Happy Wednesday, Tech Take readers!
Memorial Day weekend is upon us. And the question becomes: what kind of vacation one can take during covid-19? In the age of social isolation, even a walk to the park feels like a new experience. But in the reality of today, is there any true escape – physical or mental – until the pandemic is over? What do you think?
The season is also changing for private equity M&A. What we saw over the course of the past week can be taken as yet another sign of how far covid-19 can influence the deal environment, interfering with deals that were already signed.
In the latest of examples, Advent International revealed Monday it would not be proceeding with its pending acquisition of publicly traded cybersecurity company Forescout Technologies. The deal was scheduled to close on May 18.
The news comes about three months after Advent agreed to acquire the company in a deal valued at $1.9 billion.
Advent may not be completely walking from the deal: the firm may try and renegotiate the price, one source told me.
According to another source, a partner at a software-focused PE firm, Advent’s move is extremely rare.
“I didn’t know it’s even possible to back away from a take-private, to be honest,” the source said. “Usually you can’t walk away from a deal after you sign it, regardless of what happens in the world or to the financials. So we’re all scratching our heads a bit.”
Advent did not disclose reasons for walking away from the agreement and declined to comment.
Ben Axler, founder of Spruce Point Capital, an activist investor with a short position in Forescout, told me indications the transaction could fall apart surfaced soon after the deal was struck.
“Upon reviewing the proxy statement, we had concerns about the financial projections and how they may or may not have been shared with prospective buyers,” Axler said. “By announcing the transaction early February, [Forescout] did not have to release illustrated guidance for Q1 that would have shown some weakness in their business.”
Forescout’s Q1 earnings report did not make the situation easier for the company. Read more in my story on PE Hub.
Advent is not the only firm trying to scrap a deal in light of covid-19.
Carlyle Group and Singapore sovereign wealth fund GIC may be able to walk away from an agreed deal with American Express GBT because of what is essentially a logistical issue, PE Hub reported earlier this month. There was also the breakup of the parent company of Victoria’s Secret, L Brands, and Sycamore Partners, which had struck a $525 million deal for a majority stake in the retailer.
Where’s this all heading? You expect to see a lot more of this type of walking from agreed deals – something that was, and continues to be, a pretty rare move? Used to be buyers were reluctant to ever break a deal agreement, but the pandemic seems to be changing mindsets. Send me your thoughts at firstname.lastname@example.org.
Request for all PE Hub readers: We’re building a database of all PE-backed companies fighting covid-19. Have any of your portfolio companies retooled their daily operations to help flatten the curb? Drop email@example.com or firstname.lastname@example.org a line with the company name, PE firm and how have they have altered things.
Hami Ebrahimi, a managing director at OMERS Private Equity, left the firm this month to join a Hellman & Friedman portfolio company, writes Kirk Falconer on Buyouts. Ebrahimi joined Caliber Collision Centers, a Texas auto repair chain that H&F acquired last year from OMERS, which retained a minority interest, Kirk writes. Read Kirk’s story here on Buyouts.
Goldman Sachs closed its second real estate secondaries fund and associated separate accounts on $2.75 billion, beating its $1.25 billion target. The fund targets LP portfolios and more complex structured and non-traditional secondary deals.
Fund II completed five transactions as of March 31, Goldman said in a statement. Sean Brenan, managing director at Goldman, said real estate secondaries opportunities have been expanding, and the pandemic will likely increase activity.
“As we enter a period of dislocation, we anticipate a range of compelling buying opportunities. These include providing liquidity to LPs motivated by the denominator effect and unfunded liabilities, as well as partnering with managers seeking to capitalize on reset pricing across the real estate landscape,” Brenan said in a statement. Read our news brief here.
That’s it! Have a great day. Hit me up as always with tips n’ gossip, feedback or just to chat at email@example.com.