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Buyout of AOL, Yahoo signals PE’s biggest bet on digital media

Apollo Global Management has for years wanted to become a major player in the media world. The firm finally got its wish Monday.

After days of speculation, Apollo has agreed to acquire a 90% stake in Verizon’s portfolio of digital news sites, including Yahoo and AOL, from Verizon for about $5 billion.

The deal marks private equity’s biggest bet yet on the embattled digital media industry, which has struggled to compete with Google and Facebook for a share of the digital advertising market. And it puts Apollo, an investor engulfed in controversy for the past year-plus over co-founder Leon Black’s connections to disgraced financier Jeffrey Epstein, in control of a collection of news sites after spending years betting on legacy media.

“It’s a textbook Apollo deal, They’ve been interested in media space for a while, judging by their past bidding activity. Apollo probably likes the space since many other investors are avoiding it.”

Indeed, Apollo’s history with media companies dates back years. But that history hasn’t always been successful.


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Private equity brushes off past club deal woes with $34B Medline buyout

Private equity’s biggest guns are once again showing they can have record-setting buyout firepower when they work as a team.

After recently backing away from so-called club deals that bring together multiple firms, the industry now has its largest acquisition in years. The Carlyle Group and Hellman & Friedman have joined forces to acquire Medline in a deal reportedly worth around $34 billion, including debt.

The deal comes after US private equity firms amassed approximately $721 billion in dry powder as of June 30, 2020 following years of record fundraising outputs. And it may signal that club deals involving multiple buyout shops have returned after they fell out of favor following a series of high-profile flops.

The Medline deal also marks the largest private equity buyout by value in at least a decade, according to PitchBook data. So far in 2021, private equity firms have struck 13 deals in the US worth $5 billion or more, surpassing last year’s total of 11.


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Mergers & Acquisitions Modelling

Achieve Corporation act as either the buy or sell side advisors on corporate transitions. This experience in a dual role gives us a valuable insight into the metrics, thought process and modelling needed to successfully plan the financial aspects of a merger or acquisition.

Our modelling can be used as either a:

  • Pitch deck to seek funding for a project
  • Back up financials for sign off at Board level planning committee
  • Feasibility studies to highlight potential financial synergies on acquiring targets in either a horizontal or vertical sector

The Achieve Corporation M&A modelling includes:

  • Acquirer & Target Models – Map financials, 3-statement model, discounted cash flow model
  • Deal Assumptions – Inputs, synergies, financing, value added and goodwill
  • Accretion/Dilution – Pro forma per share metrics
  • Closing Balance Sheet – Acquirer + target, adjustments, goodwill and pro forma
  • Sensitivity Analysis – Intrinsic value per share, ROE, ROI, changes in assumptions
  • Pro Forma Model – Combination of synergies, 3-statement model, Discounted Cash Flow  

For a discussion in the strictest confidence about the benefits of our M&A model, please contact Mark Roberts Senior Partner at

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Thoma Bravo Continues Frenetic Year With $3.7B Mortgage Deal

Thoma Bravo has wasted no time getting a jump on 2019.

The tech-focused buyout juggernaut completed its $950 million purchase of application security business Veracode from Broadcom on the first day of the year. Ten days later, Thoma Bravo finalized its acquisition of cybersecurity business Imperva for roughly $2.1 billion. And at the end of the month, the firm closed its 13th flagship fund on $12.6 billion, its biggest vehicle ever, topping a predecessor that brought in $7.6 billion in 2016 and joining an elite group of private equity firms that have raised $10 billion or more for buyout funds this decade.

Now, in its latest move, the Chicago-based investor has agreed to take mortgage software maker Ellie Mae private in a deal worth some $3.7 billion. Thoma Bravo will pay $99 per share in cash for the company, marking a 47% premium to its average closing share price over the 30 days ended February 1 and a roughly 21% premium to its Monday close. Based in Pleasanton, CA, Ellie Mae will now have a 35-day go-shop period to seek a better deal; otherwise, the buyout is expected to close in 2Q or 3Q.

Founded in 1997, Ellie Mae is the creator of a cloud-based platform used by banks, credit unions and mortgage companies to originate loans, with a client list that includes powerful US government-backed entities Fannie Mae and Freddie Mac. (Despite its similar name, Ellie Mae has no direct link to either company or to the government). Over the past eight years, the company has been on an incredible upward trajectory, driven by low interest rates and the recovery of the housing market. When Ellie Mae went public back in 2011, it raised a modest $45 million and established an initial market value south of $150 million—or about 25 times less than its valuation in the Thoma Bravo deal.

Thoma Bravo has had an impressive upward climb of its own, with its 35 completed private equity deals in 2018 representing a YoY increase of nearly 60%, according to the PitchBook Platform. And the Ellie Mae deal is right in line with Thoma Bravo’s usual preferences: Since the start of 2010, more than 80% of the firm’s PE deals have come in the IT sector.

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Norway’s DNO raises Faroe Petroleum bid to $816 million

Norwegian oil company DNO ASA raised its bid for Britain’s Faroe Petroleum to 641.7 million pounds ($816 million) on Tuesday, lifting its cash offer to 160 pence per share from 152 pence.

Shares in Faroe, which rejected DNO’s 610 million pound hostile bid in November as inadequate and “opportunistic”, have since ranged between 140 pence and 160.8 pence.

DNO’s Chairman Bijan Mossavar-Rahmani said in a statement that while the company “does not overpay for assets”, it was in the interest of most parties to raise its offer.

The deal will be funded from cash resources and the closing date for the final offer has been set for Jan. 23, DNO said.

DNO, which has been building up a stake in Faroe since April, said its combined ownership and bid acceptances on Jan. 4 stood at 43.8 percent. It requires 50 percent of Faroe’s shareholders to back its takeover bid.


Faroe had no immediate comment after DNO raised its offer.

Paul Mumford of Cavendish Asset Management, who according to Refinitiv Eikon data holds 1.4 percent of Faroe and who has said DNO’s previous offer was too low, said on Tuesday that the revised offer – which he also referred to as “low-ball” – looked likely to succeed.

“For minority shareholders this may be the nail in the coffin. They are unlikely to want to stick around with DNO holding a controlling stake in the business,” he said.

Sears reaches a deal to stay alive

Analyst Teodor Sveen-Nilsen of broker Sparebank 1 Markets in Oslo said he expected the increased offer to be successful.

“Considering the fact that peers have become cheaper over the past quarter…, we believe DNO now will end up with at least 50 percent of Faroe’s share capital,” he said in a note.


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Apollo nears Arconic mega-deal

In June 2017, a malfunctioning refrigerator sparked a fire at the Grenfell Tower apartment building in London. The blaze quickly engulfed the 24-story structure, ultimately resulting in 72 deaths and one of the largest residential disasters in recent British history.

Later government investigation attributed the rapid spread of the flames to the building’s poorly made cladding, a type of siding, which later tests showed was so combustible that it essentially turned the apartment into one giant, deadly tinderbox. The company that made that cladding was Arconic.

It perhaps wasn’t a surprise when, less than a year later, Arconic announced a strategic review, with reports indicating that it could sell the building products unit that made the aluminum panels involved in the Grenfell Tower disaster. Within months, prompted in part by continuing activist pressure from Elliott Management, talk turned to a wholesale takeover of the company.

It perhaps also wasn’t a surprise that several private equity firms showed interest—despite a number of looming lawsuits, criminal investigations and potential liabilities that could hamstring the business in the future.

Blackstone, The Carlyle Group and KKR were among the heavyweights to sniff around the building products unit, with Arconic describing the potential mega-deal as an effort to refocus its operations on building aluminum components for aerospace and auto companies rather than the construction market. But when the subject changed to a full buyout, Apollo Global Management emerged as the front-runner, with a potential price tag reported to be some $11 billion (or up to $20 billion including debt).

While Arconic’s direct involvement in a tragic, avoidable disaster that cost dozens of innocent lives is almost surely one factor behind the sale, another very obvious one is the presence of Elliott. The hedge fund won representation on Arconic’s board in early 2017 after a pitched battle and the ouster of former CEO Klaus Kleinfeld. The aluminum company’s stock price has continued to slide throughout 2018, which in Elliott’s mind seems to only cement the need for a complete leadership overhaul.

Apollo’s management thought a deal with Arconic could have been signed as soon as December, according to a New York Post report from the final day of 2018. But the buyout’s final hurdle is proving to be the continued tightening of global debt markets, raising doubt as to whether banks would be able to finance a deal as large as what Apollo and Arconic have in mind. Apollo is also believed to be considering a $40 billion move on the GE’s aviation leasing business, an even larger deal that will surely encounter similar concerns. A lack of available funding could very well endanger prospective Apollo deals worth $60 billion in total.

The role Arconic’s shoddy products played in the horrific events at Grenfell Tower make it painfully clear that major changes of some sort are needed at the company. Whether a private equity firm is the correct group to make those changes could be a matter for debate. But if the debt markets cooperate, then Leon Black and Apollo seem poised to be the ones navigating the transformations, lawsuits and reckonings that are almost surely ahead.


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Next big thing: Oiltech

Proptech, insurtech, femtech, lawtech and even MADtech (the confluence of marketing, advertising and technology)—whether you call them buzzwords or not, they are all an indication of how technology and data are disrupting traditional verticals. This is evident in the current crop of startup founders. Several stem from traditional sectors and, with the proliferation of technology, have a vision to do things differently—and more efficiently—than before.

In the first edition of our “Next big thing” series, we take a look at oiltech and, to a wider extent, commoditech.

The rise of Big Data, changing regulations and evolving real-time trading trends are leading global commodity giants, trading houses and other market participants to think about recalibrating their traditional models and how business will be conducted moving forward. This is understandable given the sums that are at stake, with research from consulting firm BCG estimating that the commodity trading industry’s potential value pool is worth around $70 billion per year.

Change is coming

Margins within commodity trading are eroding, and indeed, it appears as if the industry as a whole needs to come to terms with a less profitable reality. According to research from Oliver Wyman, gross margins dropped some 4.5% in 2016.

However, new players are emerging, either starting up businesses or backing those aiming to re-engineer some traditional methods.

“It is fascinating to see just how fast things are evolving,” Florian Thaler told PitchBook. Thaler is a former oil strategist at hedge fund Och-Ziff, Shell and Citigroup, and a co-founder and the current CEO of OilX, a tech startup that has set out to revolutionize oil trading analytics. “Commodity trading and oil trading as the largest commodity will be significantly shaped by two mega-trends, namely new data sets from remote sensing via satellites, as well as superior data science models that can process, curate and combine data in near real time on a massive scale.”

Shifting powers

These themes are also altering the power balance between the new entrants and established industry players such as oil majors, banks, brokers and service providers.

“The general complacency toward smaller players who are doing things differently is diminishing, but we still have some way to go,” Thaler said. “It is encouraging to see that money is being invested and that traditional VCs and some large family offices have realized that the market is going to look fundamentally different than it does now in only three to five years.”

Blue Bear Capital is one of the few thus far that have begun backing companies in the space. The firm invests in companies that apply data-driven technologies to the energy supply chain and counts some of the industry’s most prominent names as advisors, including former BP board member and CEO John Browne. All of its portfolio hails from the space and includes companies such as Expedi, a supply chain procurement platform for the energy industry.

Another backer is CommodiTech Ventures, a specialized early-stage venture fund investing solely in commodities technology and founded by former traders Etienne Amic and Jose Tumkaya. The industry veterans both believe that trading by gut instinct is simply outdated and the equivalent of being stuck in the analog era.

Enter technology

On the face of it, commodity trading actually sounds pretty straightforward: Make a profit by monetizing market imperfections such as those related to quality, time and location.

The reality is, of course, more nuanced.

During his time at Shell, Thaler discovered that access to data was only one of the ingredients required to gain an advantage over competitors.

“The fact is that the oil majors have access to an incredible amount of data, but the way that information gets utilized is very siloed and limited,” he explained. “In contrast to this, my experience at a hedge fund showed quite the opposite: limited access to information, but amazing tools and systems. It demonstrated to me that superior data systems can be very powerful.”

OilX’s vision is to combine the data science tools of a modern hedge fund with the knowledge base of an oil major. Its setup mirrors the technological innovation of Signal Ocean, a venture looking at a similar disparity in the shipping industry, with the aim of improving commercial performance of its clients.

Signal Ocean is a co-founder of OilX and its technology partner. Thaler and his partner have effectively created a digital twin of the oil supply chain without owning any assets in the chain, by applying AI and satellite technology to enable oil traders to make better decisions much faster than traditionally. The newcomers alter the already ultracompetitive space and could potentially reshape the industry’s dynamic from asset-driven to data-driven.

Said Thaler: “While some of the market participants have begun to invest and embrace the changing environment, there is still a number that are only slowly coming to terms with the fact that having loads of people on the ground and owning assets around the globe is no longer good enough. What is currently happening is a seismic shift away from ‘boots on the ground’ to ‘eyes in the sky.'”

The commodity trading industry has a long history of agility and constant adaptation. However, the speed of change and the diversity in background and skill set of new entrants in the space will require the big players to embark on new ways to create proprietary information flows and utilize algorithm-based analytics.

The incorporation of data science technologies into the decision-making process may also see a number of traditional players entering partnerships with some of the startups that are setting out to disrupt the industry.


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The key trends that will shape European PE and VC in 2019

Growth trajectory

While Europe has traditionally been very good at creating new companies, it hasn’t been as apt at growing them, according to Draper Esprit CEO Simon Cook. He thinks this will change. “One trend we have been tracking closely is the proportion of companies which raise early-stage money and which then go on to raise growth money,” he said. “We think this is key to building a sustainable entrepreneurship in Europe. In the US, almost 85% of all businesses that raise seed go on to raise growth capital ($5 million to $75 million). In Europe, it has previously been much less. We expect the gap between the US and Europe to close this year, and to see far more growth deals in Europe.”

Green is a go

Among Europe’s new companies, there’s one sector in particular that Matt Bradley, investment partner at Forward Partners, believes will take off in 2019.

“You’ve probably noticed—in stores, restaurants and conversations—an embrace of all things not meat,” he said. “Vegetarianism, veganism and the curiously defined flexitarianism are on the rise. Whether it’s due to animal welfare concerns, the environment or health and diet-related interest, there’s been a huge shift in public appetites and taste. The trend shows little sign of abating. That means the market size that entrepreneurs can go after is large and increasing rapidly; a great foundation from which to start a business.”

These types of companies have already seen success in 2018 with investments including vegan meal delivery business AllPlants’ £7.5 million funding round from Octopus Ventures. But, Bradley said there’s still plenty of room for innovation:

“In the offline world, I’d expect more and more vertical-focused restaurant concepts to pop up. There’s clearly appetite for more plant-based products for those entrepreneurs willing to take on food formulation and creation. In the online world, all those businesses and business models that we’ve seen prosper relating to food—marketplaces in all parts of the supply chain, on-demand, subscriptions, et cetera—are increasingly attractive. As the market grows more and more, investors are likely to want a piece of the action too.”

Impact’s breakthrough year

It’s not just the food industry that’s going green, according to Sir Ronald Cohen, chairman for the Global Steering Group for Impact Investment. He expects that 2019 will be a “breakthrough year” for impact investing, which he believes will develop into a multitrillion-dollar market.

According to Cohen, impact investing not only more than matches returns generated by more traditional investment strategies, but is also the answer to some of society’s biggest challenges.

“On a global level, I am concerned by the tensions that are building in societies around the world,” he said. “Migration, inequality, the widening gap between the ‘haves’ and the ‘have-nots’ and the resulting erosion of some of our most trusted institutions are all causes for great concern. If we want to maintain a market-based system, we have to face these challenges head-on.

“I believe impact investing can contribute to a solution in a meaningful way, not by fixing issues at the edges, but by putting us on the path to systemic change. Impact investment moves us away from the doctrine of maximizing profit alone to a new paradigm. It brings impact to the center of our consciousness, measures it, and shifts us to optimize risk-return-impact when making business and investment decisions.”

Business as usual

While societal challenges and political events such as Brexit have created a fair amount of uncertainty, Andres Saenz (pictured), EY global private equity leader, expects European activity to remain robust.

“2018’s fundraising market was notable for closings by a number of large European funds and one of the best years on record,” he said. “We expect continued strength in 2019, while recognizing that there are fewer such vehicles currently in the pipeline.”

Saenz anticipates the coming 12 months will keep up the pace after a busy 2018: “We expect continued momentum heading into 2019, given record levels of dry powder and an overall accommodative financing environment. Tech, healthcare and consumer products remain powerful trends and platforms for growth, and we expect continued appetite for deals in these spaces.”

The end of an era

However, not everyone shares an optimistic view for the year ahead. Richard Clarke-Jervoise, partner and head of the Stonehage Fleming Private Capital, claims that private equity has reached the end of its “Golden Age.”

“I think we, like many people, have been preparing for a downturn for a number of years,” he said. “We’ve been very conscious that it has been a good sellers’ market and a tougher buyers’ market. The period from 2012 to 2018 will be remembered as private equity’s ‘Golden Age’ due to exceptionally benign economic conditions, very strong interest from investors and a strong bull market for equities. Private equity managers have taken advantage of various innovations: GP-led restructuring, GP-stake transactions and a growing willingness for LPs to support multiple strategies. However, cracks have started to show in 2018 as it closed on an uncertain note.”

He continued: “The technology space has suffered from falls in public market valuations, IPOs trading below their listing price and the first signs of the impact of trade wars. This has led to a palpable sense of caution from most GPs and we’re getting closer to the top of the market, if we’re not there already. This means that it’s time to be cautious rather than piling on a lot of risk. We’ve tried to be very disciplined in the way we commit money and really focus on managers with a huge amount of experience; they’ve seen a lot of cycles and we think that has a lot of premium in a volatile period.”


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KKR stock surges after first earnings as a corporation

KKR’s conversion to a corporation is paying off for stockholders.

The New York-based buyout shop announced its 3Q earnings on Thursday, including after-tax distributable earnings of $496.7 million, or 60 cents per share, a YoY increase of 21.3% and about in line with analyst predictions. The firm also reported $640.2 million in profit attributable to shareholders, up more than 300% YoY. KKR’s stock responded positively, closing Thursday up more than 6% on a day the market rebounded from a recent sell-off, thanks in part to several strong earnings reports across the corporate spectrum.

KKR changed its tax structure from a partnership to a corporation on July 1 in hopes of making its shares more accessible on indices. As a result, the firm has stopped reporting its economic net income, an opaque metric that publicly traded peers such as Blackstone, The Carlyle Group and Apollo Global Management use to grade performance.

So far, KKR management likes the results.

“We’re encouraged by the earnings we are having,” said Craig Larson, the firm’s head of investor relations. “We feel like we’re seeing an increase in the breadth of our shareholders.”

Co-COO and co-president Scott Nuttall took away positives both from KKR’s results and the wider market downturn, saying the firm will be able to grow at a faster pace if valuations drop.

“We saw this coming out of the financial crisis a decade ago,” Nuttall said. “We can also buy back our stock at lower prices. From our seat, our stock is worth even more today and our firm has even more opportunities and better prospects than a month ago.”



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Uber Unveils New Division

Elon Musk introduced us to the hyperloop. Now, thanks to Uber, we have a Powerloop, too.

That’s the name of the new service the ridehailing company unveiled Wednesday, which will involve renting pre-loaded trailers to shipping carriers in an effort to help smaller carriers connect to businesses with plenty of goods to move—including Anheuser-Busch, which is one of Powerloop’s first clients. Powerloop will be affiliated with the existing Uber Freight unit, which uses an app to direct truckers with empty trailers to cargo waiting to be hauled.

The announcement came a day after reports emerged indicating that Uber has been in discussions with investment banks regarding a public debut that could be worth up to $120 billion. The San Francisco-based company and its primary rival, Lyft, are both making progress toward enormous IPOs that are expected in 2019.

Uber isn’t the only VC-backed company with its eye on reshaping the world of shipping. Last month, Convoy confirmed it had raised $185 million at a $1.1 billion valuation, essentially tripling its valuation from barely a year prior, while Cargomatic brought in $35 million in August. Both companies have similar aims to Uber Freight, using a platform to connect available trucks to clients with goods to ship.

Powerloop’s trailer-pool services are already available in Texas, with plans to expand throughout the US. The division represents Uber’s latest effort to diversify away from its flagship ridehailing business. That unit, the company’s Freight division and its UberEats subsidiary are all currently unprofitable, per The Wall Street Journal, with UberEats expected to be the first of the units to get into the black.

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