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Optiv confirms ‘temporary’ UK closure and turns attention to M&A

Security giant says it is still committed to European expansion

US-based MSSP Optiv has confirmed what it called a “downsizing” of its UK operation, claiming the move is temporary as it turns its attention to M&A.

CRN reported yesterday that Optiv was in the process of shutting down in the UK, keeping on a handful of staff to continue any outstanding customer transactions.

 

In a statement Optiv called the move “temporary”, insisting that it still has plans to build a presence in Europe and has looked at 40 European businesses to acquire before deciding it “simply couldn’t justify the high valuations of these companies”.

“After a comprehensive strategic review, we’re temporarily downsizing our London-based organic operations,” Optiv said.

“We remain committed to serving the European market, clients, partners and prospects,” it added, claiming it could acquire “once European valuations right-size”.

Optiv’s CMO had previously said that the firm looked at acquiring the likes of SecureData and SecureLink, opting against making a bid because it thought the pair were overvalued.

SecureData was bought last year for a multiple of 20 times its EBITDA.

Micky Patel – partner at August Equity, which sold SecureData to Orange – told CRN earlier this year that the multiple was achieved because SecureData was unique in that it was a cybersecurity service provider that had scaled.

A panel of private equity investors also told delegates at CRN‘s Channel Conference MSP that they believe high multiples are here to stay.

 

Read More – www.channelweb.co.uk

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Yahoo Japan and Line set to merge

Japan’s biggest search engine and messaging app are set to merge under a deal agreed by their parent companies.

Yahoo Japan is the country’s biggest search engine, and has e-commerce and online banking subsidiaries.

Line is the country’s dominant messaging app, and is also popular in Southeast Asia and Taiwan.

Analysts say the merger will help the companies compete with Japan’s other online giants.

Yahoo Japan has long offered a diverse range of services but has lagged behind many of its competitors, said Seijiro Takeshita, from the University of Shizuoka.

“This will be a very big headache and threat to the players like NTT Docomo and Rakuten,” he said.

Big in Japan

While Google is the predominant search engine in the US and Europe, Yahoo is Japan’s most popular search engine.

More than 50 million people visit Yahoo Japan’s website every month.

Yahoo Japan is no longer linked to its US namesake, which sold its remaining stake in the company in 2018.

Line, which is owned by South Korean company Naver, has roughly 80 million users in Japan and a similar number in Southeast Asia and Taiwan.

The app itself is perhaps best known for cartoonish stickers, a feature which its competitors have also adopted.

In recent years, Yahoo Japan’s parent company, Softbank, has bet billions on primarily Asian-based tech companies.

The deal could also make it a dominant player in the payments market in Japan.

Softbank already has its own payment service PayPay.

With this deal, it will scoop up Linepay, which is used by many of its competitors.

“I think there will be a lot of game-changing issues that will go on,” said Mr Takeshita.

 

Read More- www.bbc.co.uk

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A buyer for British Steel is welcome but what’s Jingye’s strategy?

It’s hard to see why the Chinese firm wants to take over a loss-making business in a tough market.

 

Half the woes for steelmakers in Britain derive from dumping into world markets by Chinese producers, or so we have been told for a couple of decades. So it is a strange sort of rescue for British Steel that ownership should pass to a little-known Chinese conglomerate, Jingye, offering a vague promise to invest a large sum.

Any buyer is better than none, of course, since the effects of irreversible closure of the Scunthorpe steelworks would be appalling. Top of the list would be 4,000 jobs, with another 20,000 in the supply chain. Then there would be the huge environmental clean-up costs.

Jingye counts as a more credible owner than Greybull Capital, the private equity outfit that took British Steel into administration. Yet it is still hard to understand why a Chinese group, which is only the world’s 37th largest producer of steel, wants to own a loss-making producer on the other side of the world.

 

Tata Steel couldn’t make financial sense of what it called its “long products” business, so gave it away to Greybull for £1 in 2016. Industry conditions haven’t notably improved for high-cost European producers since then. The price of iron ore, of the two key raw materials, is high. And complaints about energy and environmental costs, the other half of the industry’s troubles, are constant.

Perhaps Jingye wants overseas assets to balance the volatility in its home market. Or perhaps it calculates that a purchase of British Steel will open up opportunities to export to the UK some of its current products. But those theories are speculative. This £50m purchase may just be a hopeful punt in which the downside risks are deemed tolerable.

 

Read More – www.theguardian.com

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These firms are keying 2019’s record rate of add-ons

Private equity firms are living in the age of the add-on.

Through the first nine months of the year, add-ons to existing portfolio companies accounted for 68% of all private equity investments in the US—the highest annual rate on record—according to PitchBook’s 3Q 2019 US PE Breakdown. With deal multiples spiking across the broader buyout market, this inorganic growth is one of the few ways left for investors to find the potential for value creation to which they’ve grown accustomed.

As with every investment trend, some firms have embraced the strategy more fully than others. In ascending order, here’s a look at the six investors who have been most active in the US add-on market during 2019, according to PitchBook data, along with a rundown of the sorts of deals they’ve been getting done:

T-5. Insight Partners—30 add-ons

Until earlier this year, Insight Partners was known as Insight Venture Partners. That’s reflective of how the firm differs from most of the other firms on this list. Instead of focusing almost exclusively on buyouts and other private equity deals, Insight operates across a much broader segment of the private investment spectrum. It’s just as well known for its venture deals (or perhaps more so) as it is for conducting control investments.

But those control investments are still a major part of its strategy. And this year, it’s led to a spate of add-ons for a number of different portfolio companies, with a seeming focus on deploying new types of software across a range of sectors.

One example is Community Brands, a creator of software for nonprofits and other well-meaning organizations, which earlier this year announced three add-ons in a single day. Another is Enverus, which changed its name from Drillinginfo in August. The developer of software and data analytics for the energy sector has been busy building out its suite of services, acquiring one company that provides maps of the Permian Basin in March and another that makes billing and revenue software for the oil sector in July.

T-5. Harvest Partners—30

Harvest Partners, a New York-based firm that’s been making private equity investments since 1981, has taken a more diverse approach to its add-on activity in 2019, with no single portfolio company dominating its dealmaking.

In recent weeks, it’s been busy with Integrity Marketing Group, a distributor of life and health insurance that Harvest bought into alongside existing backer HGGC in August. (Of note to some, surely, is the fact that the chairman of Integrity’s board is Steve Young, the NFL hall of famer who’s also a co-founder of HGGC). Integrity was already on an add-on binge before Harvest entered the picture, and it’s kept it up in the meantime, acquiring four different insurance marketing companies in October alone, per PitchBook data.

The co-investor relationship with HGGC isn’t rare for Harvest. Some of its other portfolio companies that have been busy conducting add-ons this year are also examples of Harvest investing alongside fellow firms, including recycling specialist Valet Living (which it backs along with Ares Management) and insurance brokerage Acrisure (both Blackstone and Partners Group). That likely lightens some of the sourcing, diligence and dealmaking loads.

 

Read More – www.pitchbook.com

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Google snaps up Fitbit for $2.1bn

Google has snapped up the Fitbit activity tracker business in a $2.1bn (£1.6bn) deal that will enable the search giant to go toe-to-toe with Apple in the fast-growing smartwatch and wearables business.

Google is paying cash for the San Francisco-based Fitbit, which was set up in 2007.

It is paying $7.35 per share – a premium of more than 70% to the Fitbit share price before the shares were suspended earlier this week amid takeover speculation.

The price, however, is a fraction of the company’s value when it floated in 2015. The shares were initially priced at $20, and soared to more than $50 in the weeks following the initial public offer. But it has suffered in recent years from competition from bigger rivals Apple, Samsung and China’s Xiaomi. In August the group’s shares hit a low of $2.85.

The deal, which is Google’s biggest consumer purchase since it bought home-tech business Nest five years ago for $3bn, will have to be approved by shareholders and regulators, especially over how it handles Fitbit users’ data. The firm claims to have 28m active users worldwide and its fitness trackers store location and physical health data for users who monitor their activity, sleep and and exercise using a range of wearable devices.

Fitbit said it would not sell customers’ personal data and pledged that wellness data would not be used by Google ads.

Google has offered its own fitness tracking service, called Google Fit, since 2014, but has relied on third parties such as Fossil and Tag Heuer to produce Android-compatible smartwatches.

In a blogpost announcing the deal Rick Osterloh, Google’s senior vice president in charge of devices & services, said Fitbit had been a pioneer but that Google could “help spur innovation in wearables and build products to benefit even more people around the world.”

The market for wearables is growing rapidly. Last week, in its latest quarterly financial results, Apple reported annual sales growth of more than 50% in its “wearables” division, which includes watches. The iPhone-maker’s total sales from wearables over the three month period were £6.5bn.

The deal will expand Google’s range of consumer products, which already includes smartphones, headphones, smart speakers and laptops.

Osterloh wrote that Google would not misuse Fitbit users’ personal data: “We will never sell personal information to anyone. Fitbit health and wellness data will not be used for Google ads. And we will give Fitbit users the choice to review, move, or delete their data.”

Earlier this week, amid reports that the deal was being finalised, the British Labour party wrote to the UK’s competition regulator calling for the takeover to be blocked. Tom Watson, the shadow digital, culture, media and sport secretary, called the deal a “data grab”.

He said: “If this acquisition were to proceed, Google could have information on how we sleep, when we move, what we eat, on our breathing and our heartbeats. This data could hardly be more sensitive, but … all this information could then be used [for] micro-targeting, advertising, and behaviour modification. The risk to consumers here is significant.”

Watson has also written to the information commissioner, Elizabeth Denham, expressing concern over the data aspects of the merger and asking her office to assess whether it raises privacy concerns.

 

Read More – www.theguardian.com

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Vauxhall fears after car giants Fiat and PSA announce merger

Fiat Chrysler is to merge with Vauxhall’s owner PSA to create the world’s fourth largest car company.

The two sides say they have yet to finalise all the details, but the 50-50 merger is expected to provide significant cost savings.

That has raised concerns at Vauxhall, which employs 3,000 people in the UK, as it could be vulnerable to any restructuring.

Unions called for talks with France’s PSA, which owns Peugeot and Citroen.

Fiat Chrysler, the Italian-US business behind Jeep, Alfa Romeo, and Maserati, has been looking for a big tie-up for years, believing that consolidation in the global industry is needed to cuts costs and overcapacity, and fund investment in electric vehicles.

It has tried previously to form alliances with General Motors and Renault.

A combined Fiat Chrysler-PSA will have a market value of about $50bn (£39.9bn) with annual sales of 8.7 million vehicles. The companies said there are no plans to shut factories, but UK unions are uneasy about the impact on Vauxhall.

“Merger talks combined with Brexit uncertainty is deeply unsettling for Vauxhall’s UK workforce which is one of the most efficient in Europe,” said Unite national officer Des Quinn.

“The fact remains, merger or not, if PSA wants to use a great British brand like Vauxhall to sell cars and vans in the UK, then it has to make them here in the UK.”

 

Read More – www.bbc.co.uk

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Thomas Cook’s Nordic business lives on after private equity deal

A trio of investors—including two private equity firms—has teamed up to save Thomas Cook’s Nordic business a month after the British travel company suddenly declared bankruptcy, delisted its shares, ceased operations and stranded more than 150,000 customers.

European buyout firms Altor Equity Partners and TDR Capital, along with Norwegian real estate tycoon Petter Stordalen’s Strawberry Group, are slated to assume ownership of the Ving Group, as the Northern Europe unit is called. The group employs 2,300 people across charter businesses in Sweden, Norway, Denmark and Finland, along with Thomas Cook Airlines Scandinavia.

Strawberry Group and Altor will each buy 40 percent of Ving, while TDR Capital will purchase the remaining 20 percent, though no price was revealed. Following the acquisition, the investors will work to secure approximately 6 billion Swedish kronor (about $618 million) in liquidity and guarantees for the business.

Unlike the larger Thomas Cook Group, which was founded in the 1840s to serve the burgeoning British middle class, Ving has recently proved itself profitable. Some of the Ving units will declare bankruptcy in order to facilitate the redirection of all businesses to a freshly established company created by its new owners, but the company’s sale will ensure 400,000 people who have booked upcoming trips will be able to travel without issue.

“[The deal] secures the business and creates a stable foundation for future development,” Harald Mix, a partner at Altor, said in a statement.

Altor, based in Stockholm, has raised five funds since its creation in 2003. It has invested in more than 60 middle-market Northern European companies, worth a total of €8.3 billion (about $9.25 billion).

TDR Capital, founded in 2002, manages €8 billion in assets and is headquartered in London. It also focuses on mid-market companies, with a preference for growth-oriented investments.

Strawberry Group maintains 11 companies and invests primarily across the real estate, finance, hospitality and art industries. Stordalen is a Norwegian billionaire who, along with his three children, also owns the region’s largest resort chain, Nordic Choice Hotels. The brand operates 180 luxury hotels across five countries.

The buyout of Thomas Cook’s Nordic unit may be one of the more dramatic deals in recent memory, but it fits cleanly into the bigger picture of the region’s PE landscape. Nordic dealmakers such as Altor have maintained a relatively consistent slice of the European private equity pie over the past decade. As of September 30, Nordic PE deal value this year totaled about €26 billion, about 11% of overall European deal value, per PitchBook’s 3Q 2019 European PE Breakdown. Through the past decade, the Nordic region’s deals have largely hovered around that same share of the total.

 

Read More – www.pitchbook.com

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China-driven M&A in North America is nearly MIA this year

North American M&A activity involving Chinese buyers has fallen off a cliff this year. That’s not a complete surprise, but it’s not often you see such swift drop-offs without something alarming going on. China-driven M&A is on pace to fall by more than 90% from its 2016 peak, according to PitchBook’s 3Q 2019 North American M&A Report.

Just over $20 billion worth of North American M&A deals with Chinese acquirers have been consummated this year through 3Q, which would have been a blip in 2016, when $298.5 billion changed hands. Combined M&A value figures treaded water over the past two years, at least comparatively, and a few big deals were executed. In the background, though, volume slid very quickly, from 696 deals in 2016 to 496 in 2017, then to 274 deals last year, and finally, to only 73 so far this year:

US-based companies and Chinese acquirers have more or less ceased doing business, at least for now. Some of that is collateral damage from the trade war, but more of it is likely related to The Committee on Foreign Investment in the US. The CFIUS has effectively blocked several major transactions, mostly on national security grounds.

The list of affected sectors is broader than aerospace and semiconductors—reviews are now triggered for energy, transportation, healthcare and even financial services companies. Taken together, the regulatory territory covered by CFIUS reviews is quite extensive. The market is now very aware of the penalties involved, thanks to high-profile deals being scuttled by regulators—including some completed deals that had to be unwound after the fact. It would be interesting to track all of the broken deal fees and legal expenses involved in the deals that didn’t make it into the chart above.

It isn’t clear that an end to the trade war would lead to an immediate recovery in the M&A market. Activity would pick up to some degree with an agreement, but most of these cross-border cancellations boil down to those security concerns, many of them well-founded. As long as Donald Trump remains in office, China remains communist and we continue to give each other the side eye, it may be radio silence on the M&A front for a while.

 

Read More – www.pitchbook.com

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JD Sports’ Footasylum takeover could be bad for shoppers, says CMA

The UK’s competition watchdog has said JD Sports’ £90m deal to buy its smaller rival Footasylum could result in higher prices and that it will carry out an investigation unless JD can address its concerns.

The Competition and Markets Authority (CMA) said its initial investigation found the deal could result in a “substantial lessening of competition”.

The CMA is concerned this could result in a worse deal for shoppers through higher prices, reduced choice or worsening customer service. “JD Sports must now address the concerns identified or face a further, more in-depth investigation,” it said.

Colin Raftery, a senior director at the CMA, said: “JD Sports is already by far the largest player in the growing sports fashion sector, so any deal that results in it buying up one of its closest competitors could clearly give cause for concern.

“Our investigation has shown us that JD Sports and Footasylum have been competing strongly across the UK, with a sports fashion offering that few other retailers are able to match.”

Peter Cowgill, JD Sports’ executive chair, said: “We continue to believe that Footasylum would be a positive addition to the group, bringing a differentiated customer demographic and fashion-led product range that is complementary to our existing business.

“We also believe that there will be significant operational and strategic benefits from a combination of the two businesses. Our discussions with the CMA are ongoing as we consider whether to proceed to phase two or if acceptable remedies can be agreed at this stage.”

 

Read more – www.theguardian.com

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Flutter shares jump 14 per cent on £11bn merger with Stars Group to create one of the world’s largest gambling firms

Flutter Entertainment and Nasdaq- and Toronto-listed Stars Group said today they were merging in a deal that will create one of the world’s largest gambling businesses.

Shareholders in Flutter, formerly known as Paddy Power Betfair, will own approximately 54.6 per cent of the new company with Stars shareholders owning approximately 45.3 per cent of the combined group.

The combined revenue of the two businesses in 2018 was £3.8bn and their combined market capitalisation is £11bn, enough to make it one of the world’s largest online betting and gaming operators globally.

The new business will be based in Dublin, with a premium listing on the London Stock Exchange and a secondary listing on Euronext Dublin.

Flutter shares jumped nearly 14 per cent this morning to 8,700p.

News of the deal also boosted other gambling stocks, with William Hill up 3.65 per cent, 888 Holdings up 1.8 per cent and GVC Holdings up nearly one per cent.

 

The two businesses said the merger would help the combined group crack the US market which is liberalising its gambling rules.

The pair said the deal would create value for shareholders with pre-tax cost-synergies of £140m per annum along with lower finance costs.

Flutter chief executive Peter Jackson will be chief executive of the combined group with Flutter chair Gary McGann taking the role of chair.

Flutter has entered into third-party deals in the US with Fox Sports, Fastball Holdings and Boyd Interactive Gaming conditional on the merger going ahead.

 

Read More – www.cityam.com