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.

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