Venture capital deals continue to be on fire, particularly out of Austin, and Texas law firms are competing mightily for the business.
Some firms are even getting involved in the city’s popular music-turned-technology conference South by Southwest, which runs March 8-17.
Baker Botts is hosting an inaugural corporate venture panel and emerging company showcase on March 12. It will feature Samsung Catalyst Fund, Toyota AI Ventures, Cisco Investments, Chevron Technology Ventures and Global Corporate Venture, which together invest $500 million-plus per year in emerging technologies.
“An event like this allows us to both work with many of our clients while also highlighting the current industry climate and look ahead to the future,” Baker Botts partner and Austin corporate chair Jordan Herman said in the event’s announcement.
On the eve of SXSW, PitchBook ranked the top VC investors in Texas since 2010. The Houston Angel Network topped the list with 145 deals, followed by the Central Texas Angel Network (144), the Capital Factory (97), Austin Ventures (89) and Silverton Partners (85).
The rest were the Mercury Fund (70), Right Side Capital Management (45), the Baylor Angel Network (43), S3 Ventures (42) and LiveOak Venture Partners (41). Of course all of them need lawyers to complete their deals.
But Texas’ growing venture ecosystem has been in the news beyond the scope of SXSW’s imminent arrival, PitchBook said.
According to its figures, Texas-based companies raised a record-breaking $3.11 billion last year, surpassing the $1.96 billion level in 2017 and the $2.83 billion peak in 2013.
However, the deal count only reached 461 transactions, the lowest since 2012, signaling larger fundraises for fewer companies, it said.
The firm found that the largest capital raises since the start of 2018 have come from Bungalo ($250 million), Peloton ($150 million), Hedera Hashgraph ($101 million), Siete ($90 million) and Disco ($83 million).
Texas also remains fourth in the country in terms of market share with only 3.43 percent of all completed deals since 2010, behind perennial leader California (52.06 percent), New York (10.63 percent) and Massachusetts (9.85 percent), PitchBook said.
PitchBook noted Austin-based ATX Seed Ventures reportedly raising $100 million for its third Texas-centric venture fund, which the Corporate Deal Tracker wrote about last week.
According to its data, the technology-focused firm has completed 34 VC deals in Texas-based companies since the start of 2010, ranking as the 14th most active investment for startups headquartered in the Lone Star State.
Meanwhile, dealmaking among Texas lawyers fell off this past week, with only 9 transactions worth $1.8 billion versus 20 deals valued at $3.03 billion the previous week and 19 transactions worth $5.4 billion in the same week last year. Impending spring break vacations could have been the culprit.
Forty-nine attorneys and six different Texas law firms were part of the action.
There were eight M&A/private equity/venture capital deals worth $1.3 billion and one capital markets deal valued at $500 million. Industries ran the gamut from renewable energy to flooring to industrial fans to aviation to containers.
M&A/PRIVATE EQUITY/VENTURE CAPITAL
Kirkland advises KKR on $900M equity purchase in NEP partnership
Kirkland & Ellis said March 4 it advised KKR on its agreement to acquire an equity interest in a newly formed partnership with NextEra Energy Partners for $900 million.
The venture owns 10 utility scale wind and solar projects across the U.S. totaling 1,192 megawatts.
The deal team in Houston included transactional partners John Pitts and Jhett Nelson and associates David Thompson and Patrick Moneypenny; debt finance partner Roald Nashi and associate Osaro Aifuwa; and capital markets partner Julian Seiguer.
Skadden represented NextEra Energy Partners led by a lawyer out of its Willington, Del., office.
The deal is related to NextEra Energy Partners’ purchase of six renewable energy portfolio projects from parent NextEra Energy for $1.02 billion. The partnership with KKR will include those six projects plus four others in its portfolio.
The transaction with KKR is creative because it avoids selling stock to pay for the acquisition, which would dilute existing investors, while still bringing in cash flow to help support the partnership’s dividend, according to Motley Fool. NextEra Energy Partners did a similar deal with BlackRock last fall, but the latest deal with KKR is on “slightly better terms,” the publication said.
NextEra Energy Partners also will use some of KKR’s cash and more borrowings to refinance some existing debt on four wind assets, boosting the cash flow of those assets by $25 million per year.
The partnership has rights to acquire KKR’s interest at pre-determined return levels between three-and-a-half and seven years after the partnership’s formation. KKR’s share of partnership cash flows increases to 99 percent if such call options aren’t exercised within certain milestones.
Brandon Freiman, KKR member and head of the firm’s infrastructure business in the Americas, said in a statement that the diverse portfolio of projects, all of which have long-term contracts with investment grade customers, is an excellent addition to the firm’s portfolio.
KKR is paying for the investment with new term loan financing and equity from its third Global Infrastructure Investors fund, which closed in September with $7.4 billion in commitments.
KKR said that it invests in infrastructure globally with $12.6 billion in assets under management and that its renewable assets have more than four gigawatts of installed capacity.
Latham aids Hess on $225M sale of Bakken water business
Latham & Watkins said March 8 that it advised Hess Corp. on the sale of its Bakken water business to Hess Infrastructure Partners for $225 million.
Hess Infrastructure is a midstream energy joint venture between Hess Corp. and Global Infrastructure Partners, known as GIP.
Latham’s team leaders were Houston partners Stephen Szalkowski, Chris Bennett, Thom Brandt and Robin Fredrickson and associates Michael Sellner, Corey Allen and Alice Parker. Houston partners Tim Fenn and Bryant Lee weighed in on tax matters.
Hess Corp. has the right of first offer to acquire the water services business if the partnership decides to sell it.
The deal involves almost all of Hess’ Bakken produced water gathering assets and saltwater disposal services in North Dakota, including more than 150 miles of Hess water gathering pipelines capturing 30,000 barrels per day of produced water.
The water services business is supported by a long-term contract that includes minimum volume commitments for produced water gathering and disposal services and annual tariff rate recalculations for the produced water gathering services.
As The Texas Lawbook previously reported, Hess Infrastructure agreed to acquire 75 miles of produced water gathering pipelines as part of the Tioga Midstream unit from Summit Midstream Partners for $90 million.
Hess said those assets will be incorporated into its existing long-term water contract. That transaction is expected to close this quarter. Vinson & Elkins, Akin Gump Strauss Hauer & Feld and Bracewell worked on that deal.
Viper buys more Permian royalty acreage for $78.9M
Viper Energy Partners has acquired more royalty acreage in West Texas’ and New Mexico’s Permian Basin for $78.9 million, according to Opportune unit Ralph E. Davis Associates.
Viper’s outside counsel couldn’t be determined by press time, but it’s believed that Akin Gump partner Seth Molay worked on it.
Viper’s general counsel is Randall J. Holder, who has been in that role since 2014. He also is general counsel of Viper’s parent, Diamondback Energy Inc.
Before joining Diamondback, the Oklahoma City University-educated lawyer was general counsel of Great White Energy Services and R.L. Hudson. He also was in private practice as part of Holder Betz, was assistant general counsel at Dollar Thrifty Automotive Group and general counsel at Thrifty Rent-A-Car System and Chrysler unit Pentastar Transportation Group. He started his legal career at Tenneco Oil Co.
Noble sells Delaware assets to Tall City Exploration III for $132M
Noble Energy Inc. has sold acreage in the Delaware Basin to Tall City Exploration III for $132 million, according to Opportune unit Ralph E. Davis Associates.
The parties’ outside counsel couldn’t be determined by press time, but both have used Bracewell partner Molly Butkus on deals. Butkus didn’t respond to requests seeking comment.
Noble’s general counsel is Rachel Giesber Clingman, who joined the company last year. She previously was general counsel for the global petroleum and Americas minerals businesses of BHP.
Before BHP, Clingman was a senior partner and on the executive committee of Sutherland Asbill & Brennan (now Eversheds Sutherland). While at the firm, she was appointed as Transocean’s acting legal counsel and co-general counsel to help guide the company in response to the 2010 Macondo Gulf of Mexico oil spill. The University of Texas-trained lawyer also practiced at Fulbright & Jaworski.
Willkie aids Sterling-backed Artisan Design on Builders Wholesale buy
Artisan Design Group, a Southlake portfolio company of the Sterling Group, said it acquired Builders Wholesale, a provider of flooring products and services in the Carolinas. Terms weren’t disclosed.
Willkie Farr & Gallagher parter Scott Miller in Houston advised Artisan/Sterling on the transaction.
Led by co-CEOs Larry Barr and Wayne Joseph, Artisan Design is a dealer of flooring products and services, providing design, procurement, installation and quality control for homebuilders. It operates 40 distribution, design and service facilities and coordinates installation through 800 independent contractors across 13 states.
Artisan Design was formed in 2016 through the combination of Floors Inc. and Malibu. Builders Wholesale is its ninth acquisition in the past two years and it said it continues to seek local and regional market leaders to add to its family of flooring specialists.
Columbia, S.C.-based Builders Wholesale claims to be the leading provider of flooring products and services in the Carolinas region. It’s led by president Wayne Martin.
Founded in 1982, Sterling targets controlling interests in basic manufacturing, distribution and industrial services companies with enterprise values ranging from $100 million to $750 million.
The firm has sponsored the buyout of 54 platform companies and several add-on acquisitions with a total transaction value of more than $10 billion. Sterling has more than $1.9 billion of assets under management.
Willkie advises Sterling on Process Barron sale to Carousel
The Sterling Group said March 6 that it completed the sale of Process Barron to funds managed by Carousel Capital for an undisclosed sum.
Willkie Farr & Gallagher’s Bruce Herzog, who offices out of Houston and New York, represented Sterling. Houlihan Lokey provided financial advice.
Based in Birmingham, Ala., Process Barron designs, makes and installs industrial process fans and material handling systems and provides follow-on service and maintenance. It serves various industries, including pulp and paper, power, steel, cement, food and agriculture.
Sterling partnered with the company’s management team, including members of its founding family, in 2015. Process Barron’s CEO is Ken Nolen.
Sterling said it’s long partnered with family-owned businesses, including Tangent Technologies, Time Manufacturing, Construction Supply Group, and Evergreen North America.
V&E counsels ForeFlight on sale to Boeing
Vinson & Elkins said March 6 that it advised ForeFlight on its sale to Boeing for an undisclosed sum.
Also advising were partner Devika Kornbacher and associate Ben Cukerbaum on intellectual property; partner David Peck and senior associate Allyson Seger on tax; and partner Shane Tucker and senior associate Stephen Oyler on executive compensation/benefits.
Led by co-founder and CEO Tyson Weihs, Houston-based ForeFlight provides mobile and web-based aviation applications and employs 180. It’s partnered with Boeing for the past two years to bring aviators Jeppesen’s aeronautical data and charts through ForeFlight’s mobile platforms.
The two teams plan to integrate talent and offerings to bring expanded digital solutions to all segments of the aviation industry,
“This acquisition also expands Boeing’s rapidly growing, unparalleled digital services portfolio, which will enable us to compete and win in the $2.8 trillion, 10-year services market,” Boeing’s VP of digital solutions and analytics Ken Sain said in a statement.
Boeing said the acquisition aligns with its strategy of complementing organic investments with targeted investments that position the company for long-term growth.
Boeing claims to be the world’s largest aerospace company and top provider of commercial airplanes, defense, space and security systems and global services. As the top U.S. exporter, the company said it supports commercial and government customers in more than 150 countries and employs 150,000.
JW, Winstead advise on Trinity’s investment in Falcon
Trinity Private Equity Group announced that it invested an undisclosed sum in Falcon Structures, a Manor, Texas-based manufacturer of container-based structures.
Jackson Walker associate Cade Satterfield in Austin advised Trinity while Winstead shareholder Alex Allemann, also of Austin, represented Falcon.
Trinity managing partner Sanjay Chandra is joining Falcon’s board, as is Alan Blake, co-founder of GloFish.
Founded in 2003, Falcon said it expects to double its number of employees by 2021 and ramp up its production capacity with the capital infusion. Its CEO and co-founder is Stephen Shang.
The capital will fuel growth initiatives in Falcon’s business of space augmentation using container-based structures for offices and storage units, field operations and equipment enclosures. Its clients include energy companies, defense contractors, construction firms and the U.S. Department of Defense.
Latham, V&E aid on CNX’s $500M private senior notes offering
Latham & Watkins said March 8 it advised CNX Resources Corp. on a $500 million senior notes offering.
Vinson & Elkins advised the underwriters with a corporate team led by partners Doug McWilliams, David Stone and Thomas Zentner with assistance from senior associate Raleigh Wolfe and associates Andrew Schulte, Todd Hartis and Jordan Fossee.
Pittsburgh-based CNX said the senior notes would be due 2027 and guaranteed by all of its U.S. restricted subsidiaries that guarantee its revolving credit facility.
The company intends to use the net proceeds to purchase up to $400 million of its outstanding 5.875 percent senior notes due 2022 and repay existing debt under its revolver.