$5.57bn deal sees KKR take Envision Healthcare private

BY Fraser Tennant

Continuing its recent, high-profile mergers & acquisitions (M&A) activity within the healthcare sector, private equity (PE) firm KKR is to acquire US medical staff provider Envision Healthcare in a deal valued at $5.57bn.

The acquisition of Envision saw global investment giant KKR see off competition from Carlyle Group, TPG Global and others to seal the deal for $46 per share. The agreement is an all-cash transaction, including the assumption or repayment of debt.

"Envision is a leading provider of physician-led services in a healthcare system in which physician-patient interactions have a pronounced impact on nearly all healthcare decisions,” said Jim Momtazee, head of KKR's healthcare investment team. “Envision has a very strong reputation for delivering high-quality, patient-focused care through its network of 25,000 clinical professionals at thousands of hospitals, surgery centres and alternate sites of care across the country.”

No stranger to Envision Healthcare, KKR already owns Envision American Medical response (AMR), the largest US provider of ambulance services, which it bought for $2.4bn in 2017 and merged with its helicopter ambulance service. Another healthcare sector deal last year saw KKR take WebMD Health Corp private for an estimated $2.8bn.

The agreement for KKR to acquire Envision Healthcare has been unanimously approved by Envision's board of directors and represents the culmination of the board's comprehensive review of strategic alternatives to enhance shareholder value.

Over the last seven months, the Envision Healthcare board, with the assistance of three independent financial advisers and legal counsel, examined a full range of options to generate shareholder value, including capital structure alternatives, potential acquisitions, portfolio optimisation, a potential sale of the whole company, and continued operation as a standalone business.

"After conducting a robust review of the business and competitive landscape, the company's opportunities and challenges, and the strategic and financial alternatives available, the board unanimously believes that this transaction will deliver the most value to Envision's shareholders,” said James D. Shelton, Envision's lead independent director.

The transaction is expected to be completed in the fourth quarter of 2018 and is subject to customary closing conditions and regulatory approvals.

Mr Momtazee concluded: “We are excited to partner with the outstanding team at Envision Healthcare to help build upon the strong foundation in place and accelerate the organisation’s growth going forward."

News: KKR to take Envision private for $5.57 billion in healthcare push

Walmart sells 80 percent of Brazilian operations to Advent

BY Fraser Tennant

A conversion, not an expansion. That is how global private equity (PE) investor Advent International is describing its majority stake investment in Walmart Inc’s operations in Brazil.

Under the terms of the acquisition agreement, Advent will invest in Walmart Brazil to strengthen the business and position it for long-term success – converting store formats instead of opening new ones – with the remaining 20 percent being retained by Walmart Inc. upon completion of the transaction.

A presence in Brazil for the last 22 years, Walmart Brazil currently has 438 stores in 18 states, with 55,000 associates. In 2017, the company’s total sales were more than $25bn.

“We have been in Brazil for over 20 years and are excited about this partnership with one of the country’s leading retailers,” said Patrice Etlin, a managing partner at Advent International in Brazil. “We believe that with our local market knowledge and retail expertise we can position the company to generate significant results and reach new levels of success in Brazil. We plan to invest in the business, work with the Walmart Brazil management team, associates, Walmart and our industry advisors to create a more agile and modern company to accelerate its development and improve the customer experience.”

A global PE fund with a strong local presence and extensive experience in retail investment both in Brazil and internationally, Advent has been present in Brazil for more than 20 years. Over that time, the firm has invested in 30 Brazilian companies, always with a strategy focused on revenue growth and operational excellence. Previous investments have included several retail companies such as Dufry, Quero-Quero, Allied and Internat.

Walmart’s decision to partner with Advent in Brazil is the result of the retail corporation’s review of its international portfolio. Following completion of the transaction, Walmart expects to record a non-cash, net loss of approximately $4.5bn.

“Walmart is committed to building strong, resilient businesses that continuously adapt to local customers’ needs in a rapidly changing world,” said Enrique Ostale, executive vice president and chief executive of Walmart UK, Latin America and Africa. “We will retain a stake in Walmart Brazil and continue to share our global retail expertise, giving our Brazil business the best opportunity for long-term growth, providing opportunity for associates and low prices for customers.”

The Advent/Walmart transaction is subject to regulatory approval in Brazil.

News: Walmart sells majority of Brazil unit, takes $4.5 billion charge

KKR to acquire BMC Software for $8.3bn

BY Fraser Tennant

In its largest acquisition since the financial crisis, leading global investment firm KKR is to buy BMC Software, a global leader in IT software solutions, in a deal valued at $8.3bn.  

BMC is being acquired from a private investor group led by Bain Capital Private Equity and Golden Gate Capital, and includes GIC, Insight Venture Partners and Elliott Management. The group has owned BMC since 2013.

Since then, BMC has reallocated hundreds of millions of dollars toward higher growth R&D and go-to-market initiatives to address the massive digital disruption that is taking place in industries around the globe. Furthermore, the company has helped companies accelerate their cloud adoption.

"With the support and partnership of our investor group, BMC significantly accelerated its innovation of new technologies and new go-to-market capabilities over the past five years," said Peter Leav, president and chief executive of BMC. "Our growth outlook remains strong as BMC is competitively advantaged to continue to invest and win in the marketplace.”

Acquirer KKR has a long record of supporting technology companies, having invested over $26bn in the TMT sector in the last decade. KKR also has experience with a number of enterprise systems software related investments, including Mitchell, Epicor and Calabrio.

"In an ever-changing IT environment that is only becoming more complex, companies that help simplify and manage this essential infrastructure for their enterprise customers play an increasingly important role," said Herald Chen, KKR member and head of the firm's technology, media & telecom (TMT) industry team and John Park, KKR member. "We are thrilled to partner with the talented BMC team to accelerate growth, including via M&A, building on BMC's deep technology expertise and long-standing customer relationships."

Financing for the transaction is being provided by Credit Suisse, Goldman Sachs Bank USA, Jefferies Finance LLC, Macquarie and Mizuho Bank.

“Customers can expect the BMC team to remain focused on providing innovative solutions and services with our expanding ecosystem of partners to help them succeed across changing enterprise environments,” added Mr Leav. “We are excited to embark on our next chapter with KKR as our partner."

The KKR/BMC transaction is subject to regulatory approvals and other customary closing conditions and is expected to be completed in the third quarter of 2018.

News: KKR to acquire PE-backed IT management business BMC in reported $8.3bn deal

PE giant Silver Lake acquires Zoopla parent in £2.2bn deal

BY Fraser Tennant

In a move that is expected to give a massive boost to the PropTech sector, US private equity (PE) firm Silver Lake is to acquire ZPG, parent company of Zoopla, one of the UK’s largest internet property search companies.

The deal will see the PE giant pay £2.2bn for ZPG, a leading residential property data and software provider with a range of products, including, in addition to Zoopla, the PrimeLocation, uSwitch and SmartNewHomes websites.

Since its initial public offering in 2014, ZPG has evolved and diversified and made significant progress toward becoming the platform of choice for consumers and partners engaged in property and household decisions. Founded in 2007, ZPG's websites and apps attract over 50 million visits per month and over 25,000 business partners use its services.

“ZPG is a great growth technology company,” said Simon Patterson, managing director of Silver Lake. “It has established strong positions in property classifieds, home and financial services markets by innovating in product and marketing. We are delighted to partner with Alex Chesterman, one of Europe’s leading and most accomplished technology entrepreneurs, to invest in ZPG’s continued growth.”

Founded in 1999 and headquartered in Silicon Valley, Silver Lake is the global leader in technology investing, with an estimated $39bn in combined assets under management and committed capital.

“I  am firmly of the belief that ZPG will benefit from Silver Lake’s technology expertise and global network, which will help accelerate our growth,” said Alex Chesterman, founder and chief executive of ZPG. “The terms of the acquisition represent an attractive premium that recognises the quality of ZPG’s businesses and the strength of its future prospects and allows shareholders to realise today in cash the potential future value of their holdings.”

The acquisition is subject to conditions, including receipt of merger control approval from the European Commission and the Financial Conduct Authority (FCA), and is expected to be completed during the third quarter of 2018.

Mr Chesterman concluded: “I am very excited about the opportunity this deal offers to our employees, customers and partners as we move to the next stage of ZPG’s development and growth.”

News: Zoopla, Uswitch and Primelocation owner ZPG sold for £2.2bn

2018 a strong year for PE – report

BY Richard Summerfield

Building on an impressive 2017, 2018 looks set to be another strong year for the private equity industry, according to the Akerman 'PErspectives on U.S. Middle Market Private Equity' report, based on data from PitchBook.

Not only did the industry accumulate record levels of dry powder in 2017, but the US tax reform and persistently low interest rates were also beneficial, helping to drive record or near-record buyout and exit activity. The report also notes near-historical highs in several other categories for sub-$500m US buyout funds, including the number of deals and add-on deals closed, number of closed exits and fundraising.

Furthermore, US funds with less than $500m under management set record-highs in 2017 for total deal value, add-on deal value and deal exit value.

Overall fundraising for funds between $500m and $1bn grew last year. The sector raised a record $39bn , up from $35bn in 2016, and a total of 117 funds closed. Fundraising is expected to continue to grow in 2018, provided that the economy remains healthy.

Deal activity was down slightly in 2017, with 1133 transactions completed worth a combined $44.8bn, from 1258 deals worth $51.2bn in 2016. However, dealmaking is  expected to grow in 2018, particularly in the mid-market, due to “heightened interest in Section 1202 of the Internal Revenue Code, which allows PE funds to avoid the 23.8 percent federal capital gains tax on dispositions of qualified portfolio companies”, according to Carl Roston, co-chair of Akerman’s Corporate Practice Group.

“In today’s market environment, PE fundraising and transaction volumes have maintained healthy levels thanks to a host of favorable market dynamics. Factors driving this PE activity include low interest rates, a growing economy, the reduction in marginal federal income tax rates, the relative outperformance of domestic middle market private equity compared to other asset classes, benign credit markets, and the rebalancing of portfolios by institutional investors,” said Mr Roston.

He added: “With growing competition and robust valuations for quality buyout targets, increasingly there is a premium on sophisticated deal sourcing through industry relationships, as well as on cost-effective and efficient processes that facilitate closed deals, collaborative relationships with management teams and prudent risk management.”

Report: PErspectives on U.S. Middle Market Private Equity