New Mountain Capital wins Deal of the Year for sale of Equian, The pandemic market storm could wash out ‘tourist’ co-investors, Francisco Partners acquires Smith Corp

New Mountain Capital's sale of Equian is the Deal of the Year and "tourist" LP co-investors could get exposed in the pandemic downturn.


We got a lot going this morning at the Metuchen compound.
I was talking to a source the other day who shared a great thought: The person said, we’re living history right now.

That’s something I’ve been feeling lately, and in fact I remember a similar feeling back in that fall of 2008 when the world seemed to be collapsing, the feeling of constant anxiety, of waking up and wondering what you missed in the fitful hours spent tossing around your bed — what fresh hell is this? — like Dorothy Parker said.

Living through history; it helps put things into perspective, at a time when the lock-down situation can veer close to the absurd. Like the other day, I was on the phone with another source, talking about the fate of potentially billions of dollars that had been expected to flow into private equity markets, now caught up in the anxiety of the people controlling the flow of funds.

We were trying to hash out a situation for which there is almost no clarity, while my four-year-old daughter pounded on the door to the spare room I’m using as an office in a panic to explain that she had decided that morning to dress like both Queen Elsa and bat girl. The human brain can only stretch so far …

Take a moment: I know it’s mostly coronavirus news these days, but let’s take a moment and step back. Our Deal of the Year awards published this week, recognizing the top exits from 2019. With everything going on, it might be a bit strange to dwell on the halcyon days of 2019, but these big winners deserve their moment.

Buyouts editors vetted more than 40 submissions from PE firms. We used conventional criteria (investment rationale and plan, return information, methods of growth and innovation and how the exit happened), with one big stipulation: employee retention. We don’t reward deals that succeeded by stripping staff and then making money on the carcass.

Our overall Deal of the Year winner (as well as large-cap deal winner) was New Mountain Capital’s sale of Equian, a healthcare payment integrity provider. New Mountain acquired Equian from Great Point Partners. New Mountain sold Equian last year to United Healthcare Group’s Optum for a total enterprise value of about $3.2 billion, or nearly 7x its value three-and-a-half years earlier, Sarah Pringle writes on Buyouts. The sale generated a gross multiple of about 8.3x and a gross IRR of about 79 percent, Sarah writes. Check it out here. 

This morning our Middle Market Deal of the Year winner posted: FFL Partners’ sale of Crisis Prevention Institute, which the firm acquired in 2016. CPI provides workplace training focusing on the safe management of disruptive and assaultive behavior, serving everyone from behavioral healthcare professionals to correctional facility staffers.

“There were a lot of aspects of this that both were kind of feel-good but also clearly were solving important problems, so we felt like the demand would be very high,” Cas Schneller, partner at FFL, told Justin Mitchell. Check out there story here.

The rest of our winners will publish over the next few days: small-market, turnaround, international and secondaries deals of the year. Tomorrow look for our turnaround deal winner.

Top Scoops
We do have corona news today. We’ve been exploring every angle possible for how the pandemic-fueled downturn is impacting the private equity industry. Today we have news about how ‘tourist’ LP co-investors could get exposed by the downturn. Market dislocation will highlight the stark divide between LPs who have set up sophisticated co-investing programs composed of assets across sectors, sizes and geographies, and those fund investors who have taken a more “rifle-shot” approach to co-investing.

“I would be worried if your co-investment strategy was a rifle shot approach … so large, concentrated commitments into a handful of companies,” said an LP with a large public pension. “The concentrated, large-check approach of some LPs is going to expose them to chance. Through no fault of their companies they will be either lucky or unlucky.” Read it here.

Alaska Permanent Fund Corp and Railways Pension Scheme increased their commitment by $100 million each to a seeding partnership called Capital Constellation. The additional pledges bring Capital Constellation’s total assets to $1.2 billion. Read our news brief here on PE Hub.

That’s it! Have a great rest of your day. Hit me up as always with tips n’ gossip, feedback or just to chat at, on Twitter or find me on LinkedIn.