Healthcare-centered private equity is on the brink of another record year.
According to newly released data from Preqin, 585 healthcare-related deals had been announced through November worth $56 billion, putting the year on track to surpass the 619 deals worth a record $57 billion in 2017. The years of 2015 and 2016 also were record years.
Preqin added that deal activity looks set to increase even further, as the industry holds $56 billion in dry powder, pushing total assets under management to $199 billion.
Although just 84 healthcare-focused private equity funds held a final close as of November, they have raised $22 billion, making this year the fourth consecutive one in which the industry has raised more than $20 billion, Preqin said. It also puts the year on track to hit similar levels to those seen in 2017, when 140 funds raised $26 billion.
“The private equity healthcare industry is booming: strong fundraising, record levels of dry powder available to invest and record numbers of deals in the sector,” said Christopher Elvin, Preqin’s head of private equity. “It is a testament to the healthcare industry’s growing importance for private equity: having once been a sector with few dedicated players, it is now an integral part of the buyout deal making ecosystem.”
Texas has seen its share of big healthcare deals involving private equity, most notably Kindred Healthcare’s $4.1 billion acquisition by Humana, TPG (which is co-headquartered in Fort Worth) and Welsh Carson.
Texas law firms have geared up this year for the activity. Katten Muchin Rosenman’s new Dallas office added a trio of well-known healthcare lawyers – Kenya Woodruff, Lisa Atlas Genecov and Cheryl Camin Murray – to its ranks in October, a story The Texas Lawbook broke.
Overall, dealmaking involving Texas lawyers continues to slow down a bit given the typical Christmas and Hanukkah merriment at this time of the year. Indeed, a handful of Texas lawyers were seen at Tudor, Pickering, Holt’s holiday party at Houston’s new Post Oak Hotel on Thursday, including from Baker Botts, Sidley Austin and in-house legal departments.
Fifteen transactions were announced last week involving Texas lawyers worth $1.819 billion. While the number of deals was up from 12 last week, the $1.819 billion value was down 84 percent. The number of deals was up one over the same period last year, but the value dropped an even greater 88 percent over the previous period.
M&A, private equity and venture capital deals numbered 12 at a disclosed value of $552.2 million while capital markets transactions came to three at $1.267 billion. Sixteen Texas firms and 65 Texas lawyers worked on the transactions.
Dealmaking involved quite a mix of industries, from energy to industrial to consumer (including fast food, amusement park kiosks and a movie theatre chain) to telecom to IT, showing how diverse Texas lawyers really are.
M&A/PRIVATE EQUITY/VC TRANSACTIONS
Gibson Dunn represents Contran on $320M stock sale to GFG
Gibson, Dunn & Crutcher LLP said Dec. 3 it represented Contran Corp. on the sale of its stock in Keystone Consolidated Industries Inc., or KCI, to GFG Alliance’s Liberty Steel USA for $320 million in cash less certain assumed liabilities.
The team includes mergers and acquisitions partner Jeffrey Chapman, tax partner David Sinak, tax associate Michael Cannon and benefits associate Krista Hanvey, all of Dallas. Attorneys in the firm’s New York and Washington, D.C. offices also took part.
Norton Rose Fulbright counseled GFG with an attorney in its New York office.
Deutsche Bank Securities Inc. and Wyelands Capital Ltd. provided financial advice to GFG while Stephens Inc. assisted Contran.
Liberty Steel said adding KCI’s 1.1 million tonne electric arc furnace in Illinois and market-leading downstream operations position it as one of the top producers of wire rod in the U.S.
The transaction, which will combine Liberty’s Georgetown steel plant, is being financed via equity, a revolving credit facility from two North American banks and a term loan from funds managed by BlackRock Financial Management Inc.
GFG will contribute equity and its unencumbered Liberty Steel Georgetown plant to the transaction.
“The Keystone acquisition is a core part of GFG’s Greensteel vision to become a leading U.S. producer of high quality, cleanly produced steel,” said British industrialist Sanjeev Gupta, who is executive chairman of Liberty and GFG. “As we look ahead to the future, GFG will benefit from Keystone’s century-long history, its robust operations and its reputation for producing top quality steel.”
GFG North American CIO Grant Quasha said KCI and its businesses offer Liberty the chance to merge its U.S. steel business with one of the country’s most productive wire rod operations, which will increase its downstream capabilities, create synergies, add strong management and provide better value and products for customers as it advances its U.S. steel business to its 5 million tonne per year goal by 2020.
Regulators have to clear the deal, which is expected to close by year-end.
Liberty said Keystone Steel and Wire, a unit of KCI, has a 100-plus year history in the steel and steel products business and recently posted its strongest results in its history after improving its profitability over the last five years by expanding into value-added products.
The combination will have operations in Illinois, Ohio, South Carolina, New Mexico, Texas and Georgia.
GFG acquired Liberty Steel Georgetown in Georgetown, S.C., at the end of 2017 from Arcelor Mittal, which had mothballed the plant. It was restarted in June and has been steadily ramping production with further expansion to follow.
GFG has rehired 100 employees at the site, recruited 50 new employees, revitalized the facility and has re-established its reputation as the top producer of high carbon wire rod in the U.S.
GFG plans a diverse mix of assets for the U.S. business, ranging from the revitalization of steel plants that had previously been taken offline, such as Georgetown, to those operating and performing very well, like KCI.
Weil aids Cresta on Easton’s $177M pipeline purchase from Williams
Houston midstream company Easton Energy, which is backed by Cresta Energy Capital, said Dec. 6 it acquired 416 miles of Gulf Coast natural gas liquids pipelines from the Williams Cos. Inc. for $177 million in cash.
Weil Gotshal partner Rodney Moore in Dallas advised Cresta on the acquisition. Vinson & Elkins counseled on the debt financing, including attorneys Mike Bielby and Danny Strassman in Dallas. Credit Suisse was Williams’ investment banker on the sale.
The pipeline assets are used to transport natural gas liquids, or NGLs, from various supply sources to petrochemical consumers in Texas and Louisiana markets.
Cresta is an energy infrastructure-focused private equity firm in Dallas.
Paired with Easton’s salt cavern storage development at Markham, Texas, the acquisition represents an opportunity for the company to use a footprint of pipelines to connect NGL storage markets with end users along the Texas Gulf Coast, Easton president Joel McComas said in a statement.
Cresta managing partner Chris Rozzell said in a statement that the acquisition highlights Easton’s commitment to investing in much needed NGL infrastructure across the U.S. Gulf Coast.
Williams said the assets included the 31-mile Texas Belle Pipeline, which transports NGLs from Mont Belvieu to along the Houston Ship Channel; the Purity pipeline system; assets in the Live Oak pipeline system; and additional idle pipelines along the Gulf Coast.
It said its Atlantic-Gulf business segment still includes 506 miles of purity product pipelines.
Gibson Dunn represents Pizza Hunt on its acquisition of QuikOrder
Gibson Dunn & Crutcher said Dec. 5 it represented Pizza Hut U.S. on its acquisition of online ordering provider QuikOrder.
Terms of the deal weren’t disclosed, but Pizza Hut said it marks one of its largest acquisitions to date.
The team included M&A partner Robert Little and associates Joseph Orien, Needhi Vasavada and Thomas Canny in Dallas. Partner David Sinak and Michael Cannon, also of Dallas, handled tax aspects and a lawyer in the firm’s Washington, D.C. office handled benefits. Davis Wright Tremaine counseled the sellers.
Pizza Hut’s in-house counsel included chief legal officer Lauren Leahy and legal counsel Savannah Franklin in Plano.
Leahy joined the company five-plus years ago as senior counsel, becoming chief legal officer at the beginning of last year. The Harvard-educated lawyer previously clerked at the U.S. Court of Appeals for the Fifth Circuit and the Northern District of Texas and worked as an associate at Vinson & Elkins for two years.
SMU-trained Franklin joined Pizza Hut a year ago after five years as an associate in the investment funds practice at Akin Gump.
Pizza Hut, a unit of Yum! Brands Inc., said the acquisition of its long-time technology provider expands its digital ordering capabilities.
Pizza Hunt said acquiring QuikOrder’s online ordering capabilities will improve its ability to deliver an easy and personalized online ordering experience and accelerate digital innovation across its base of 6,000 U.S. locations.
About half of Pizza Hut’s U.S. sales were processed through QuikOrder’s platform last year.
Founded in 1997 and led by CEO Jim Kargman, QuikOrder has served the pizza chain for nearly two decades. Pizza Hut U.S.’ president is Artie Starrs.
Pizza Hut said the acquisitions builds on the strides it’s made over the past year since entering into a “transformation agreement” with its franchisees focused on improving operations and accelerating technology enhancements and e-commerce capabilities.
Over that period, the company has introduced online ordering tools and services, such as a delivery tracker with text alerts, voice-enabled ordering and Hut Rewards, the only national pizza loyalty program that rewards members for every dollar spent on food online.
Yum! Brands CEO Greg Creed said it might roll out QuikOrder’s technology to its other fast food chains, which include KFC and Taco Bell.
Pizza Hut’s acquisition of QuikOrder is expected to close this month.
Weil advises Orix Capital on NTI Connect purchase
Weil said it advised Dallas-based Orix Capital Partners on its acquisition of O2 Investment Partners-backed NTI Connect for an undisclosed sum.
The team included private equity partner David Gail and associates Andrew Stotts, Anne Langford and Heather McKinney and litigation partner Paul Genender, all of Dallas. Its lead was based out of Boston.
Honigman Miller Schwartz and Cohn counseled NTI, which used Stifel for financial advice.
Chicago-based NTI provides network deployment solutions in fiber optics, data centers, wireless and video networks. It’s led by Lynn Refer, a longtime telecom executive.
Orix CEO and president Terry Suzuki said in a statement that U.S. demand for highly scalable data capacity, ever increasing fiber optic network reach, the upcoming 5G wireless “revolution” and upgraded video networks will drive growing demand for NTI’s services.
Sidley Austin advises Z Capital on CTM acquisition
Sidley Austin advised Z Capital Partners on its acquisition of CTM Group Inc. for an undisclosed sum.
The team was based mostly in California but included Dallas global finance partner Kelly Dybala and associate Adam Nelson in Dallas.
A lawyer at Fredrikson & Byron in Minneapolis counseled CTM.
Z Capital is the private equity management arm of Z Capital Group, a New York- and Chicago-based global alternative investment manager focused on opportunistic, value-oriented private equity and credit funds.
Salem, N.H.-based CTM provides interactive attractions, kiosks and services for amusement parks and tourist destinations with 10,000 pieces of installed equipment in 2,000 venues. Since its founding in 2002, the company has grown organically and through acquisitions while introducing new equipment and categories for customers.
Z Capital Group CEO James Zenni said in a statement that it plans to continue product innovation and capitalize on a pipeline of opportunities to accelerate future growth.
CTM CEO Tom Coco said Z Capital’s operational expertise will be valuable as the company enters its next expansion phase of expansion.
Z Capital Private Equity Funds’ portfolios span industries and have annual revenues of $1.3 billion, sell products in 57 countries and employ 11,000.
Aceable raises $47M in funding from Sageview
Aceable, an Austin-based mobile education platform, said Dec. 4 it raised $47 million in Series B funding led by Sageview Capital.
Kastner Gravelle’s Evan Kastner in Austin represented Aceable and a Cooley lawyer in Palo Alto counseled Sageview.
Aceable said the funds will be used to expand the company’s national footprint and its team and move into new industries from driver’s education, where it has 70 percent of the Texas market.
Sageview partner Dean Nelson and principal Mike McClure will be joining Aceable’s board.
Aceable CEO Blake Garrett said in a statement that the funding will fuel the company’s next “inflection point.”
Aceable has grown a lot over the last 12 months, serving more than 550,000 students and employing 100.
The company was part of the Capital Factory accelerator program, receiving backing from Silverton Partners, Floodgate Fund, Next Coast Venture Partners, Wildcat VC, Nextgen Partners and the Capital Factory Fund.
Founded in 2006, Sageview is led by former KKR partners Ned Gilhuly and Scott Stuart and Nelson, who was the former head of KKR Capstone. It provides growth capital to small and mid-sized companies in the technology, business services and financial services sectors.
The firm’s investments include 360insights, Avalara, CallRail, Crimson Hexagon, Demandbase, DMT, Elastic Path, MetricStream, NAM, Reflexis, United Capital and Womply. It’s based in Greenwich, Conn., and Palo Alto, Calif.
SourceDay raises $6.5M from Silverton, others
SourceDay, an Austin provider of automated procurement and purchase order management software, raised $6.5 million in Series A funding from Silverton Partners, Draper Associates and ATX Seed Ventures.
SourceDay used Samer “Sam” Zabaneh, who is a partner at DLA Piper and chair of the firm’s Texas corporate and securities practice in Austin.
Silverton tapped Kastner Gravelle partner Jerry Galvan in Austin and Draper reached out to Brubaker Law in California.
SourceDay said the investment brings its total funding to $10.9 million. It plans to use the new funds to accelerate sales and marketing and execute a product roadmap.
Silverton general partner Morgan Flager said in a statement that SourceDay’s software is well-timed with the rapidly increasing demand for solutions that digitize the supply chain. “We see direct spend purchasing and procurement as areas ready for improvement,” he said.
According to a report in May by research and advisory firm Gartner, the procure-to-pay market is growing rapidly as organizations seek automation and innovation to control spending and improve supplier collaboration.
By 2025, more than half of the global middle market and large enterprises will have deployed procure-to-pay suits via a cloud delivery model, Gartner estimates.
SourceDay CEO Tom Kieley said in a statement that by replacing outdated manual processes with automated efficiency, manufacturers, distributors and their suppliers are bridging the gaps in productivity, resource management, collaboration and margins. He said the company’s customers are saving 35 percent on average in on-time material deliveries.
Tim Draper leads Draper Associates, which was created in 1985 in California to provide seed-stage funding to entrepreneurs.
Founded in 2006, Austin-based Silverton has been recognized by CB Insights as the most active venture capital firm in Texas. It was an initial investor in Convio, WP Engine, SpareFoot, SailPoint, Silicon Labs, TurnKey, The Zebra, AlertMedia, SpyCloud, Convey, Aceable, Big Squid and Billie.
ATX is an early-stage venture capital firm specializing in Texas. Its investments focus on software, internet-of-things, e-commerce and mobile applications.
Enzyme Health raises $1.7M from Silverton
Enzyme Health, an Austin recruiting marketplace for clinical telehealth jobs, said Dec. 4 it’s raised $1.7 million in seed funding in a round led by Silverton Partners and unnamed private investors.
Johnson & Oshan Law, known as J&O, represented Enzyme, including JD Peters in Austin. Kastner Gravelle represented Silverton, including Ariana Zikopoulos Coppola and Evan Kastner in Austin.
Founded earlier this year, Enzyme said 90 percent of its available positions enable clinicians to work remotely. Machine-learning matches doctors and nurse practitioners with jobs that suit their expertise and availability, meaning they can work full-time or part-time and on their own schedules.
“Traditional healthcare jobs require spending 50 to 80 hours per week in a hospital, which often means clinicians give up work-life balance and doing the things they enjoy,” Enzyme co-founder and CEO Michelle Davey said. “We started Enzyme Health after speaking with hundreds of doctors who wanted more career flexibility but couldn’t find the time, resources or job opportunities to make that a reality.”
Enzyme Health helps companies like Doctor on Demand, MDLive, InTouch Health, Hims/Hers and Parsley Health scale their offerings nationwide, filling open telehealth roles with talent. Enzyme Health also tries to make recruiting more efficient for healthcare companies, which it says yields better care and convenience for patients.
“The digital healthcare industry is growing exponentially and companies like Enzyme Health are leading the way,” Silverton general manager Morgan Flager said in a statement.
Davey previously was founder and CEO of RecruitHere and worked in recruiting at Medici, Favor and Google. Enzyme’s other co-founders are Griffin Mulcahey, who is chief revenue officer and previously was general counsel at Medici, and Philip Johnson, who is chief product officer.
Akin Gump advises DEA on Sierra Oil acquisition
Akin Gump Straus Hauer & Feld said Dec. 4 it advised DEA Deutsche Erdoel AG on its acquisition of Mexican oil and gas company Sierra Oil & Gas for an undisclosed sum.
Akin Gump oil and gas partner David Sweeney and associate Eduardo Canales, both in Houston, led the team, which included global project finance attorneys in the firm’s London office. DEA also was represented by Baker McKenzie in Mexico City on Mexican, Canadian and Dutch law matters.
King & Spalding partner Vera de Gyarfas in Houston and counsel Todd Amdor, who offices out of Houston and Silicon Valley, advised on Mexican law matters along with Galicia Abogados in Mexico City.
Sierra holds interests in six exploration and appraisal blocks in Mexico, including the Zama discovery, one of the world’s largest with an estimated 400 to 800 million barrels of oil equivalent in recoverable volumes.
Led by CEO Maria Moraeus Hanssen, DEA had wanted to build a significant portfolio in the Mexican upstream market, where it already operates production and exploration blocks. It now claims to be one of the country’s largest acreage holders.
DEA said Dec. 4 that the deal will be the largest upstream M&A transaction in the country since the 2013 liberalization of the petroleum sector.
The transaction has to clear Mexico’s National Hydrocarbons Commission and the Federal Economic Competition Commission and is expected to close in the first half of next year. It will be funded with equity from LetterOne.
Accenture buys Houston-based Enaxis Consulting
Accenture acquired Enaxis Consulting, a Houston management consulting firm with experience in digital capabilities, data science and project delivery for the upstream oil and gas, oilfield services and airline industries. Terms weren’t disclosed.
A Shulman Rogers attorney in Maryland advised Enaxis along with Houston solo practitioner Peter Workin, who has been the company’s counsel for 15 years.
Led by founders and managing partners Dhiren Shethia and Jonas Georgsson, Enaxis helps clients improve operational efficiency and drive innovation. It serves Fortune 100 and Fortune 500 companies, consulting with leaders on the design and implementation of emerging digital technologies and business operating models, including robotic process automation and internet-of-things technologies.
John Downie, a senior managing director at Accenture who leads its energy practice in North America, said Enaxis’ team will advance its plans for expanding its oil and gas business by helping clients with end-to-end transformation services. It already advises on drilling and completions, production operations and asset portfolio optimization.
Enaxis said it has been named to the Houston Chronicle’s Top Work Places for the past five years.
Cohen buys Landmark Theatres from Mark Cuban, Todd Wagner
Cinema chain Landmark Theatres, which is owned by billionaires Mark Cuban’s and Todd Wagner’s 2929 Entertainment, has been sold to billionaire Charles Cohen’s Cohen Media Group.
Terms weren’t disclosed. The Hollywood Reporter said Landmark fetched $70 million to $75 million, citing sources, while Deadline reported that the sale price was closer to $100 million.
Both sides’ outside counsel couldn’t be ascertained by press time. Robert Hart is Cuban Cos.’ general counsel.
Cohen has said he’s wanted to buy the theater chain since it was put on the block in 2011 and again in April. Netflix and Amazon also were thought to be interested.
Cuban and Wagner were cofounders of Broadcast.com, which Yahoo bought in 1999 for $5.7 billion. They acquired Landmark in 2003 through 2929 Entertainment for an undisclosed sum.
Landmark has 252 screens across 52 theaters with a focus on independent films. Among them are the River Oaks Theatre in Houston and the Inwood Theatre in Dallas.
Formed in 2008, Cohen Media produces and distributes independent films. It also owns the Quad Cinema in New York City and La Pagode in Paris.
V&E aids Thorntons on sale to ArcLight/BP venture
Vinson & Elkins said Dec. 4 it represented Louisville, Ky., convenience store chain Thorntons Inc. on its sale to a joint venture created between ArcLight Capital Partners and BP plc for an undisclosed amount.
The team was led by partner Jeff Floyd and counsel Jay Blackman with assistance from senior associate Brittany Sakowitz and associates Aaron Carpenter and Jonathan Sapp.
Also advising were partner John Lynch and associate Lauren Meyers on tax; partner David D’Alessandro and senior associate Heather Johnson on executive compensation/benefits; and counsel Sarah Mitchell on litigation.
Others were partner Randy Jurgensmeyer and associate Courtney Hammond (real estate); partner Sean Becker and senior associate Christie Alcalá (labor/employment); and associate Sean Hill (intellectual property).
Wyatt, Tarrant & Combs also represented Thorntons, which used Lazard as its financial advisor.
Morgan Lewis counseled BP with a team that included Houston partner Sameer Mohan and associate Tara McElhiney advising on the joint venture side of the deal with ArcLight. Kirkland & Ellis partners Doug Bacon and Kyle Watson in Houston were part of the group that represented ArcLight (Watson was promoted to partner in October).
Bank of America Merrill Lynch provided the debt commitment to the joint venture.
ArcLight and BP said their partnership will accelerate Thorntons’ growth and expand its footprint.
The 47-year-old chain owns 191 stores in six states. They will continue to operate under the Thorntons name and the venture will keep team members in the store support center in Louisville, including chairman and CEO Matt Thornton.
The deal has to clear regulators. The parties didn’t disclose a possible closing date.
CAPITAL MARKETS
Latham aids Southwestern on $901M cash tender for senior notes
Latham & Watkins said it represented Southwestern Energy Co. on cash tender offers and consent solicitations for senior notes valued at $901 million.
The transaction was led by Houston partners Ryan Maierson and John Greer with associates Monica White and Felicia Alexander.
Cleary Gottlieb counseled the investment banks, which included Citigroup, MUFG Securities Americas, RBC Capital Markets, SG Americas Securities and Wells Fargo.
The tender was for the company’s 4.10 percent senior notes due 2022, 4.05 percent senior notes due 2020, 4.95 percent senior notes due 2025, 7.50 percent senior notes due 2026 and 7.75 percent senior notes due 2027.
The tender offers and consent solicitations were subject to the $1.65 billion sale of Southwestern’s Fayetteville Shale exploration and production and midstream gathering assets to Kayne Anderson-backed Flywheel Energy, the proceeds of which funded the purchase. That deal closed Dec. 3.
Bracewell is bond counsel on Natgasoline project
Bracewell said it served as bond counsel on the issuance of $336.43 million in senior lien revenue bonds for Mission Economic Development’s Natgasoline project.
The team included partners Cristy C. Edwards and Brian P. Teaff, counsel Charles L. Almond and associate Paige H. Abernathy.
Proceeds of the bonds are being loaned to Natgasoline to finance and refinance a methanol production facility in Beaumont.
Citigroup and Morgan Stanley & Co. were the underwriters of the bonds.
Ewing & Jones, Foley work on CrowdOut’s $30M credit facility to Personivs
CrowdOut Capital, a non-bank private lender for middle market companies, announced Dec. 5 it provided a $30 million credit facility to Personivs.
Randolph Ewing and Ben Hughes at Ewing & Jones in Houston counseled CrowdOut while Glenn Singleton and Robert D. McCutchan III at Foley Gardere in Dallas assisted Personiv.
The borrower is a business process outsourcer that employs 2,500 employees in 3 different countries. Proceeds from the loan will be used to provide additional liquidity for future acquisitions, organic growth and to recapitalize the company.
It’s the second loan CrowdOut has provided to Personiv in just over a year.
CrowdOut CEO Alexander Schoenbaum said in a statement that the lender’s expedited due diligence and streamlined approach to underwriting loans is a unique value proposition over banks and traditional credit funds.
Founded in 2015, CrowdOut uses a web-based platform to offer individuals the opportunity to invest as little as $1,000 directly into corporate loans that range from $3 million to $50 million.
UPDATE:
Jones Day advises on five real estate deals
Jones Day said Dec. 7 that Dallas partner Susan Cox worked on five sales of apartment complexes for Mill Creek Residential over the last several months, one of which was worth more than $90 million.
Cox advised Mill Creek on the sale of Modera Observatory Park, a 275-unit apartment complex in Denver, in May for $92.5 million.
The other four sales were of the Modera Ballard, a 132-unit complex in Seattle, in June; the Sola Uptown River Oaks, a 317-unit complex in Houston, in August; and the Modera Turtle Creek, a 207-unit complex in Dallas, and the Modera Near the Galleria, a 321-unit complex also in Dallas, in October.
As The Lawbook previously reported, Cox also counseled Mill Creek on the sale the 135-unit Modera Capitol Hill Apartments in Seattle this past September to Rise Properties Trust for $69 million.