Five U.S. Deals That Helped Define 2019
Originally published in The Wall Street Journal
By Isaac Taylor and Laura Kreutze
Overall, U.S. private-equity deal volume slowed somewhat in 2019 as of early December, despite a mounting pile of dry powder available to invest. However, plenty of private-equity firms kept themselves busy with new, and often ambitious, deals. This month, we highlight five deals that helped shape the deal market in 2019. In compiling the list, we looked not just at the monetary value but also considered the precedent each deal sets for future transactions, a prominent trend associated with it or the buzz surrounding the deal.
GLP’s U.S. Industrial Warehouses
Private-Equity Backer: Blackstone Group Inc.
Deal Size: $18.7 billion
Blackstone Group Inc.’s $18.7 billion purchase of a network of U.S. industrial warehouses from Singaporean real-estate investor GLP was more of a private real-estate than private-equity deal, setting a record for the largest private real-estate transaction. However, the deal highlights how private investment firms aim to capitalize on the rise of online shopping and concurrent shift away from traditional bricks-and-mortar retailers. Blackstone took a specific interest in “last mile” warehouses, storage centers that are located near large cities to improve the efficiency of next-day shipping, The Wall Street Journal reported in October. The firm outbid real-estate company Prologis Inc. for the roughly 180-million-square-foot portfolio, the Journal reported, citing people familiar with the matter. The deal price includes about $8 billion of debt, one of the people said, which Blackstone plans to refinance. The portfolio includes about 1,300 properties across the country, many of them near population centers. GLP had been gearing up to take its U.S. business public at the end of 2019, the Journal reported in April, but drew buyout interest and chose to take that route instead.
OneTeam Partners LLC
Private-Equity Backer: RedBird Capital Partners
Size: $250 million (RedBird Capital’s investment)
Private equity backed its share of large sports and entertainment companies (think the $3.5 billion purchase of the YES Network from Walt Disney Co., a deal that includes investments from private-equity firms RedBird Capital Partners and Blackstone.) However, Redbird Capital Partners’ much smaller investment in the formation of OneTeam Partners LLC stood out for its innovation. RedBird has invested $125 million of a $250 million commitment that the firm made alongside the players associations of the National Football League and Major League Baseball, reflecting the increasingly lucrative nature of the professional athlete’s personal brand in the digital age. RedBird will own a roughly 40% stake in OneTeam, The Wall Street Journal reported. The players associations will own the rest. The company is also in talks with other U.S. players unions and could eventually expand internationally. The two players associations get roughly $120 million in combined annual revenue from licensing deals with companies including videogame publishers Electronic Arts Inc. and Sony Corp. and trading-card maker Panini America Inc. They plan to pool that together with the RedBird commitment and invest in projects that expand opportunities to license their group name, image and likeness rights.
OneTeam focuses on helping players manage their portrayals and will aid players’ unions in expanding group licensing deals into areas like mobile gaming and digital trading cards. As usual, players will be paid for the use of their likenesses. However, OneTeam will use some of the money it received from RedBird and its partners to form a venture-capital fund that will invest in startups that want to license player rights. The players associations for the Women’s National Basketball Association, Major League Soccer and the U.S. women’s national soccer team will also be investing in the venture fund and are in talks to potentially join OneTeam, The Journal reported. Ahmad Nassar, president of NFL Players Inc., the licensing and marketing arm of the NFL Players Association, will be chief executive of OneTeam. Brent Stehlik, a RedBird operating partner and a former Cleveland Browns executive, will be its president.
Quick Base Inc.
Private-Equity Backers: Vista Equity Partners, Welsh Carson
Anderson & Stowe
Deal Size: More than $1 billion
Parting is such sweet sorrow, so some buyout firms decide not to do it at all. When Welsh Carson Anderson & Stow sold down a chunk of its stake in software provider Quick Base Inc. to Vista Equity Partners, for example, the firm retained a minority stake in the company. However, while Welsh Carson originally backed Quick Base in 2016 through a $3 billion fund it closed in 2015, it recapitalized the company out of a much newer $4.3 billion fund that closed earlier last year. Welsh Carson is one of a number of firms that used newer funds to recapitalize portfolio companies from older ones last year, allowing them to hold on to promising companies longer. Vista itself completed a similar move with its investment in software provider Aptean, and Apax Partners did it with insurance company AssuredPartners Inc.
Press Ganey Associates Inc.
Private-Equity Backers: Leonard Green & Partners, Ares Management Corp., GIC, British Columbia Investment Management Corp. and a wholly owned subsidiary of the Abu Dhabi Investment Authority
Amount: More than $4 billion
The roughly $4 billion buyout of health-care technology company Press Ganey Associates Inc. captured several trends that characterized private-equity deal making and sits in two of the most attractive industries for investors in 2019: technology and health care. Press Ganey offers technology and services that help health-care facilities manage tasks such as workforce and patient safety, clinical-care management and patient feedback. The deal was also a secondary buyout, in which both the seller, EQT Partners, and the buyers were private-equity investors. Finally, the consortium of institutional investors, namely the sovereign-wealth funds, that backed the deal also reflects a rising wave of interest in direct deals among such investors.
Owl Rock Capital Group
Private-Equity Backer: Dyal Capital Partners
Deal Size: Around $500 million
The market for stakes in private investment firms is hardly new. In fact, in 2018, firms inked a record 24 such deals, according to PitchBook Data Inc. However, the momentum remained strong into 2019 as more investors entered the market, including Europe’s Azimut and Stonyrock Partners. At the same time, investors are expanding beyond buyout groups into other types of private investment firms including private credit. Dyal Capital Partners’ roughly $500 million investment for a 20% stake in Owl Rock Capital Group valued the private-debt firm at more than $2.5 billion, the Journal reported earlier last year. The credit firm plans to use the investment to help launch a new investment fund that it ultimately aims to grow to between $3 billion and $5 billion, according to the Journal. The volume of capital available for acquiring GP stakes also grew significantly in 2019, thanks partly to a new $9 billion fund that Dyal wrapped up late in the year.
Link to original publication: https://www.wsj.com/articles/five-u-s-deals-that-helped-define-2019-11578308402