The Black Market is Hot from the Vaccine Trade.

Black Friday Started in October

Christmas decorations set the tone for the holiday season. But all major retailers have been discounting deals for several weeks now. So don’t expect major deals this Black Friday.

First, brick-and-mortar retail stores will see you less traffic. This gives eCommerce businesses more leverage. Ecommerce companies have seen an all time high in e-commerce sales this year. There's less of a reason to discount products if customers can only shop online this holiday. Nobody wants to be sitting next to somebody else or fighting in a crowd this season.

The holiday shopping season begins in mid October, with Amazon Prime day and Alibaba Singles day. this is given major retailers a big lift for the fourth quarter. Online groceries have already seen more than 50% increase in year-to-date sales.

Walmart, Best Buy in Home Depot are trying different ways to enhance the retail experience. Walmart started its holiday shopping season the first week of November. Best Buy started its Black Friday deals weeks before Thanksgiving too. And Home Depot is spreading out products across the store along with Black Friday specials for the next two months.

Target will accommodate more customers by doubling the size of its parking spots to increase curbside service. This an innovative way for retailers that have the luxury of big real estate. I can't say the same will happen for small businesses. But car dealerships will continue to struggle with more lockdowns until the spring season.

Acquisition of HD Supply by Home Depot

Speaking of Home Depot, last week they acquired HD Supply Holdings for $11.35 billion, an old subsidiary that went public in the past. In 2007, The Home Depot had sold HD Supply to private equity firm Clayton, Dubilier & Rice for $8.3 billion. This is a big deal since 2020 has been the year of house renovation. Cost of lumber has more than doubled in 12 months. With people moving outside of major cities, the need for construction has only increased. It helps that Home Depot is based in many suburban neighborhoods.

Owning its own supplier always made sense for Home Depot. HD Supply is one of the largest wholesale distributors in North America. The company provides a broad range of products and value-add services to approximately 300,000 customers. If you like boring businesses, Home Depot now owns the entire value chain from the living room to your HVAC system.

We'll continue to see a boom in homebuilding going into 2021. The demand for new suburbia is far from peaking. But white collar workers haven't figured out the remote work environment yet. With a shortened work week and flexible office environment, many cities will have new mini offices spring up after this pandemic. For example, right now Austin is the most popular place to move to from New York and San Francisco.

Virtusa is the Hot IT Deal

Last week the President of Virtusa Americas, Samir Dhir, spoke at our TiE New Jersey event. And on November 20, 2020, Virtusa Corporation (NASDAQ:VRTU) announced that its stockholders will adopt the announced merger agreement with Baring Private Equity Asia. This is an all-cash transaction valued at $2 billion.

Virtusa Corporation is a global provider of digital business strategies for industries such as the Financial Services,, Healthcare, Technology industries. Virtusa works with a wide range of vendor partners to provide digital strategy, digital engineering, and IT services and solutions. Key relationships include Amazon Web Services Premier, Google Cloud Premier and Microsoft Azure Gold partnerships.

Baring Private Equity Asia (BPEA) is one of the largest and most established private alternative investment firms in Asia, with $20 billion assets under management. Barings owns several other IT companies such as CitiusTech, Coforge, and Hexaware Technologies. The Canada Pension Plan Investment Board will also invest $300 million alongside Barings to acquire 24% of Virtusa.

“This is a significant opportunity to acquire an interest in a highly differentiated player in the fast-growing IT services industry, alongside our long-standing partner BPEA,” said Frank Su, Managing Director and Head of Private Equity Asia, CPP Investments. “Virtusa’s ability to partner with a blue-chip client base to rapidly build scale in an industry with strong fundamentals will deliver long-term value for CPP contributors and beneficiaries.”

The Transaction, which is expected to close in the first half of 2021, is subject to customary regulatory requirements. Today the stock trades at ~$50 per share, a 6% discount to the merger price. This may be a risk-free arbitrage deal over the next six months if you think the deal will close.

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