Roper Technologies to acquire Frontline Education

BY Fraser Tennant

In a move to reposition itself as a software firm, US diversified industrial company Roper Technologies, Inc. has acquired school administration software provider Frontline Education from private equity firm Thoma Bravo in an all-cash transaction valued at $3.7bn.

The sale follows a five-year partnership between Thoma Bravo and Frontline during which Thoma Bravo leveraged its specialised operating model and deep sector expertise to enable Frontline to drive profitable growth and expand its market leadership in the K-12 education sector.

Moreover, since its acquisition of Frontline in 2017, Thoma Bravo has completed six highly strategic acquisitions, significantly grown its revenue, expanded its market leading product portfolio from 16 to 30 products and increased headcount by over 70 percent – all while bringing increased value to school districts across the US.

“Thoma Bravo’s investment in Frontline is another clear example of our deep expertise across education, software and strategic M&A to accelerate growth and drive positive impacts – in this case promoting highly efficient and effective K-12 district operations,” said Brian Jaffee, a partner at Thoma Bravo. “We have enjoyed our close partnership with Mark and the Frontline management team and are excited to watch the business continue to thrive with a great new partner in Roper.”

The transaction is expected to close in the fourth quarter of 2022, subject to regulatory approvals and customary closing conditions.

“Frontline has a proven track record of strong organic and inorganic growth, excellent cash conversion and an outstanding management team that will thrive as part of Roper,” said Neil Hunn, president and chief executive of Roper Technologies. “This acquisition demonstrates our disciplined capital deployment strategy that focuses on identifying high-quality, market-leading technology businesses.”

Frontline’s management team will continue to lead the business from its Malvern, Pennsylvania headquarters. The company’s name, brands and office locations will not change as a result of the transaction.

“We are deeply appreciative of Thoma Bravo’s partnership over the last five years, which have allowed us to deliver an expanded portfolio of mission-critical solutions,” concluded Mark Gruzin, chief executive of Frontline Education. “Roper’s acquisition of Frontline Education represents the next phase of our journey.”

News: Roper eyes U.S. teacher shortage in $3.7 billion deal for Frontline Education

Canadian VC and PE markets return to pre-pandemic levels, reveals new report

BY Fraser Tennant

Canadian venture capital (VC) and private equity (PE) markets returned to pre-pandemic levels in the first half of 2022, with PE investment almost doubling, according to a new report by the Canadian Venture Capital and Private Equity Association (CVCA).

In its ‘H1 2022 VC and PE Canadian Market Overview’, the CVCA reveals that C$1.65bn was invested across 182 deals in the second quarter of 2022, bringing the total for the first half of the year to C$6.2bn invested across 371 deals.

In terms of mega-deals, eight deals worth C$50m-plus closed in Q2 2022, valued at C$799m, bringing the total for the first half of 2022 to C$4bn closed across 25 deals. Moreover, investment in the early stages in Q2 remained strong, with the highest seed stage investment and deal count on record: C$263m across 104 deals.

“VC investment performance is mirroring the 2020 market,” said Kim Furlong, chief executive of the CVCA. “In choppy waters, we need to continue to ensure Canadian companies have access to capital. Programmes like the federal government’s Venture Capital Catalyst Initiative (VCCI) will be essential to help weather unpredictability.”

Sector-wise, information, communications & technology received two-thirds of all investment in the first half of 2022, with C$4.1bn invested across 205 deals. The life sciences sector received 10 percent of investment with C$622m across 55 deals.

As far as PE activity is concerned, deals under C$25m continue to make up the largest percentage of Canadian PE activity, with 87 percent of disclosed deals in the first half of 2022 in this category. Moreover, the average deal size continues to decrease steadily, reaching an all-time low in Q2 of C$11.81m.

“Private markets are normalising to pre-pandemic levels,” added Ms Furlong, chief executive of the CVCA. ​“After an outlier 2021, investors are closely monitoring macroeconomic volatility and public market trends, which are impacting the private capital investment environment. While the landscape is more challenging as we head into the second half of 2022, PE investors continue to actively invest and largely in Canada’s small and medium enterprises (SMEs).”

The industrial and manufacturing sector saw the most PE investment activity in H1 – C$1.36bn over 101 deals – followed by information and communications technology, C$998m over 77 deals, and the life sciences sector, C$87m over 55 deals.

Ms Furlong concluded: “In a lot of ways, 2021 was an abnormal year, particularly when it came to company valuation. What we are seeing now, is the correlation between the decrease in public markets slowly permeating the private markets.”

Report: H1 2022 VC and PE Canadian Market Overview

European PE dealmaking strong in H1 2022, reveals new report

BY Fraser Tennant

European private equity (PE) dealmaking was strong through the first half of 2022, with record dry powder and the rise of private credit funds keeping the deal environment moving, according to a Pitchbook report published this week.

In its ‘European PE Breakdown’, Pitchbook reveals that despite an unpredictable macroeconomic and policy environment, and continued downside volatility, PE dealmaking across Europe continued to be resilient in the first half of 2022.

The report also makes clear that deal size, not deal count, was behind the record deal value seen in the first half of the year. Transactions got larger, with the median deal size accelerating to €47.6m. Deals sized greater than €2.5bn hiked nearly three times in deal value compared to H1 2021.

“Sponsors’ record dry powder levels and the rise of private credit funds has kept the deals environment moving, as the syndicated loan and high yield debt markets come under stress,” said Dominick Mondesir, senior analyst of EMEA private capital at Pitchbook. “Sponsors doubled down on their investment sweet spots, as they were able to take advantage of softer multiples.”

Key takeaways from the report include: (i) deal value totalled €463.5bn through 30 June, a year-over-year (YOY) increase of nearly 35 percent, driven primarily by a spike in deal sizes; (ii) take-private activity also increased over H1 2021, and with take-privates offering one of the best risk-reward plays for PE firms, they are expected to remain a major theme in 2022; (iii) exit volume remained flat, but cumulative exit value fell by 25 percent YoY as valuations dropped; and (iv) fund count is pacing toward its lowest total ever, with just 40 vehicles closed in H1, as limited partners struggle to keep up with general partners’ demand for capital.

However, despite these strong H1 figures, Pitchbook forecasts that the second half of the year may be a different story, with slowing growth, rising interest rates and the possibility of a recession potentially leading to a more pressurised dealmaking environment.

Mr Mondesir concluded: “In the second half of the year, we expect the dealmaking environment to experience rapidly declining consumer and business confidence, rising high yield credit spreads, falling GDP, accelerating inflation, and the expectation of further interest rate increases, which is likely to cause a recession underpinned by stagflation.”

Report: European PE Breakdown

Siemens acquires Brightly in $1.6bn transaction

BY Fraser Tennant

In its latest move to broaden its software credentials, German engineering group Siemens – through its Smart Infrastructure (SI) business – is to acquire US-based software-as-a-service (SaaS) provider Brightly Software in a deal valued at $1.6bn.  

Once complete, the acquisition is expected to elevate Siemen’s to a leading position in the software market for buildings and built infrastructure by adding Brightly’s well-established cloud-based capabilities across key sectors, including education, public infrastructure, healthcare and manufacturing.

The transaction also accelerates the build-up of Siemens’ SaaS business and enables Siemens and Brightly together to deliver superior performance and sustainability.  

“This acquisition is another important step in our strategy as a focused technology company,” said Roland Busch, president and chief executive of Siemens AG. “By combining the real and digital worlds, we provide our customers with the technology required to drive their digital transformation to create the most sustainable and human-centric buildings.”

According to Siemens, it is estimated that 7 billion people will live in urban areas by 2050 – a trend which, when coupled with the urgency of tackling climate change, highlights the need for smart and sustainable communities and infrastructure.

“With digital transformation and sustainability high on agendas, coupled with a challenging regulatory environment, the need for connected assets and real-time asset data is driving greater demand for intelligent asset management solutions across the globe,” said Kevin Kemmerer, chief executive of Brightly. “We see an incredible opportunity to combine our knowledge and software with Siemens to accelerate the digitalisation and optimisation of the built environment. “

Headquartered in North Carolina, Brightly has around 800 employees serving around 12,000 customers, mainly across the US, Canada, the UK and Australia. The company has been owned by private equity firm Clearlake Capital since 2019.

The transaction is subject to regulatory approvals, with closing expected by the end of 2022.

Mr Kemmerer concluded: “Together, we have the experience to help clients across the world transform the performance of their assets and create safe, sustainable and thriving communities.”

News: Siemens to buy U.S. software company Brightly in $1.58 bln deal

PE consortium to acquire Zendesk for $10.2bn

BY Richard Summerfield

Zendesk Inc. has agreed to be acquired by an investor group led by leading global investment firms Permira and Hellman & Friedman LLC in an all-cash $10.2bn deal.

Under the terms of the agreement, Zendesk shareholders will receive $77.50 per share held, a premium of approximately 34 percent over Zendesk’s closing stock price on 23 June 2022, the last full trading day prior to the announcement of the deal.

Zendesk, founded in Copenhagen in 2007 and now headquartered in San Francisco, is a service-first CRM company that builds software designed to improve customer relationships. According to its website, the company operates in 160 countries and employs around 5,450 people globally.

“This is the start of a new chapter for Zendesk with partners that are aligned with the strength of our agile products and talented team, and are committed to providing the resources and expertise to continue our growth trajectory,” said Mikkel Svane, founder, chairman and chief executive of Zendesk. “With Hellman & Friedman and Permira’s support, we’ll continue to execute on our long-term strategy with our customers as our top priority, taking full advantage of the opportunity we see to help businesses navigate the ever changing expectations and demands of their customers.”

“Zendesk has reimagined customer service software and empowers businesses to transform how they communicate with their customers in an increasingly digital world,” said Ryan Lanpher, a partner at Permira. “We believe Zendesk is uniquely positioned to enable meaningful interactions and deliver compelling business outcomes across any channel.”

“We look forward to partnering with Zendesk’s management team and talented employees to help them accelerate product innovation and achieve their growth ambitions,” said Brian Ruder, a partner and co-head of technology at Permira.

“Over the past 15 years, Zendesk has revolutionized how companies serve their customers and has become a leading platform within the customer experience ecosystem,” said Tarim Wasim, a partner at Hellman & Friedman. “We deeply believe in the company’s growth opportunity as it continues to help businesses across the world delight their customers.”

“We see tremendous value in Zendesk’s platform and ability to grow at scale,” said Stephen Ensley, a partner at Hellman & Friedman. “Its intuitive yet powerful offering serves over 100,000 companies, ranging from the smallest businesses to the largest enterprises.”

Zendesk has been subject to considerable private equity interest this year. In February 2022, the company announced that it had rejected an unsolicited $17bn proposal from a consortium of private equity firms to acquire all of Zendesk’s outstanding shares in an all-cash transaction valued at $127-$132 per share. The offer was rebuffed by Zendesk as, according to a statement from the company’s board of directors, it “significantly undervalues the company and is not in the best interests of the company and its shareholders”.

News: Zendesk drama concludes with $10.2 billion private equity acquisition