Goodwin Insights May 08, 2017

Take Private Trends

We have been seeing a recent increase in private equity sponsor interest and activity involving U.S. take private transactions. The trend is hardly a tsumani, and not quite yet a wave, but the tide of private equity sponsors looking to take privates as a way to deploy capital and earn target returns is on the rise. Some data (from PitchBook):

  • 47 U.S. take privates were completed in 2016 compared to 39 in 2015 and 37 in 2014, with 7 completed YTD 2017 at 3/31/17.
  • 25 of these 54 deals closed at values over $1 billion, with an average value for deals below $1 billion of $416 million.
  • The list of sponsors who have led successful take privates in this period is fairly broad in terms of size, focus and geography, and includes such firms as Accel-KKR, KKR, Antares, Apollo, Bain, Baring, Thoma Bravo, Carlyle, Crestview, EQT, GTCR, Golden Gate, Harvest, HIG, Insight, Investcorp, OakTree Capital, Pamplona, Platinum, Providence, Vector, Caisse de dépôt, Vista and Triton, among others.
  • Many of the closed take private deals have occurred in the tech/IT sector, but the deal list also includes healthcare, consumer, energy, business services, and financial services. The focus on tech tracks U.S. market direction generally  - one fifth (20.4%) of all U.S. PE deals in the first quarter were in tech (with software companies the most popular targets), as compared to the 10%-15% that has been the market norm for the past decade or so. 

Goodwin has been very active in this space, acting as counsel on take privates such as Lionbridge (business services, HIG led, $360 million, February 2017), Neustar (technology, Golden Gate and GIC led, $2.9 billion, closing pending) and Imprivata (healthcare, Thoma Bravo led, $544 million, February 2016). We foresee continued activity, with a number of deals pending and announcements to follow, both on the company side and on the sponsor side. 

Several things are notable about this activity. First, it is occurring in both the middle market and upper market. Second, in many of these deals the winning bidders have succeeded in executing strategies that have enabled them to pursue and sign definitive agreements on a proprietary/exclusive basis, generally with a go shop period following the announcement of the deal in which other bidders are sought and can emerge. The head start this strategy affords is critical. In a macro sense, which is typically perceived as the most competitive of contexts  - a sale process for a public company, often through an auction  - becomes a strategy for finding and landing deals that can have many of the hallmarks of a proprietary process.

As a result of our deep involvement in this market, we have developed insights and ideas that we believe would be interesting to discuss, around such topics as winning strategies in bidding for public companies on a proprietary basis, the special rules that apply to public company M&A, which in many cases are unfamiliar to PE sponsors especially in the middle market, and strategies for competing with other potential bidders.

If you would like to discuss this topic further please contact