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Q2 League Tables: KKR Leads PE Deal Value Skyward

By Armie Margaret Lee | Published on June 29, 2018

The second quarter of 2018 saw private equity activity led by KKR & Co. LP‘s (KKR) back-to-back deals for enterprise software company BMC Software Inc. and healthcare services firm Envision Healthcare Corp. (EVHC). The acquisitions capped a quarter that saw fewer deals compared with a year earlier but valuations almost twice as large.

The New York investment firm on May 29 unveiled a deal to buy BMC from Bain Capital Private Equity, Golden Gate Capital LP, Insight Venture Partners LLC, Singaporean government vehicle GIC Special Investments Pte Ltd. and Paul Singer‘s Elliott Management Corp. Terms were not disclosed, but Reuters reported that the deal was valued at $8.5 billion, including debt, marking KKR’s biggest purchase since the 2008 financial crisis. Macquarie Capital was KKR’s financial adviser on the transaction and KKR’s longtime outside law firm, Simpson Thacher & Bartlett LLP, provided legal counsel.

Then about two weeks later, KKR said on June 11 it was taking Envision private for $46 a share or about $5.5 billion. Including the assumption or repayment of debt, the deal is valued at about $9.9 billion.

The transaction came on the heels of the close in March of KKR-backed Air Medical Group Holdingspurchase of Envision‘s medical transportation unit, American Medical Response. Simpson Thacher, which advised Air Medical on the acquisition, also provided advice to KKR on the Envision buyout.

Healthcare is an area in which KKR has been active. “We like healthcare a lot and we’re finding a lot of opportunities in that area,” said KKR co-founder, co-chairman and co-CEO Henry Kravis at the Bernstein Strategic Decisions CEO Conference on June 1.

In other PE activity during the quarter, Veritas Capital-backed healthcare data analytics company Verscend Technologies Inc. said June 19 it was acquiring Advent International Corp.-backed payments accuracy technology company Cotiviti Holdings Inc. (COTV) for $4.9 billion, including assumed debt. Skadden, Arps, Slate, Meagher & Flom LLP advised Veritas. Goldman Sachs & Co. and William Blair & Co. LLC were the financial advisers to Cotiviti, which received legal counsel from Latham & Watkins LLP.

Among the other transactions were Francisco Partners-led group’s deal, announced April 9, to acquire payments company Verifone Systems Inc. (PAY) for $3.4 billion, including net debt, and Hellman & Friedman LLC’s $3.02 billion deal, announced April 30, to acquire investment adviser Financial Engines Inc. (FNGN), which the buyer plans to combine with its portfolio company Edelman Financial Services.

Credit Suisse Securities (USA) LLC, Barclays plc and Royal Bank of Canada were the financial advisers to the Francisco-led investor group and Kirkland & Ellis LLP was the legal adviser.

On the Financial Engines deal, J.P. Morgan, Barclays, Deutsche Bank Securities Inc. and UBS Investment Bank were the financial advisers to  Hellman & Friedman. Simpson Thacher provided Hellman & Friedman and Edelman with legal counsel.

In the second quarter, there were 345 PE acquisitions globally worth a total of $146.37 billion as of June 25, according to Dealogic. In the same period last year, there were 372 deals valued at a total of $77.54 billion.

In the first half of the year, there were 795 PE acquisitions with an aggregate value of $249.47 billion as of June 25, compared with 765 deals worth a combined $142.18 billion in the same period in 2017, data show.

One of the factors contributing to PE deal sizes creeping up is a “bit of relaxation by money center banks with respect to their willingness to lend at higher leverage multiples,” said a source familiar with the matter.

“Financing is more available, though not like it was pre-financial crisis,” the source said.

–Chris Nolter, Michael Brown and Alice Cantwell contributed to this article

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