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A Private Equity Deal Thaw | Diligent's CEO Talks Board Diversity | Apollo Big Credit Bet
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Good day and welcome back to any of you returning from vacation. The 2020 halftime show is officially over and it's time to finish the rest of the game (hat tip to my colleague Bowdeya Tweh for that metaphor).
As the nation tries to balance the risks and rewards of reopening the economy, deal activity may be gradually starting to pick up again, our own Preeti Singh writes this morning, citing conversations with private-equity firms, bankers and advisers. It remains to be seen whether or not the early signs of renewing momentum continue. Meanwhile, Brian Stafford, chief executive of private-equity-backed Diligent Corp., shares more details about the company's efforts to improve racial diversity on corporate boards, Miriam Gottfried has news about a new credit platform from Apollo Global Management and Laura Cooper has news of a rail bet by Paceline Equity Partners. Finally, we had a spate of SPAC news on Friday so we created a special section just for them.
Now on to the news...
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Deal making is beginning to show early signs of a thaw.
PHOTO: YURI KADOBNOV/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Private-equity investors and bankers say they have seen deal activity start to slowly pick up in recent weeks after the coronavirus pandemic virtually stalled activity for more than three months, WSJ Pro Private Equity’s Preeti Singh writes. Firms are relying more on limited auction processes and creative approaches to due diligence to get deals to the finish line as the coronavirus pandemic continues to cast uncertainty over travel and the pace of reopening across the nation.
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Apollo Global Management is launching a business to make direct loans of around $1 billion to companies that can't get the financing they need from a bank, as the private credit market continues its explosive growth, Miriam Gottfried reports for The Wall Street Journal. Mubadala Investment Company is the lead investor in the new $12 billion platform, which Apollo plans to build out with additional money raised from other investors.
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Last week, Diligent Corp., a software-as-a-service provider whose governance programs are used by company directors and executives, announced an initiative designed to improve racial diversity on corporate boards. The Modern Leadership project includes a pledge by 10 private-equity firms to open a total of around 50 portfolio company board seats for racially diverse candidates. Brian Stafford, Diligent’s chief executive, shared a few details about the project.
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$43.7 billion
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The amount of U.S. leveraged loans issued in the second quarter, the lowest quarterly issuance in more than four years, according to the LCD service of S&P Global Market Intelligence, which said that 57% of the latest total occurred in June.
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A piece of equipment called a Mark IV Tamper that is used in railroad track maintenance. PHOTO: 1435 RAIL INC.
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Paceline Equity Partners, a new firm created by former members of Dallas-based Lone Star Funds, is betting on the continued need of rail transport with an investment in railroad track maintenance company R.E.A.L.M., Laura Cooper reports for WSJ Pro Private Equity. The firm plans to combine the company with 1435 Rail Inc., which leases railroad maintenance equipment. Paceline acquired the business earlier this year.
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Endologix Inc. said it has filed for chapter 11 bankruptcy with a deal in hand to be acquired by its biggest lender, health-care investment firm Deerfield Management. The Irvine, Calif., maker of medical devices late Sunday said it also filed a consensual reorganization plan backed by Deerfield that would reduce about $180 million in debt and provide roughly $30 million in additional exit financing.
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KKR & Co. has agreed to buy a controlling stake in Indian pharmaceutical company J.B. Chemicals & Pharmaceuticals Ltd. for 745 rupees ($9.96) a share from the company’s founding family, and later expects to make an open-market bid to buy another 26% of the company, Dave Sebastian reports for Dow Jones Newswires. Founded in 1976 by J.B. Mody, the company makes drugs in the cardiac, gastrointestinal and anti-infective therapeutic areas. Its brands include Cilacar, Metrogyl, Nicardia and Rantac, with drugs exported to more than 40 countries. The New York private-equity firm is investing in the company through its Asian Fund III.
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Ares Management has acquired a controlling stake in Asian private credit and special situations investment manager SSG Capital Holdings Ltd., extending the Los Angele-based firm’s reach into Asia. Founded in 2009 by a group of bankers from Lehman Brothers Holdings, Hong Kong-based SSG focuses on making secured loans in core areas that include India, China and Southeast Asia. Last year it was in the market raising its fifth flagship fund, SSG Capital Partners V, and had surpassed its $1.5 billion target. Ares said that as of
the end of March, SSG employed more than 70 professionals and managed more than $6 billion.
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Ardian has agreed to buy a real-estate portfolio from Montepaschi Group, Banca Monte dei Paschi di Siena SpA said late Wednesday. The Italian bank said that the sale of most of the portfolio should be completed by the end of the year and have a positive impact of 13 basis points on its capital. The transaction is part of the troubled bank's restructuring plan.
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Black Dragon Capital has acquired the live media business of Belden Inc. for about $120 million in cash and deferred payments, the supplier of specialty networking systems said. The deal also includes a $3 million reinvestment by Belden into the business, called Grass Valley, and a $175 million five-year seller’s note to be refunded to Belden in 2025, the company said.
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Carlyle Group has acquired a majority stake in language translation software provider Memsource, for an undisclosed sum, Selin Bucak writes for sister publication Private Equity News. Equity for the deal came from Carlyle Europe Technology Partners IV fund, which typically invests €30 million ($33.8 million) to €80 million in lower mid-market technology companies with enterprise values ranging from €40 million to €250 million. The fund closed in 2019 raising €1.35 billion in capital.
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Lower midmarket private-equity firm Warren Equity Partners said it has acquired Gunnison Tree Services LLC and New Urban Forestry. Atlanta-based Gunnison offers tree and vegetation management services to utility, government, residential, and commercial customers across the Southeastern United States, while Athens, Ga.-based New Urban provides tree removal, arborist and tree management services. Gunnison founder Matt Cathell will retain an equity stake in the company and remain its chief executive while New Urban Forestry will operate as a separate subsidiary, according to a press release.
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Midmarket firm CORE Industrial Partners said it has invested in Arizona Natural Resources, a contract manufacturer for personal care products, particularly skincare and haircare. Phoenix, Ariz.-based CORE said in a press release that it plans to pursue strategic acquisitions for Arizona Natural Resources to extend the company’s product offerings and geographic presence.
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EW Healthcare Partners and Hayfin Capital Management have put together a $150 million financing package for publicly listed MiMedx Group Inc., with an equity component through both EW Healthcare and Hayfin and a debt arrangement from Hayfin, according to a company news release. The transaction calls for EW Healthcare to acquire $90 million in convertible preferred shares and Hayfin to purchase $10 million of the stock. Hayfin is also providing a five-year term loan of $50 million. The Marietta, Ga.-based company makes medical products for procedures such as burn treatment.
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Real estate focused Round Hill Capital has acquired a group of mostly residential properties in several cities in the Netherlands, including 12 vacant office buildings that were made over into 821 residential units. Round Hill’s legal adviser was Greenberg Traurig. The firm said the deal was the first done through a joint venture with a Middle East sovereign-wealth fund, which it didn’t name, and said more are planned in Holland.
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Salt Creek Capital, a San Francisco-based lower midmarket private-equity firm, said it has acquired IT Assist Inc., a Newton, Pa.-based provider of outsourced technology services to companies in the greater Philadelphia area.
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Alterna Equity Partners, a South Florida-based private equity firm, said it has completed a $15 million preferred equity follow on investment in Alterna Capital Solutions LLC., an accounts receivables financing company for funding small and medium-sized enterprises. The investment, along with new lending syndicate commitments, provide the company with a $105 million balance sheet, according to a press release.
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Our add-on deal interactive tool allows you to sort and analyze volumes of add-on deal data compiled by WSJ Pro. View more.
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Noam Gottesman, left, stood with Stefan Descheemaeker, the Nomad Foods chief executive, when the company moved its share listing to the New York Stock Exchange in January 2016. PHOTO: RICHARD DREW / ASSOCIATED PRESS
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Travel-oriented private-equity firm Certares Management founder and senior managing director Gregory O’Hara, a co-founder of asset manager GLG Partners Inc., is partnering once again with fellow GLG co-founder and former chief executive and chairman Noam Gottesman to run GO Acquisition Corp. The blank-check company has filed to raise $500 million in an initial public offering with the intent to acquire growing travel-related and travel-adjacent businesses, a sector temporarily disrupted by the coronavirus pandemic. Mr. Gottesman, who started two previous blank-check companies, Nomad Foods Ltd. and Digital Landscape Group Inc., set up GLG as a division of
Lehman Brothers International (Europe) in 1995. Ultimately, the firm managed about $31 billion before it was acquired by Man Group PLC. Both previous special-purpose acquisition companies each raised $500 million through IPOs.
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Boon Sims, the founder of Artius Capital Partners, a private-equity firm that specializes in growth investments in technology businesses, has co-founded a blank-check acquisition company, Artius Acquisition Inc., which plans to raise $550 million through an initial public offering to buy a tech company. The SPAC's co-founder, Charles Drucker, a former chief executive and chairman of payments processing company Worldpay Inc., also led predecessor company Vantive Inc. as it was carved out of Fifth Third Bank and then taken public in 2012. Worldpay was ultimately acquired by Fidelity National Information Services Inc. last year in a roughly $35 billion deal. Mr. Sims started Artius after leaving Singapore’s Temasek investment firm, where he held a variety of executive leadership roles from 2012 into 2017. Previously, he was an executive with Credit Suisse, where he led the mergers and acquisitions team in North America
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A blank-check acquisition company set up by Austin, Texas-based private investment firm Capstar Partners has priced its upsized initial public offering at $10 a share to raise $240 million. Capstar, led by founder and former broadcasting executive Steven Hicks, was joined by Allianz SE asset manager Pacific Investment Management Co. in backing the new special purpose acquisition company, or SPAC. Called Capstar Special Purpose Acquisition Corp., the blank-check company intends to capitalize on its backers’ experience in the consumer, health-care, telecommunications, technology and media sectors in selecting a business to acquire, according to a regulatory
filing. It initially filed to sell 20 million shares in the IPO to raise $200 million.
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A group of gaming and media industry entrepreneurs have formed Ascendant Digital Acquisition Corp. in New York, a blank-check company that has filed to raise $300 million in an initial public offering, according to a regulatory filing. Ascendant is focused on finding a company to buy that is engaged in interactive entertainment, film or television, music, print and digital books, magazines or comics, e-sports, live events and other forms of consumer entertainment and enabling services and technologies, the filing states. The company is led by Mark Gerhard as chief executive, David Gomberg as president and Riaan Hodgson as chief operating officer. Mr. Gerhard and Mr. Gomberg are co-founders of
Disruptional Ltd., an artificial intelligence and game development studio where Mr. Hodgson was COO from 2008 to 2015. He has been a director of Cambridge Venture Partners since January 2015.
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The co-managing partners of private-equity firm Benchmark Real Estate Group have formed a special purpose acquisition company called Property Management Solutions Corp. to buy a company involved in real estate management services or that have developed property-management technology, according to a regulatory filing. The Benchmark partners, Jordan Vogel and Aaron Feldman, are the co-chief executives of the blank-check company, which has filed to raise $200 million through an initial public offering. The company’s directors include Avi Savar, a Dreamit Ventures partner, and Eduardo Abush, the managing partner and a portfolio manager for Waterfront Capital
Partners, a hedge fund he founded in 2013.
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Angelo Gordon & Co. has raised more than $1.5 billion for its latest European real estate fund, AG Europe Realty Fund III LP. The amount exceeded the firm’s $1.2 billion target and reached its hard cap for the vehicle. The strategy for the fund focuses on sub-performing and distressed assets, the New York firm said. Its predecessor vehicle, AG Europe Realty Fund II LP, raised more than $840 million last year, the firm said. Angelo Gordon manages roughly $35 billion, mostly for credit and real estate strategies.
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Octavian & Co., an investment firm run by Richard Hurowitz as chief executive, said it has launched a transaction platform to facilitate investments in partnership with private-equity firms and institutional investors. Octavian has several transactions pending that involve private-equity firms, the firm said, adding that it focuses on niche deals. Octavian previously managed $1.4 billion through its Octavian Advisors hedge fund, which was sold to TPG Special Situations Group in 2013.
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Clothing retailer Lucky Brand Dungarees LLC has filed for bankruptcy with initial plans to close at least 13 stores and with a possible deal to sell its private equity-backed business to the operator of Aéropostale and Nautica brands, Becky Yerak writes for WSJ Pro Bankruptcy. Debts of the Los Angeles-based business, which is owned by Leonard Green & Partners LP, include $182 million owed to lenders and $79 million to merchandise vendors, according to a filing Friday in U.S. Bankruptcy Court in Wilmington, Del.
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Global deal volume fell 49.3% to its lowest level in at least 15 years during the first six months of 2020 compared with the same period a year ago, according to Dealogic data. While the aggregate value dropped to $1.11 trillion, transaction volume slid 15.6% to 15,217, the data show. Dealogic cited the coronavirus pandemic, a related crash in public securities markets and civil rights protests as factors in the declines. The research company said the average aggregate first-half value for M&A deals since 1995 was $1.38 trillion.
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Executives in every industry are confronting their diversity track records, pressed by a national reckoning over racial justice. But Wall Street’s task is taller: Finance remains stubbornly white, even after years of lip service paid to the need to recruit and retain people of color, and millions of dollars spent on the effort, Liz Hoffman and Susan Pulliam report for The Wall Street Journal.
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Credit Suisse Group AG has launched an internal review into four funds that the bank runs alongside Greensill Capital, a SoftBank Group Corp. backed financing firm that offers a way for investors to boost yields by helping companies manage cash flow, Duncan Mavin and Julie Steinberg report for the Journal.
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