Oak Hill, Genstar, Sixth Street, Avista, Eir make deals, plus Jamie Dimon on SVB

PE Hub does a deep dive into one of Yellow Wood's platforms.

Good morning, Hubsters. MK Flynn here with today’s Wire.

In his annual letter to shareholders this morning, Jamie Dimon shared insights on the Silicon Valley Bank debacle, including the role venture capital firms played. I’ve got the relevant excerpts below.

But first, I’ve got a slew of private equity-backed deals announced this morning to share with you, including several in healthcare.

Plus a deep dive into one of Yellow Wood’s platforms.

Let’s get right to today’s deals.

Household names: Solarcaine & A+D
WellSpring Consumer Healthcare, a Sarasota, Florida-based developer of over-the-counter and personal care brands backed by mid-market PE firm Avista Capital Partners, has acquired a portfolio of well-recognized OTC skin care brands from Bayer AG, including sunburn relief brand Solarcaine and diaper rash protectant A+D.

“This is a highly strategic acquisition for WellSpring, which not only adds established OTC brands to the WellSpring portfolio, but also provides attractive scale, future growth opportunities, and expands our presence in one of WellSpring’s core product categories,” said Alex Yu, partner at Avista.

Faster prescriptions
Eir Partners, a Miami-based private equity firm that invests in high-growth healthcare companies, has taken a majority interest in Gifthealth, a Columbus, Ohio-based pharmaceutical software developer that seeks to streamline the Rx experience through intelligent scripts.

Through the capital raise, Gifthealth aims to enhance product functionality, make key hires and expand into new medical specialty verticals.

The company was founded by Nick Potts, who serves as CEO, and John Romano, who serves as president.

“The acquisition of Gifthealth represents the culmination of a proactive sourcing effort in the pharma services spaces,” said Brett Carlson, managing member, Eir Partners. “We have met with a number of rapidly growing competitors over the past 18 months and come to the conclusion that Nick and John have built the best solution for the space. Gift is in front of a massive opportunity to reduce the cost of drugs to consumers and meet the need of specialty providers.”

Women’s soccer
The National Women’s Soccer League today announced it has awarded expansion rights for team #14 to an investment group representing the Bay Area, California, and led by majority investor Sixth Street.

Sixth Street is partnering with four former U.S. Women’s National Team players in Brandi Chastain, Leslie Osborne, Danielle Slaton and Aly Wagner, who launched the effort to bring an NWSL expansion team to the Bay Area with the support of women executives and community leaders. As the club’s Founding Football Four, they will be represented on the club’s majority women board and will work alongside Sixth Street in setting the team’s strategic direction.

Headquartered in San Francisco, Sixth Street’s sports investments include Real Madrid, FC Barcelona, and the San Antonio Spurs. The firm is also partnered with the New York Yankees and Dallas Cowboys through its majority investment in Legends, a global sports and live venue experience business. Sixth Street is making the largest institutional investment in women’s professional soccer to date as the NWSL experiences record-breaking viewership, attendance, and sponsorship growth, according to the firm.

On a roll
Oak Hill Capital and Genstar Capital-backed Mercer Advisors continues its add-on streak.
The Denver-based wealth management and financial planning firm has acquired dozens of companies over the last couple of years. Today, Mercer announced it has purchased Andesa Financial Management, a wealth management firm located in Allentown, Pennsylvania.

Sexual wellness
Beyond today’s deals, we’ve got a look at one private equity firm’s foray into a new area.
A year ago, Boston-based mid-market buyout shop Yellow Wood Partners generated industry chatter when it announced the formation of a new sexual wellness platform called Beacon Wellness Brands, with PlusOne as the anchor brand.

Iris Dorbian caught up with Yellow Wood principal Jennifer Roach to see how the platform is evolving.

“We all have been hearing about men’s sexual wellness for years with the hundreds of millions of dollars of media spent on Viagra,” said Roach. “It is time for the rest of our society to share in that experience.”

Not the finest hour
Jamie Dimon’s annual letter to shareholders is always worth reading, and this time the chairman and CEO of JPMorgan Chase & Co. weighs in on what went wrong at Silicon Valley Bank, including the role of venture capital firms and their portfolio companies:

Regarding the current disruption in the U.S. banking system, most of the risks were hiding in plain sight. Interest rate exposure, the fair value of held-to-maturity (HTM) portfolios and the amount of SVB’s uninsured deposits were always known – both to regulators and the marketplace. The unknown risk was that SVB’s over 35,000 corporate clients – and activity within them – were controlled by a small number of venture capital companies and moved their deposits in lockstep. It is unlikely that any recent change in regulatory requirements would have made a difference in what followed. Instead, the recent rapid rise of interest rates placed heightened focus on the potential for rapid deterioration of the fair value of HTM portfolios and, in this case, the lack of stickiness of certain uninsured deposits. Ironically, banks were incented to own very safe government securities because they were considered highly liquid by regulators and carried very low capital requirements. Even worse, the stress testing based on the scenario devised by the Federal Reserve Board (the Fed) never incorporated interest rates at higher levels. This is not to absolve bank management – it’s just to make clear that this wasn’t the finest hour for many players. All of these colliding factors became critically important when the marketplace, rating agencies and depositors focused on them.

As for what comes next, Dimon said, “It is extremely important that we avoid knee-jerk, whack-a-mole or politically motivated responses that often result in achieving the opposite of what people intended.”

He continued: “America has had, and continues to have, the best and most dynamic financial system in the world – from various types of investors to its banks, rule of law, investor protections, transparency, exchanges and other features. We do not want to throw the baby out with the bath water.”

Moving forward, Dimon recommends a mix of regulations, including new ones based on the vulnerabilities revealed by SVB.

The debate should not always be about more or less regulation but about what mix of regulations will keep America’s banking system the best in the world, such as capital and leverage ratios, liquidity and what counts as liquidity, resolution rules, deposit insurance, securitization, stress testing, proper usage of the discount window, tailoring and other requirements (including potential requirements on shadow banks). Because of the recent problems, we can add to this mix the review of concentrated customers, uninsured deposits and potential limitations on the use of HTM portfolios. Ideally, new rules and regulations would also make it easier for banks to provide credit in tougher times.

On that forward-looking note, I’ll sign off.

Chris Witkowsky will bring you Wednesday’s Wire, and I’ll be back on Thursday.

Until then, happy dealmaking,