Definitive Agreement: How Winston & Strawn moved up the PE league table, Fried Frank’s decade long trek with New Mountain to Blue Yonder

by Jay Antenen

Definitive Agreement is a new column for the corporate legal community in North America. The weekly report combines insights on M&A trends with analysis on the relationships behind important transactions.
 
Law firms aspire to build private equity practices but breaking into the fee-heavy, ultra-competitive market is challenging.
 
One firm making headway is Winston & Strawn, according to Mergermarket data. Chicago-based Winston jumped 10 places in Mergermarket’s private equity league table last year to 10th place, advising financial sponsors on 31 buyouts in 2020 compared to 17 the year prior.  
 
Eva Davis, co-chair of Winston’s private equity practice, credits Winston’s success to staying focused on its middle market niche, developing strong market knowledge within her team, and taking a deliberate approach to expansion through lateral partner hires.
 
The firm specializes in advising sponsors on deals valued at USD 20m to USD 1bn with USD 50m to USD 200m the sweet spot for buyside work. It regularly works with around 100 funds on M&A transactions.
 
In recent years, many of Winston’s clients have raised larger successor funds, increasing the number of acquisitions they make annually and driving more business to the firm.
 
“Our private equity deal work has really accelerated,” says Los Angeles-based Davis, who joined Winston from PE powerhouse Kirkland & Ellis in 2014 as part of the firm’s private equity expansion under transactions chair Dominick DeChiara and private equity co-chair Brad Vaiana.
 
Enhanced deal flow gives Winston attorneys a better sense of the market, which in turns helps when pitching potential new sponsor clients, Davis says.
 
The current sellers’ market is pushing suitors to use tactics like offers with enhanced upside and preemptive bids to win deals.
 
In a twist on earnouts, Davis says that some sponsors are pitching owners of closely held targets with creative structures to provide value on top of a fully priced bid. The “bonus” a fund touts to the seller may include additional equity if financial thresholds are met and a path for meeting these metrics through access to the fund’s industry knowledge and contacts.
 
Middle market sponsors with lean deal teams are becoming more open to making and receiving preemptive bids in part because they are pursuing multiple buyside and sellside transactions at once and want to minimize lengthy auctions, Davis says.
 
Adding to the competition, SPACs that historically pursued larger targets are looking in the middle market for companies as small as USD 200m to combine in a roll up transaction, Davis says. A de-SPAC is more complex and less certain but typically offers a seller higher valuation than can be obtained in the private market.
 
For Winston’s own expansion, the firm in the past year has added lateral partners in complementary practices to private equity, most recently hiring IP and M&A partner Stephen Kong in Los Angeles and leverage finance partner Rachel Gray in New York.
 
Davis is actively recruiting for lateral private equity partners who can bring new sponsor clients to the firm amid high demand for the specialty.
 
Market knowledge is crucial when assessing potential candidates and Davis says an attorney can only know the market if they have least one private equity client who routinely hires them to advise on acquisitions.
 
“If the partner only handles sell-side deals or only represents portfolio companies . . . then that partner will have difficulty in a pitch meeting with a private equity fund prospect. The partner needs to be able to talk the talk or the partner will be found out in the first five minutes of the meeting,” she says.
 
Market Snapshot
 
For the week ending 26 April, Canadian and US companies and financial sponsors announced 90 transactions for a total disclosed deal value of USD 50.3bn, according to Mergermarket data.
 
Below are three deals that stood out, followed by three advisory opportunities identified by Mergermarket intelligence.
 
Three name changes, one law firm
 
Fried Frank’s 10+ years’ work with supply chain software group Blue Yonder culminated in Panasonic’sUSD 7.1bn acquisition of the Arizona-based company.
 
Starting in 2010, the law firm advised long-time client New Mountain Capital on a series of transactions that saw the company, then called RedPrairie, acquire publicly-listed JDA Software for USD 1.8bn in 2012, take the JDA name and sell a stake to the Blackstone Group and finally rename itself Blue Yonder and sell a 20% stake to Panasonic in May 2020.
 
This month Panasonic reached a deal to acquire the remaining 80% stake in Blue Yonder. White & Caseadvised the Japanese electronics conglomerate on the initial investment and complete buyout. JPMorgan worked with Blue Yonder and Goldman Sachs and BofA Securities advised Panasonic.
 
Delay pays for Dessert Holdings
 
After throwing out the first batch of suitors, Gryphon Investors-backed Dessert Holdings finally found a buyer with Bain Capital.
 
Mergermarket reported in November that Dessert was on the block in a process focused on strategic suitors. When it couldn’t find a bite at the right price, the USD 70m EBITDA company restarted the process with private equity bidders this year.
 
Kirkland & Ellis and Houlihan Lokey advised the North America producer of premium desserts on the sale.
 
Gryphon acquired The Original Cakerie in 2015 and used it as a platform to buy several dessert brands under the Dessert Holdings name. Kirkland and Stikeman Elliott advised the financial sponsor on the investment. Houlihan, McCarthy Tetrault and K&L Gates advised the then Canada-based company.
 
For the Bain deal, the private equity firm used Ropes & Gray and PwC. Ropes & Gray has advised Bain on at least 44 transactions, trailing Kirkland, which has advised on 54, according to Mergermarket data.
 
Davies’ gold card
 
Eight-and-half years after mining executive Oliver Lennox-King used Davies in a successful proxy fight to join the board of Roxgold, the law firm advised the Canadian gold miner on its sale to Fortuna Silver Mines.
 
Paul Weiss and Blakes worked with Fortuna, dual listed in the US and Canada, on the CAD 1.1bn transaction. Blakes and Skadden Arps previously advised the miner on an acquisition in 2016.
 
Scotiabank and INFOR Financial provided financial advice to Fortuna and BMO Capital Markets and Canaccord Genuity advised Roxgold.
 
Opportunities
  • Factset Research Systems is on the radar of potential buyers amid continued consolidation among financial data providers, sector advisors told Mergermarket. With a close to USD 13bn market cap, Factset is smaller than peers, making a potentially manageable acquisition. Cravath  has advised Factset on deals since at least 2005, according to Mergermarket data.
  • Kitchen Stadium, the operator of SnackMagic, expects to double revenue this year from USD 20m in 2020 as it builds out multiple platforms that allow employers to bulk-order gifts for employees, CEO Shaunak Amin told Mergermarket. The New York-based company just raised a USD 15m funding round from Craft Ventures and Luxor Capital.
  • Anti-insurance fraud software developer FRISS is looking to raise up to USD 50m ahead of considering a further capital raise or exit in 24 to 35 months, CEO Jeroen Morrenhof told Mergermarket. The fintech company, based in the Netherlands and Chicago, is working with FT Partners. Netherlands-based boutique law firm INGEN HOUSZ provides legal advice.