It was a deal a day in Minnesota last year.
About 375 public and private Minnesota companies acquired or sold a business, in what was the busiest year for corporate transactions since the Great Recession of 2008-09.
The 2015 total transaction value for Minnesota was $65.7 billion, down slightly from $72.2 billion the year before. 2014 was bolstered by Medtronic’s $49.9 billion stock-and-cash acquisition of surgical-supply maker Covidien PLC. The largest Minnesota deal in 2015 was a quarter that size.
Nationally, after a six-year run of increased merger-and-acquisition activity, the value of U.S.-based transactions broke through $2 trillion in 2015 for the first time, totaling $2.47 trillion, according to Dealogic.
Mergers and acquisitions were the hottest part of the corporate-finance business. Buyers, whether strategic competitors or financial, such as private equity funds, are using low-cost borrowed money to “buy growth.” They are adding to their product lines or expanding geographically through acquisitions more cheaply than they could by investing in organic expansion.
The national deal list was led by Pfizer’s proposed $160 billion merger with Allergan and Dell’s pending $66 billion acquisition of EMC.
There were up to 226 Minnesota companies sold last year, based on data compiled by Dealogic, Thomson One and S&P Capital IQ. Those transactions were worth more than $30 billion. Not all transactions are reported publicly and the data services often arrive at varying totals.
Minnesota’s largest company, Minnetonka-based UnitedHealth Group, paid $12.8 billion to acquire Illinois-based Catamaran Corp., a prescription drug-benefit manager in a deal designed to give UnitedHealth more clout to push back on drug prices. It already was the third-largest player in the nearly $300 billion business of managing prescription-drug benefits for Americans.
And the senior management of Life Time Fitness, with private equity partners, took itself private in a $4 billion deal after about a decade as a public company.
St. Jude Medical announced its largest deal, a $3.4 billion acquisition of California device maker Thoratec Corp., a bid to bolster the Little Canada company’s roster of devices that aid circulation in patients with failing hearts.
In another significant transaction, 3M Co. announced its largest acquisition, the $2.5 billion purchase of Bloomington-based Capital Safety, a maker of rugged harnesses and other safety equipment for workers in the construction, drilling and mining industries.
And Mills family-owned Mills Fleet Farm, in a deal reached in December, plans to sell itself to New York investment firm KKR. KKR said it would expand the company beyond its Upper Midwest roots. The Mills transaction, although not publicly disclosed, has been speculated in financial circles as worth at least $1.2 billion and attracted numerous suitors.
That deal also is the largest ever for Greene Holcomb Fisher, the Minneapolis-based investment bank.
“It was a record year in terms of the number of transactions and the transaction value of the deals,” said Kyle Crowe, a managing director of Greene Holcomb, which advised clients on 32 transactions worth more than $3 billion.
Greene Holcomb is a 20-year-old boutique founded and populated disproportionately by veterans of Piper Jaffray, the larger, diversified investment bank and securities trader that is a publicly traded company.
Greene Holcomb has doubled in size to more than 30 professionals since 2010, with plans to add a couple more. The firm typically represents sellers with revenue of less than $500 million and median deal values of around $100 million. Last year was Greene Holcomb’s busiest and most profitable.
It is considered one of the most successful independent boutique investment banks focused on smaller, private transactions that often don’t make headlines. It also has gotten industry notoriety for besting Wall Street competition in winning the business of several larger Midwest companies.
“We connect with some of these family-owned businesses, particularly in the Midwest,” said Crowe, born and raised in Iowa and who worked in mergers at a big Chicago law firm and for Piper before joining Greene Holcomb.
Brian Holcomb, who with Piper veteran Hunt Greene were two of the three founding partners in 1995, said they had an “entrepreneurial itch.”
“We saw an opportunity to provide a higher level of service to companies in the lower-middle market,” Holcomb said. “We have a culture that works for us and a laser focus on what we do. It’s all we do.”
Of the 14 managing partners at Greene Holcomb, 12 came from Piper, an investment bank with a national span in several industries that provides debt-and-equity financing, securities trading and investment management services.
Investment banks typically earn 1 to 3 percent of the transaction value as their fee in mergers and acquisitions. The percentage typically declines the higher the transaction value.
Greene Holcomb also has advised on the sale of the same fast-growing company twice in the last five years.
It sold client ABRA Auto Body & Glass in 2011 to New York-based Palladium Equity Partners and in 2014 to San Francisco-based Hellman & Friedman, another private equity firm that has fueled ABRA’s growth. ABRA’s senior management team, which has retained a minority stake in the company, has grown to 22 states and annual revenue over $900 million thanks partly to expansion capital.
The price was not disclosed but the value of the 2014 deal was five times that of the 2011 transaction, according to Green Holcomb. Most recently, last September, ABRA purchased the six-location Lehman’s Garage business in the Twin Cities.
Deal making also can lead to spinoffs and new starts.
For example, CEO Mike Crest of Eden Prairie-based Arcserve was a veteran executive of New York-based CA Technologies in 2014 in charge of data management. Arcserve was the former data protection-and-recovery unit within the much-larger CA. CA sold its data-protection solutions business, the predecessor to Arcserve, for $170 million to lead investor Marlin Equity Partners and Crest’s management team.
Crest, a Minnesota native, moved the business here. It employs 525 and posted revenue of more than $100 million in 2015. A spokeswoman refers to Arcserve as a “25-year-old start-up in the data protection business.”