What we look for For the Rising Stars of Private Equity, we seek individuals who are full-time private equity investors and whose best days are yet to come. These are the folks you predict will one day play a key leadership role at your PE firm – or will head up their own. New for 2020: This year, we will be taking a close look at how Rising Stars candidates are performing in the face of the Coronavirus Pandemic, how they are excelling in dealmaking while Working from Home and how they are Helping Portfolio Companies Pivot to the Future New Normal.
Decisions are made at the sole discretion of the editorial team of Mergers & Acquisitions, led by Editor-in-Chief Mary Kathleen Flynn. Note: Nominations must come from people who represent the company at which the Rising Star candidate is employed. If you have suggestions for people at a firm other than your own, or any questions, please send email to email@example.com.
There is no age cutoff. As a general rule of thumb, we are looking for candidates beyond entry-level investing but before making partner. We publish the list online in late July and in the July/August issue of the magazine. In 2019, we named 10 Rising Stars of Private Equity. The 2020 list will be the third edition of the list.
The deadline for nominations is end of day Friday, May 22, 2020. There is no fee.Nominations will be accepted only through our online form. (We are not accepting submissions over email.) All information submitted should be proofread and suitable for print. If approval from public relations or compliance teams are needed, please secure that approval prior to submitting. We do not accept confidential information in the nomination forms. For more on our other annual special reports, seeSpecial reports: Advancing the middle market through Most Influential Women, M&A Mid-Market Awards and Rising Stars.
Advanced economies will shrink about 35% this quarter from the prior three months, four times as much as the previous record set in 2008 during the financial crisis, according to annualized figures from Goldman Sachs Group Inc.
How fast economies will rebound is an open question because nobody knows how quickly people can get back to work, New York-based economist Jan Hatzius wrote in a note to clients dated April 13.
The number of new virus cases appears to be peaking globally, but the bad news is that “the improvement is probably a direct consequence of social distancing and the plunge in economic activity, and could reverse quickly if people just went back to work,” Hatzius wrote.
Overall, global policy makers have mounted an impressive response to try to replace people’s incomes and keep credit flowing so that households and businesses can stay afloat, but Europe should do more and wealthy countries will need to help developing economies, he wrote.
“The response in Europe needs to be scaled up, via greater (and ideally centrally funded) ﬁscal easing and a more unconditional ‘whatever it takes’ commitment to the integrity of the euro area,” Hatzius wrote. “Emerging economies will need a lot more help from the rich world” to get through the crisis.
JPMorgan Chase & Co. said first-quarter profit tumbled 69% to the lowest in more than six years as credit costs surged, giving investors a first glimpse at the extent of the damage Covid-19 is wreaking on bank results.
The company set aside $8.29 billion for bad loans, the biggest provision in at least a decade and more than double what some analysts expected, as it grappled with the effects of the coronavirus pandemic on the economy. That prompted JPMorgan’s first drop in profit since the fourth quarter of 2017.
Chief Executive Officer Jamie Dimon warned earlier this month that the bank wouldn’t be immune to fallout from the pandemic, predicting in his annual letter to shareholders that the economy would suffer a “bad recession” and financial stress mirroring the 2008 financial crisis.
“Given the likelihood of a fairly severe recession, it was necessary to build credit reserves,” Dimon said in a statement Tuesday. “The first quarter delivered some unprecedented challenges and required us to focus on what we as a bank could do — outside of our ordinary course of business — to remain strong, resilient and well-positioned to support all of our stakeholders.”
The damage at JPMorgan hints at what’s to come when the rest of Wall Street reports results this week. Wells Fargo & Co., which also disclosed a surge in credit costs Tuesday, will be followed Wednesday by Bank of America Corp., Goldman Sachs Group Inc. and Citigroup Inc. Morgan Stanley is scheduled for Thursday.
Some of the declines at JPMorgan were offset by gains in the bank’s trading operation, which benefited from record volatility during the quarter as investors moved in and out of positions in response to the unfolding crisis. The bank generated $7.23 billion from trading stocks and bonds, the most on record, according to data compiled by Bloomberg.
The trading gains came off a wild three months for the markets, with stocks reaching record highs in January only to suffer the biggest decline since the 1987 crash as the extent of the pandemic started to become clear.
Equities traders generated a record $2.24 billion in the quarter, 28% more than a year earlier, driven by derivatives. Bond-trading revenue rose 34% to $4.99 billion, the highest in nine years.
Revenue and profit fell in all but one of the bank’s four major business lines, driven by a 95% drop in net income in the massive consumer unit as the division set aside $5.77 billion of provisions for credit losses. The unit generated $191 million in profit.
The corporate and investment bank, which houses the trading and banking businesses, was the most profitable unit, earning $1.99 billion, or 39% less than last year. The asset and wealth management unit was the only division to see revenue rise, up 3% from last year’s first quarter.
The bank on Tuesday lowered its full-year outlook for net interest income — revenue from customers’ loan payments minus what the bank pays depositors — by $1.5 billion to $55.5 billion. The revenue source accounted for about half the company’s total last year, and in the past has helped counter more volatile results in the trading and investment-banking divisions.
The crisis is still relatively new, and net charge-offs actually fell from the fourth quarter. But the bank increased its loan-loss reserve by more than $11 billion as it braced for higher credit-card defaults and saw corporate borrowers tap $50 billion worth of existing credit lines. The total allowance for possible loan losses rose to $25.4 billion, the highest since 2012, boosted by a $4.3 billion increase from new rules the bank had previously announced and a $6.8 billion reserve build.
JPMorgan and other banks adopted a new accounting standard this year known as CECL, which aims to push banks to set aside provisions earlier in a cycle.
The Federal Reserve had two emergency rate cuts, bringing the central bank’s benchmark to virtually zero. The action came as more evidence emerged that the U.S. economy was being hit hard by the virus and the global economic shutdown.
For its part, JPMorgan has been waiving fees for some loans, allowing customers to defer payments on mortgages and auto loans, and removing minimum payment requirements on credit cards. It’s planning to lend an additional $150 billion to clients across the world.
The bank got caught with $13 billion of loans in its bridge book in the first quarter, which resulted in an $896 million pretax markdown as credit spreads widened. That’s about a quarter the size of the book going into the last crisis. Dimon said he expects some of the deals to get syndicated by the end of the second or third quarters.
“We’re adults, we’re going to have quarters” with losses, Dimon said on a conference call with analysts. “We’re a leader in leveraged lending, we’re a leader in high yield, and we intend to maintain that position,” he said.
Dimon also said the bank is willing to sustain losses to help support the economy.
“If we can help the country get through this, everybody’s better off,” he said. “If we lose a little more money in the meantime then so be it.”
Dimon, speaking less than six weeks after undergoing an emergency heart procedure that forced him to temporarily relinquish control of the firm, said his views on retirement haven’t changed. “I was eager to get back to work,” Dimon said on a call with reporters. “Having purpose in life is a good thing.”
KBW analysts led by Brian Kleinhanzl said in an April 8 report they expect provisions to peak in the second quarter as banks build reserves in advance of expected charge-offs under the newly adopted CECL accounting rules.
Investors and analysts are taking comfort in the fact that banks are entering the uncertain period with higher capital levels than they had during the 2008 financial crisis.
“The company entered this crisis in a position of strength, and we remain well capitalized and highly liquid – with a CET1 ratio of 11.5% and total liquidity resources of over $1 trillion,” Dimon said in the statement.
While the results offer a look at the impact of the virus, the picture is somewhat muddled because they include January and February, before government lockdown measures began in earnest. Analysts are expecting future quarters to show even more damage to consumer businesses, as near-zero interest rates and rising unemployment take a toll.
Analysts at Jefferies Financial Group warned before earnings were released that traditional credit metrics would be thrown off by “forbearance programs aimed at limiting long-term effects on the economy,” such as the payment deferrals JPMorgan has offered on consumer loans.
The global impact of Covid-19, or coronavirus, is one that no business can ignore. The outbreak is an international issue that touches all aspects of business, including M&A.Before the outbreak, middle market M&A transactions were on the rise and were predicted to steadily increase over the upcoming …
There is no question the global pandemic is disrupting the M&A landscape, injecting significant uncertainty into the deal-making market. In addition to delaying or derailing potential transactions, Covid-19 is forcing M&A practitioners to assess appropriate risk allocation mechanisms to address the impact of the virus on global business …
Getting to scaleAgainst the backdrop of soaring bank M&A last summer, Piper Jaffray Cos. announced the acquisition of Sandler O’Neill & Partners LP, creating the newly formed Piper Sandler and instantly becoming a leading investment bank in financial services. While Piper Jaffray grew organically and through hiring over the …
CORONAVIRUS IMPACTThe Dow Jones closed more than 900 points lower on Friday, as investors try to gauge the impact of the coronavirus on businesses and consumers.The economic impact of the coronavirus pandemic will likely lead to an uptick in bank failures, but when and how many will depend on an …
Merrill Corp., best known for its virtual data room, is rebranding the company and renaming itself Datasite, after its well-known VDR. Mergers & Acquisitions asked Rusty Wiley, CEO of Datasite, to explain the changes.After over 50 years under the Merrill Corp. name, why did the company decide to rebrand?M&A …
The Dow Jones Industrial Average plunged more than 1,000 points on Monday, posting its worst day in two years as the coronavirus triggered fears of a global economic slowdown. To gauge the potential impact on the middle market, we look at recent comments made by CEOs of public companies, and we hear from Hong Kong-based dealmakers at the Riverside Co. and Paul Hastings. How it will play out in M&A and private equity is difficult to discern this early in the spread of the virus. To get a sense of the ramifications for the middle market, Mergers & Acquisitions examines several factors, including the current impact on China’s economic growth; how the virus was discussed in the earnings calls of U.S. public companies from Apple Inc. (Nasdaq: AAPL) to Walmart Inc. (NYSE: WMT); and the views of two prominent dealmakers who are based in Hong Kong. As this is an ongoing story, we’ll continue evaluating the economic and business effects. Analysts are already forecasting slowed growth for China, due to COVID-19. While the country’s economic growth was 6.0 percent in the fourth quarter of 2019, it may fall to as low as 3.5 percent in the first quarter of 2020, if the spread of the virus is not contained fast enough for manufacturing production to resume to normal levels, Morgan Stanley analysts wrote in a Feb. 19 report. While factories had started to come online, analysts found that production had only reached 30 to 50 percent of normal levels. Read our full coverage: Viral impact: How COVID-19 is affecting M&A and private equity
M&A in the manufacturing industry is flourishing, despite many challenges in the sector – or rather, because of those challenges. The Institute for Supply Management said that its manufacturing index fell in December 2019 to 47.2. That’s its lowest level since June 2009, when it hit 46.3. This, in addition to a tight labor market, China’s retaliatory tariffs and the upcoming presidential election, has made manufacturing a tricky sector to do business in these days. But M&A remains active. Interest rates are low, and companies as well as investors have cash to invest. Additional factors come into play, including the need for consolidation and globalization in the manufacturing industry. Robots are playing a role as well, and manufacturing automation has become appealing. “The tight labor market and increasing wages have led us to pursue a number of different initiatives at our companies to counteract the resulting pressures created,” says Brad Roberts, a partner with the Riverside Co. “Where economical, we are investing in increased automation to enable us to meet growing sales volume amidst this difficult hiring environment.” Read our full coverage: 5 trends driving manufacturing M&A.
DEAL NEWS Intuit Inc. (Nasdaq: INTU) is close to buying Credit Karma Inc. for about $7 billion in cash and stock deal, the Wall Street Journal reported. The purchase will push the maker of TurboTax deeper into the consumer finance space. The acquisition would also be Intuit’s largest in its 37-year history. Broadening its sales base is important at a time when Morgan Stanley said it’s expecting tax-preparation software companies to face headwinds for the revenue they get from each tax return this year due to the combined effect of a rising mix of free filings and lower need for services that assist do-it-yourself filers, says Bloomberg News. Read the full story from Bloomberg: Intuit nears deal to buy Credit Karma.
Crane Co. (NYSE: CR) is buying Cummins-Allison Corp., which handles currency, ticket and check handling services, for $160 million. Livingstone is advising Cummins.
Perrigo Co. (NYSE: PRGO) is buying the oral care assets of High Ridge Brands for $113 million. The acquisition is subject to bankruptcy court approval in connection with High Ridge Brands’ chapter 11 cases. Sawaya Partners and Morgan Lewis & Bockius are advising Perrigo.
DEAL TRENDS Rising demand for food delivery is driving investment in ghost kitchens, commercial spaces that let restaurants operate without brick-and-mortar dining locations, according to PitchBook. Ghost Kitchens are already supported by major delivery brands like Grubhub (NYSE: GRUB) and DoorDash as a way to both reduce costs and add new revenue streams.
PEOPLE MOVES Michael Greenman and James Mitchel have been promoted to partners at private equity firm Harvest Partners. Josh Carter, Chris Peyser and Chris Schaller have been promoted to principal; Fabia DeCrescenzo has been promoted to director of finance; and Lucas Rogers has been promoted to vice president.
Laura Friedrich has joined law firm Willkie Farr & Gallagher LLP as a partner where she is focusing on private equity fund formation.
Gregory Hall has joined law firm Faegre Drinker. Hall was previously with DLA Piper and focuses on M&A.
FEATURED CONTENT Artificial intelligence in healthcare saw about $4 billion in funding across 367 deals in 2019, according to data and research firm CB Insights. Amazon.com Inc. (Nasdaq; AMZN) is no exception. The tech conglomerate is using itsrecent deals for Health Navigator and PillPackto launch new software services in healthcare. Health Navigator works with companies like Microsoft Corp. (Nasdaq: MSFT) in offering services such as remote diagnoses, and with triage to help patients figure out whether to stay at home, see a doctor or go straight to the emergency room. Read our full coverage: How Amazon is using M&A to revolutionize healthcare.
Pushed by a groundbreaking California law mandating it, more companies are putting women on their public corporate boards. The law faces pressure in court and may not stand, but its rippling effect has already started to increase the visibility and awareness of the important benefits of board diversity. Investors are taking notice and trying to get ahead of the curve. According to a study published by MSCI in March 2018, having three or more women on a company’s board of directors translates to a 1.2 percent median productivity above competitors. Read the full guest article by Venable’s Belinda Martinez Vega: Why businesses are adding women to their boards.
If there’s anything M&A professionals dislike, it’s uncertainty. And heading into 2020, there’s more than enough uncertainty to go around, including questions about the economy, international trade, impeachment, domestic politics and more. The funny thing is, the lack of clarity may actually make the first half of the year a great time for M&A, as dealmakers push to close transactions before the looming uncertainty of Election Day and its outcome. We conducted interviews with 8 investment bankers and other M&A advisors. Some said the first half of the year will be robust, while others said the uncertainty may have a negative impact throughout 2020. Read the full story, What’s ahead for M&A in 2020? We ask 8 advisors.
Mergers & Acquisitionshas named the2020 Most Influential Women in Mid-Market M&A. This marks the fifth year we have produced the list, which recognizes female leaders with significant influence inside their companies and in the wider dealmaking world. It’s been gratifying to watch the project evolve over the years – and become more influential itself. This year, we received more nominations than ever before. As a result, we expanded the number honored to 42 in 2020, up from 36 in 2019. Many dealmakers are new to our list, including Rockwood Equity Partners’ Kate Faust, William Blair’s Shay Brokemond and Avante Capital Partners’ Ivelisse Simon. Read our full coverage of all the champions of change on our list, including Q&As with each individual.