to work,” says Favreau. “HCM solutions can become an extension of your operating team and help private equity firms gain a competitive edge.” M&A

Outsourcing human resourcesBenefits and payroll play a vital role in employee satisfaction

036_MAJ0619 36 5/6/2019 11:11:23 AM

Mergers & Acquisitions on Facebook for the

latest news and trends in the middle-market

industry.

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People Moves

New hires and promotionsBy Demitri Diakantonis

Goodarz Agahi was hired by law firm K&L Gates as a partner. Previously with Baker & Hostetler, Agahi concentrates on M&A across the consumer, food and beverage, medical devices, pharmaceutical and technology sectors.

Timothy Alden has joined financial advi-sory firm Macquarie Capital as a managing director and co-head of the firm’s aerospace, defense and government services group. He was previ-ously with Jefferies.

Tony Armand has been promoted from operating partner to partner at middle-market investment firm Nor-west Equity Partners. Armand joined Norwest in 2018, and he focuses on the consumer, outdoor and sporting goods sectors.

Mark Buchanan was hired by Macquarie Capital as a managing director and head of North American family office coverage. Buchanan was most recently with BMO Financial Group.

Tom Callahan has joined Great Hill Partners-backed G/O Media as chief financial officer. Callahan most recently served as CFO of Bandlan Technologies. G/O owns digital content sites Gizmodo and The Onion.

Carlo Caponi was hired by investment bank PJ Solomon as a general counsel, where he

is overseeing all of the firm’s legal matters. Caponi was most recently with Jefferies.

Drew Caylor has joined private equity firm Wilsquare Capital as a managing director. He was previously with Louis York Capital.

Lee Childers has been promoted from COO to CEO at GenNx 360-backed Tooling Tech Group, a provider of engineered tools and

assembly equipment. Childers joined Tooling Tech in 2018.

Pat Cornelius has joined law firm Barnes Thornburg as a partner. Most recently with Squire Patton Boggs, Cornelius focuses on M&A in the finan-cial services and healthcare sectors.

Mary Courtney-O’Sullivan was hired by investment firm Pal-ladin Consumer Retail Partners as chief financial officer and chief compliance officer. She was previously with Advent International.

Benjamin de Blegiers has joined Weil Gotshal & Manges as a partner. Most recently

with Clifford Chance, de Blegiers focuses on private equity and M&A.

Thomas DeSplinter has joined law firm McGuireWoods as a partner, where he is focusing on M&A in the utilities and energy sectors. He was most recently with Winston & Strawn.

James Fitzsimmons has joined law firm Drinker Biddle & Reath as a partner. He was most recently with Budd Larner, and focuses on private equity and M&A.

Sean Gallary has co-founded investment firm Stonyrock Partners. He was previously with Carlyle Group (Nasdq: CG).

Pooja Goyal was hired by the Carlyle Group (Nasdaq: CG) as a partner and head of the firm’s renewable and sustainable energy team. She was most recently with Goldman Sachs (NYSE: GS).

William Gress was hired by Core Industrial Partners-backed Prototek Sheetmetal Fabrication as CEO. Gress is a former executive at Bruns-wick Corp. (NYSE: BC).

Jimmy Holloran has joined ParkerGale as a principal, where he is concentrating on investment due diligence and talent strategy. He was most recently with meal-kit company Home Chef.

Robert Juelke was hired by law firm Hogan Lovells as a partner, where he is focus-ing on M&A in the insurance

Alex Park

Sandra Peterson

038_MAJ0619 38 5/6/2019 11:08:07 AM

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and real estate sectors. He was most recently with Drinker Biddle.

Milton Kahn has been promoted to chief operating officer at middle-mar-ket investment bank DAK Group. Kahn joined DAK in 2017 as a principal.

Matt Karlyn was hired by law firm Morrison & Foerster as a partner. He was previously with Foley & Lardner, and focuses on the life sci-ences sector.

Travis Keller was hired by M/C Partners, a private equity firm that focuses on telecommu-nications and informa-tion technology, as a partner. He was most recently with Altman, Vilandrie & Co.

Laurie MacLaren has been promoted from chief financial and op-erating officer to CEO at Advent Internation-al-backed marketing technology firmAnsira Partners.

David Marchick has joined law firm Covington as a partner. Marchick was previously with the Carlyle Group (Nasdaq: CG), and advises companies and executives on matters that involve law, policy and reputational risk.

Dan Mendelson has joined healthcare and technology-focused PE firm Welsh, Carson, Anderson & Stowe as an op-erating partner. He was previously the CEO of Avalere Health.

Bernhardt Nadell was hired by law firm King & Spalding as a partner. He was previously with Stroock & Stroock & La-van and represents private equity firms, insurers, reinsurers and investment banks in complex insurance-related

transactions including M&A.

Alex Park was hired by law firm Alston & Bird as a partner. Previously with Womble Bond Dickinson LLP, Park focuses on M&A in the real estate and hospitality sectors.

Sandra Peterson has joined private equity firm Clayton, Dubilier & Rice as an operating partner. Peterson is the former group worldwide chairperson at Johnson & Johnson (NYSE: JNJ).

Peter Rooney has joined law firm Morrison Foer-ster as a partner. Rooney was previously with Or-rick, and he focuses on private equity and M&A.

Derek Schoettle was hired by private equity firm Great Hill Partners as an operating partner.

Schoettle is the former CEO of ZoomInfo.

Craig Schortzmann has co-founded investment firm Stonyrock Partners. He was previously with Blackstone.

Jane Scobie was hired by law firm Willkie Farr & Gallagher LLP as a partner. She was most recently with Dechert, and concentrates on tax mat-ters related to private equity and M&A.

Tess Sprechman has joined private eq-uity firm AE Industrial Partners as vice president, head of investor relations. She was most recently with Sun Capital Partners.

Paul Stansik has joined private equity firm ParkerGale as a principal, where he is responsible for responsible for working with the leaders of Parker-Gale’s portfolio companies to improve their talent and performance manage-ment programs. Stansik was previously with Bain & Co.

Andrew Tay has joined private equity firm TA Associates as senior vice presi-dent. Tay was previously with Baring Private Equity Asia, and focuses on investments in the Asia-Pacific region.

Timothy Wentink was hired by lender Twin Brook Capital Partners as a man-aging director, where he is concentrat-ing on healthcare lending. Wentink was previously with Madison Capital.

Kristin Wigness has joined law firm Mc-GuireWoods as a senior counsel, where she is focusing on financial restructur-ing. Wigness was previously with Katten Munchin Rosenman.*

Mike Wollatt has joined alternative investment firm Hamilton Lane (Nas-daq: HLNE) as a principal, where he is leading the firm’s new Toronto office. Wollatt was most recently with Omers.

Oliver Wriedt has joined Vibrant Capi-tal Partners-backed credit asset man-ager DFG Investment Advisers as CEO. He most recently served as co-CEO at CIFC Asset Management.

Shingo Yatsui was hired by financial advisory firm BTIG as a managing director and head of cross-border M&A. He was previously with GCA. M&A

People Moves

Jane Scobie

Tess Sprechman

Derek Schoettle

040_MAJ0619 40 5/6/2019 11:08:12 AM

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Documents

JUNE 2019 THEMIDDLEMARKET › 8d › 8b › 39888e0d4b1999605c86… · OVERCOMING OBSTACLES FOR OVER 20 YEARS PCP_001_2019_MA_v1FA.indd 40C2_MAJ0619 2 4/30/2019 4:21:32 PM2/28/19