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M&A wrap: Clearlake, JPMorgan, Goldman Sachs, Coronavirus, W20, Autodesk, M&A Mid-Awards

Clearlake Capital has raised its sixth private equity fund at $7 billion, raising the firm’s total assets under management to about $18 billion. Clearlake focuses on the consumer, industrials and technology sectors. “The Clearlake strategy has positioned our firm to take advantage of defensive growth as well as turnaround opportunities in this market,” says Clearlake co-founder Behdad Eghbali. “These are extraordinary times, and we believe our team is well-prepared to support existing portfolio companies as well as source new platforms as we invest this new fund.” In 2019, Clearlake raised its second non-control middle-market fund at $1.4 billion. “In this dynamic market, we believe our experience, focus, and flexibility will allow us to partner with more exceptional management teams as we build lasting value for our platforms and limited partners,” adds Clearlake co-founder José E. Feliciano. Credit Suisse Securities (USA) LLC served as Clearlake’s placement agent on the latest fundraise and Kirkland & Ellis LLP provided legal advice.

In the challenging times we face now, it’s more important than ever to come together as a community and recognize the people and companies that excel and lead. We invite you to join us in honoring the 2019 winners of Mergers & Acquisitions’ M&A Mid-Market Awards. In contrast with the volatile coronavirus-driven conditions unfolding in 2020, the dealmaking environment of 2019 was remarkably stable. Among the PE firms benefitting from the auspicious fundraising climate was Vista Private Equity, which raised a $16 billion fund – the largest technology-focused PE fund ever raised. Mergers & Acquisitions is honoring Vista founder and CEO Robert F. Smith with our 2019 Dealmaker of the Year Award. In addition to leading his firm’s unprecedented fundraising, Smith excelled in philanthropy. When he spoke at the commencement of Morehouse College, he announced he would pay off all the student loans of the HBCU’s 2019 graduates, providing a helping hand in the student debt crisis facing many U.S. families. The financial services sector saw a lot of consolidation in 2019. Piper Jaffray wins our 2019 Deal of the Year for buying Sandler O’Neill to form Piper Sandler, which instantly became a leading investment bank in the financial services sector. And Stifel wins our 2019 Investment Bank of the Year for growing dramatically and making several acquisitions. Read our full awards coverage: Meet the winners of Mergers & Acquisitions’ M&A Mid-Market Awards.

CORONAVIRUS IMPACT
W20 has acquired Symplur, a social media analytics firm for the healthcare sector. “Partic ularly in these challenging, uncertain times reverberating across global communities and economies, healthcare companies are looking to track essential information in an urgent and immediate manner utilizing data and analytics to discern insights for decision-making,” says W2O CEO Jim Weiss.

Autodesk Inc. (Nasdaq: ADSK) has acquired a minority stake in construction software company Aurigo Software. “Difficult economic environments and labor shortages consistently prove the need to optimize the building process for the future,” says Jim Lynch, vice president and general manager for Autodesk Construction Solutions.

JPMorgan Chase & Co. said first-quarter profit tumbled 69 percent 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. Read the full story by Bloomberg News: JPMorgan profit sinks to lowest since 2013 on virus fallout.

Advanced economies will shrink about 35 percent 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. Read the full story by Bloomberg: Goldman sees advanced economies shrinking 35 percent amid pandemic.

The global impact 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 years. However, against this new backdrop, the outlook for M&A activity is—understandably—highly uncertain. Read full coverage: How to manage post-closing disputes in M&A as a result of the coronavirus.

The coronavirus continues to impact the global economy. In the middle market, companies are proactively drawing down on revolving lines of credit and other sources of financing to put cash on the balance sheet to weather the storm. Mergers & Acquisitions interviews dealmakers from Alvarez & Marsal, Merrill Corp., M33 Growth, M-III Partners, Paul Hastings and the Riverside Co. Read our full coverage: “Brace for impact,” say private equity firms to portfolio companies about the coronavirus

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 operations, including Representations and Warranties Insurance (RWI). Read the full story: How the coronavirus forces dealmakers to assess effectiveness of RWI policies.

Genuine economic deterioration is a primary risk to private capital markets – PE tends to behave as a GDP-linked business. As consumer spending and business investment is set to decline, we expect to see a slowdown in PE transaction volume that follows the expected economic contraction. Read the full story: Private equity deals will slow down, as global economy stalls amid coronavirus pandemic.

While the long-term economic impact on American companies remains uncertain, there are important lessons to learn on how to manage future pandemic risks. Read the full story: Coronavirus contingency planning checklist for the middle market.

The coronavirus threat is the type of risk that material adverse change, or MAC, clauses are designed to address in M&A. Why the coronavirus makes material adverse change (MAC) clauses more important than ever.

FEATURED CONTENT
Once venture capital-backed startups themselves, today’s tech giants know a thing or two about VC seed money. It’s fitting that many of them have created corporate venture capital groups of their own. These CVCs help their owners experiment and nurture new technologies and ideas in the early stages, without requiring the commitment of an acquisition. The CVC strategy often augments a company’s research and development efforts as well as complementing its M&A strategy. Middle-market dealmakers would be wise to track the VC investments of the five companies we highlight: Amazon.com Inc. (Nasdaq: AMZN), Google (Nasdaq: GOOG), Intel (Nasdaq: INTC), Microsoft Corp. (Nasdaq: MSFT) and Salesforce.com Inc. (NYSE: CRM. Read our full coverage: Venture forth: How five of the biggest tech companies explore new territory through early-stage investments.

In a period of accelerating technology innovation and investment, it’s critical to stay aware of new technologies, offerings, data and analytics types and business models in your space, and adjacent spaces. Most companies are looking for ways to get better and earlier access to the startup space. While corporate venture capital (CVC) is only one method, it can be a fairly powerful one. Read full coverage: How corporations can benefit from VC investments in technology

Houlihan Lokey, Lincoln International, Jefferies Financial Group, William Blair and Piper Sandler Cos. rank as the top five most active M&A investment banks in 2019, based on the volume of completed private equity-backed deals in the U.S., according to PitchBook. Besides advising on M&A deals, the investment banks on the top 10 list also had a busy year with acquisitions of their own in 2019, including two acquisitions by Houlihan Lokey and three by Stifel Financial. Piper Sandler Cos., was created when Minneapolis-based Piper Jaffray Cos. acquired New York-based Sandler O’Neill & Partners in a deal representing more than half of Piper Jaffray’s $930 million market capitalization. The firm also had another acquisition in 2019 and sold a company to exit the traditional asset management business. See our full coverage: Top investment banks for PE-backed deals in 2019: Houlihan Lokey led the pack.

Audax, HarbourVest and Genstar ranked as the top three most active private equity firms in 2019, based on the volume of completed deals in the U.S., according to PitchBook. Three companies tied for fourth place: Abry, Carlyle and Shore Capital. Where were these PE firms looking for deals? Eight of the firms on our list name the software and technology sector among their top investment targets, and seven put healthcare companies on their priority list. Financial services and consumer services are each named by five of the firms as industries they focus on, with four naming business services companies. Fundraising from investors in 2019 led to two notable fund launches earlier in 2020: KKR’s Global Impact Fund and HarbourVest’s $2.6 billion HarbourVest Fund XI. See our full coverage: Top private equity firms in U.S. deals in 2019: Audax Private Equity ranked No. 1.

To celebrate deals, dealmakers and dealmaking firms, Mergers & Acquisitions produces three special reports every year: the M&A Mid-Market Awards; the Rising Stars of Private Equity; and the Most Influenital Women in Mid-Market M&A. For an overview of what we’re looking for in each project, including timelines, see Special reports overview: M&A Mid-Market Awards, Rising Stars, Most Influential Women.

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2019 saw a stampede of fintech unicorns

Two years ago, we created the Matrix FinTech Index to highlight what we saw as the beginnings of a 10+ year mega innovation wave in financial services.

The trillion-dollar financial services industry was going to be turned on its head over the next decade, and we were just getting started. At the time, the top 10 publicly traded U.S. fintech companies had just surpassed the $100 billion mark in terms of total market capitalization, 12 unicorns had emerged in the category, and the U.S. VC industry had just poured in $6.7B — a record at the time.

As we predicted last year, the innovation cycle continues, and we are transitioning into its mid-phase. So what happened in U.S. fintech in 2019? In short, monster growth.

On the public side, fintechs delivered resoundingly. PayPal alone gained $26B in market capitalization. On a return basis, the public Matrix FinTech Index continued to crush every major equity index as well as the financial services incumbents. Nicely matching our forecasts, our Index delivered 213% returns over the last three years. The Index outperformed the financial services incumbents by 151 percentage points and the S&P 500 by 170 percentage points.

Source: TechCrunch