Dan Primack
Featured

Stocks get a Bannon bounce

Wall Street is reacting positively to news that Steve Bannon is out as senior advisor to President Trump.

Axios' Jonathan Swan first reported at 11:13pm ET that Bannon was likely a goner, which caused the Dow Jones Industrial Average to gain more than 60 points over 20 minutes. The momentum then kept going, with another mini-spike after a the NY Times' Maggie Haberman tweeted that a decision had been made.

Data: Money.net; Chart: Andrew Witherspoon / Axios

Confetti: CNBC reports that floor traders on the New York Stock Exchange cheered the news.

Contrast: Stocks yesterday had their worst session in months, partially due to rumors that former Goldman Sachs president Gary Cohn could step down as Trump's top economic advisor, thus potentially threatening tax reform.

Featured

Goldman Sachs: 50% chance of government shutdown

Goldman Sachs believes there is a 50% chance that the federal government will experience a short shutdown next month, according to a note sent out today by firm economist Alec Phillips. Per CNBC:

Presidential approval continues to decline, and is the lowest for any first-term president in his first year in office. Low approval ratings raise legislative risks. In the near term, we believe there is a 50% chance of a brief government shutdown, as the president seeks to solidify support among his base by embracing more controversial positions.
Featured

Financial firms slash compliance headcount

Financial institutions have begun to cut compliance headcount for the first time since the economic crisis, according to Bloomberg.

One big question is if the decrease is more due to automation or expected enforcement reduction under Trump's Securities and Exchange Commission — for example, the President supports a House bill that would end private equity registration, thus making fraud extremely difficult to uncover. It's most likely a bit of both:

"While it is impossible to determine any one specific driver of this rollback, it is likely that as the volumes of fines levied in the sector abates—after reaching a staggering cumulative total of $321 billion—senior management may see an opportunity to reallocate resources elsewhere."

Featured

Electricity giant Calpine to be acquired

AP Photo/Paul Sakuma

Energy Capital Partners has agreed to acquire Houston-based power generation giant Calpine for $5.6 billion, or $17 billion including debt. The deal comes with a 45-day "go-shop" provision and works out to $15.25 per share, which represents a 51% premium to price before first media reports of a possible transaction. Also participating on the buy-side are Access Industries and Canada Pension Plan Investment Board.

Why it matters: Calpine claims to be the country's largest producers of electricity from natural gas and geothermal energy, and one of its largest electricity retailers. But it's also gotten hammered by low natural gas prices and competition from renewables, which helped cause a $29 million net loss in Q2 2016 to balloon to a $219 million net loss in Q2 2017.

Data point: Global energy and power M&A is up 28% over year-to-date figures for 2016, per Thomson Reuters.

Bottom line: Deals are not yet done in this sector, nor even deals involving Energy Capital Partners. The New Jersey-based private equity firm is the largest outside holder in Calpine rival Dynegy, which reportedly received a takeover offer from Vistra.

Featured

Pro Rata

Greetings from the home office. Quick reminder that Pro Rata won't be published next week, as I'm taking a little time off to recharge. But the Axios Biz Stream will be active, and you can always shoot news over to Kia@axios.com. Here we go...

Top of the Morning

Source: Giphy

As Uber turns: Travis Kalanick late last night filed his reply to Benchmark's fraud lawsuit, including a rhetorical slam that Benchmark "executed its plan at the most shameful of times: immediately after Kalanick experienced a horrible personal tragedy." You can read more highlights and the full document by going here. Two additional notes, as I search for decent hotels in Delaware:

  • Earlier this week we suggested that Benchmark might have originally supported Kalanick receiving the extra board seats as a sort of quid pro quo for Kalanick's support of a massive investment from Saudi Arabia that included the Saudis receiving a newly-created board seat. Kalanick's suit asserts the same.
  • Kalanick is effectively arguing that Benchmark bungled the resignation letter process, allowing him to sign what amounts to an unenforceable half-contract. That's why he alleges that Benchmark is claiming fraud in addition to breach of contract, since there was no valid contract to breach when it came to voting rights.

• "Founder friendly" persists: Axios has obtained a proposed term sheet offered up by WeWork for a $40 million Series B investment in a fellow New York-based startup (albeit a much younger one, which has not yet agreed to the transaction). What's particularly remarkable here is that WeWork is: (a) Offering each of the two founders a $10 million secondary (i.e., only $20m is primary) at a substantial valuation boost, but then topping off founder equity to pre-deal levels; (b) Offering each of the founders a $250,000 "advisor cash award." Both clauses are highly unusual, and suggest that investors will still bend their terms over backwards to get the deals they want.

• Everyone out of the pool: The White House yesterday said it won't continue the formation of an infrastructure advisory council that reportedly would have included such private equity bigs as Josh Harris (Apollo) and Bill Ford (General Atlantic). Just as a reminder: The council is being iced because of comments Trump made at a press conference that was supposed to be about improving America's infrastructure.

Another canary: Financial institutions have begun to cut compliance headcount for the first time since the economic crisis, according to Bloomberg. The real question now is if the decrease is more due to automation or an expected enforcement reduction under Trump's SEC — for example he supports a House bill that would end PE registration, thus making fraud extremely difficult to uncover. Chances are it's a bit of both...

• Exit complicates entry: Politico's Mark Scott reports that Brexit is causing problems for British venture capital firms:

"Since the country gave notice it was leaving the European Union in March, a growing list of British venture capital funds has been told they will not receive financial support from the European Investment Fund, an EU agency that provides almost half of the money for the region's venture capital industry, according to several fund managers who held discussions with the body."

• Quiz time: Can you name the U.S. buyout boss who is (finally) forming a family office?

Have a great weekend. Sox to sweep Yanks. Pro Rata will return — rested and ready — on August 28.

The BFD

Via Retroist

Energy Capital Partners has agreed to acquire Houston-based power generation Calpine (NYSE: CPN) for $5.6 billion, or $17 billion including debt. The deal comes with a 45-day "go-shop" provision and works out to $15.25 per share, which represents a 51% premium to price before first media reports of a possible transaction. Also participating on the buy-side are Access Industries and Canada Pension Plan Investment Board.

  • Why it's the BFD: Calpine claims to be the country's largest producers of electricity from natural gas and geothermal energy, and one of its largest electricity retailers. But it's also gotten hammered by low natural gas prices and competition from renewables, which helped cause a $29 million net loss in Q2 2016 to balloon to a $219 million net loss in Q2 2017.
  • Data point: Global energy and power M&A is up 28% over year-to-date figures for 2016, per Thomson Reuters.
  • Bottom line: Deals are not yet done in this sector, nor even deals involving Energy Capital Partners. The New Jersey-based private equity firm is the largest outside holder in Calpine rival Dynegy (NYSE: DYN), which reportedly received a takeover offer from Vistra (NYSE: VST).

Venture Capital Deals

• ThoughtSpot, a Palo Alto, Calif.-based provider of search-driven enterprise data analytics, has raised $60 million in new Series C funding from Lightspeed Venture Partners and Capital One Growth Ventures. http://axios.link/jDq0

Huochebang, a Chinese on-demand trucking startup, has raised $56 million in new Series B funding led by All-Stars Investment. http://axios.link/bTdW

🚑 Unity Biotechnology, a San Francisco-based developer of anti-aging therapeutics, has raised $35 million in new Series B funding from INVUS Opportunities, Three Lakes Partners, Cycad Group, COM Investments and Pivotal Alpha. Existing backers include ARCH Venture Partners, Baillie Gifford, Fidelity Management and Research Company, Partner Fund Management, and Venrock. Other investors include Bezos Expeditions, Vulcan Capital, Founders Fund, WuXi PharmaTech and Mayo Clinic Ventures. www.unitybiotechnology.com

Ripcord, a Hayward, Calif.-based robotic digitization company focused on "paperless workplaces," has raised $25 million in Series B funding. Icon Ventures led the round, and was joined by Kleiner Perkins Caufield & Byers and Lux Capital. Silicon Valley Bank provided $15 million in debt financing. http://axios.link/9D48

• ZingBox, a Mountain View, Calif.-based provider of IoT security solutions, has raised $22 million in Series B funding co-led by Dell Technologies Capital and Triventures. http://axios.link/PwAp

• TuSimple, a Chinese autonomous trucking startup, has raised $20 million in new VC funding. Sina led the round, and was joined by Nvidia. http://tcrn.ch/2uQU6Wa

Immersv, a Castro Valley, Calif.-based mobile 360 VR ad network, has raised $10.5 million in Series A funding. Rogers Venture Partners led the round, and was joined by Foundation Capital, The Venture Reality Fund, Initial Capital, East Ventures, HTC Vive, MCJ Co., GREE, i-mobile and Metaps. http://tcrn.ch/2uOs6qa

• Monstar Lab, a Japanese developer of consumer and enterprise mobile apps, has raised $6.3 million in new VC funding from YJ Capital, Shinsei Corporate Investment, San-In Chuo Television Broadcasting Co., Ltd., Fenox Venture Capital and Tanabe Corp. www.monster-lab.com

Private Equity Deals

Artemis Capital Partners has acquired StanChem, an East Berlin, Conn.-based maker of specialty polymers and flame retardant products. No financial terms were disclosed. www.stanchem-inc.com

• The Blackstone Group has agreed to acquire Harvest Fund Advisors, an investment management firm focused on U.S. midstream energy assets. No financial terms were disclosed, except that Harvest has around $10 billion in assets under management. http://axios.link/XUgw

ConvergeOne, an Eagan, Minn.-based portfolio company of Clearlake Capital Partners, has acquired Strategic Products and Services, a Parsippany, N.J.-based managed service provider. No financial terms were disclosed. www.spscom.com

Encore Consumer Capital has invested in Veggie Noodle Co., an Austin, Texas-based food brand. No financial terms were disclosed. http://axios.link/YsYQ

• Kellermeyer Bergensons Services, a Maumee, Ohio-based property services company owned by GI Partners, has acquired Varsity Facility Services, a Salt Lake City-based facility services provider. No financial terms were disclosed. www.varsityfs.com

Public Offerings

Sigma Alimentos, a Mexican meat and dairy unit of listed conglomerate Alfa, has filed initial IPO documents with the Mexico bourse. http://reut.rs/2uOnKzr

Liquidity Events

The Carlyle Group and Southern Capital Group are seeking a buyer for their majority stake in Solusi Tunas Pratama, an Indonesian telecom towers operator, for around $1 billion, according to Reuters. http://reut.rs/2v7JYrf

Hellman & Friedman is exploring the sale of an equity stake in HUB International, a Chicago-based insurance brokerage it purchased in 2013 for $4.4 billion, according to Reuters. The hoped-for deal, which likely would be just a partial exit, could value HUB at upwards of $7 billion (including debt). http://reut.rs/2xawKM6

More M&A

🚑 Arcus Biosciences, a Hayward, Calif.-based cancer immunotherapy startup, has licensed a PD-1 inhibitor from listed Chinese company WuXi Pharmaceuticals, for development and commercialization in Europe, North America and Japan. The deal includes an $18.5 million upfront payment, and nearly $800 million in earn-outs. Arcus last year raised $70 million in Series B funding from firms like Google Ventures, Stanford University, Column Group, Foresite Capital, Celgene and Novartis. http://axios.link/bXLk

Brazil's government is considering the sale of state-owned minority stakes in four airports, which could raise upwards of $2.5 billion. http://reut.rs/2wmKLcd

⛽ CEFC China Energy is in talks to purchase a stake in Russian state oil giant Rosneft, according to Reuters. http://reut.rs/2wVYO6E

• MassMutual has agreed to sell its MassMutual Asia unit to an investor group led by Hong Kong-listed Yunfeng Financial Group, for around $1.69 billion in cash ($1.01b) and stock. http://axios.link/7Llp

It's Personnel

Vadim Balashov has joined Viaduct Ventures as a managing director, per his LinkedIn account. He is a former partner with Ersnt & Young. www.viaduct.ventures

• Mike Ghaffary has joined Social Capital as a partner. He is a onetime Summit Partners investor who most recently was CEO of Eat 24, which Yelp is selling to GrubHub. http://tcrn.ch/2v53QeW

Lydia Hao has joined Neuberger Berman to focus on Asia private equity investments, after having spent seven years with Canada Pension Plan Investment Board in Hong Kong, according to Private Equity International. http://axios.link/vi37

Final Numbers

Data: Money.net; Chart: Andrew Witherspoon / Axios

Featured

Travis Kalanick hits back at Benchmark in Uber lawsuit reply

Sam Jayne / Axios

Former Uber CEO on Thursday filed his reply to a fraud lawsuit brought against him last week by venture capital firm Benchmark, which was designed to get him removed from the embattled company's board of directors. Here are the highlights, per a filing in Delaware Chancery Court:

Urgency: Benchmark has asked for a preliminary injunction that would effectively kick Kalanick off the company's board and out of its CEO search process. Kalanick argues that the dispute should be settled by an arbiter but, if it must be dealt with in court, then there is no need for a preliminary injunction because the current board is managing the business just fine: "There is no uncertainty regarding the validity of actions approved by a majority of the board. Nor is there any other independent, impending source of potential harm to the company or its stockholders."

Under duress: Kalanick alleges that Benchmark took advantage of him while he was in mourning for his mother, who was killed in a tragic boating accident that also seriously injured his father. "It executed its plan at the most shameful of times: immediately after Kalanick experienced a horrible personal tragedy."

Deal dispute: Benchmark has argued that Kalanick agreed upon resignation to give up three unfilled board seats that he controlled, but later refused to codify such changes. Kalanick contends that he had agreed that the seats would remain, with him receiving one and the entire board approving the two other directors. Either way, however, Kalanick seems to believe the agreement he signed the night of his resignation is invalid as it was not co-signed by any other party to the company's voting agreement, nor did he receive any consideration for giving up sole appointment power over those seats.

Prove it: Kalanick says that Benchmark's fraud claims rely heavily upon "information and belief," rather than explicitly detailing fraudulent statements.

Below is the full reply:

Featured

Pro Rata

Top of the Morning

Rebecca Zisser / Axios

There has been lots of talk about how initial coin offerings could become a viable alternative to venture capital. Or perhaps it's more about remaining as a viable alternative, as we've already seen $1.5 billion raised via ICOs so far this year. That's way below the $38 billion that VCs disbursed to U.S. companies in the first half of 2017, but it's hardly chump change and the pace of growth is staggering.

So it's not surprising that top-tier venture firms like Andreessen Horowitz and Sequoia Capital are now backing "crypto hedge funds" that trade and invest in cryptocurrencies, while others are investing directly in cryptocurrency token sales. Kia has a deep dive this morning, noting that such deals share some DNA with more traditional venture transactions:

"One VC at a well-known Silicon Valley firm said projects fundraising though token sales are similar to startups because they have small teams, usually with just a white paper detailing the tech they want to build. He also compared backing these hedge funds with putting money into Y Combinator, which gives VCs a bit of exposure to the accelerator's portfolio companies."

You can't quit, you're fired: President Trump yesterday tweeted that he was ending both his CEO economic policy council and CEO manufacturing council, shortly after the former group had already decided to disband. Great tick-tock from the NY Times, including how council chairman Steve Schwarzman was blind-sided by the President's tweet, which came after he had agreed to hold the news for a joint press release with the White House.

  • Not amicable: The divorce between America's top CEOs and Trump comes just weeks before the White House is supposed to kick off a push for tax reform, the jewel of an economic agenda that the council was formed to help design and support. And, on top of that, Trump lied about the backstory after having previously insulted those who chose to quit early. These CEOs still want corporate tax reform and will be behind-the-scenes advocates, but Trump wants allies who stand beside him at press conferences and rallies. Those days are gone.

On the docket: Former Uber CEO Travis Kalanick today is expected to file his response to Benchmark's fraud lawsuit.

Corrections: For starters, I'm only taking one week off. That thing about "after Labor Day" was the result of me apparently having no idea when Labor Day is. Second, yesterday we noted VC funding for sales intelligence took Pattern. But that was old news — the new event was the company being acquired by Workday.

The BFD

Source: Giphy

China Unicom, a listed Chinese telecom, said that it is raising $11.7 billion from a group of investors that includes Alibaba Group, Tencent Holdings, DiDi Chuxing, Baidu and JD.com. The investors would hold a 35.2% stake and receive three board seats.

  • Why it's the BFD: This would be the largest capital raise in Asia-Pacific since 2010, except that China Unicom's shares remain halted after one of the named investors — rail equipment maker CRRC Corp. — said it hadn't actually participated. China Unicom says it's all a big misunderstanding, but this comes at a time when Silicon Valley investors keep casting skepticism over some of the huge growth equity fundraises that keep getting reported by Chinese tech companies. Not apples-to-apples given the publicly-traded vs. privately-held, but it does play into a narrative (whether fair or not).
  • Bottom line: "The Chinese government is seeking to rejuvenate state behemoths with private capital, with China Unicom among the first batch of state-owned enterprises slated for the mixed-ownership reforms, whose guidelines were issued in 2015." — Reuters

Venture Capital Deals

Tokopedia, an Indonesian e-commerce marketplace, has raised $1.1 billion in minority equity funding from Alibaba Group. http://tcrn.ch/2uTx5Ss

🚑 Color Genomics, a Burlingame, Calif.-based provider of genetic tests for consumers, has closed on over $50 million of what will be an $80 million financing round co-led by CRV and return backers General Catalyst and Emerson Collective. http://axios.link/wcR4

🚑 Atreca, a Redwood City, Calif.-based, developer of antibodies that "drive the anti-tumor immune response in cancer patients," has raised $35 million in Series B funding. Wellington Management led the round, and was joined by Cormorant Asset Management. www.atreca.com

🚑 VentureMed Group, a Toledo, Ohio-based maker of catheters used in the treatment of peripheral artery disease, has raised $15 million in Series B funding. Endeavour Vision led the round, and was joined by RiverVest Venture Partners. http://axios.link/yy8o

• Respond Software, a Mountain View, Calif.-based provider of automated cybersecurity solutions, has raised $12 million in Series A funding co-led by CRV and Foundation Capital. www.respond-software.com

• SnapApp, a Newton, Mass.-based content marketing platform, has raised $10.2 million in new funding from existing backer Providence Strategic Growth. http://axios.link/QgYe

⛽ Kingo, a Guatemala-based developer of solar energy technologies, has raised $8 million in Series B funding from FCP, Engie, the Dutch Development Bank, Proparco and H-Reff. http://axios.link/RVGP

🚑 MedAware, an Israeli developer of solutions for the detection and elimination of prescription errors, has raised $8 million in Series A funding. Backers include Becton, Dickinson & Co., Yingcheng City Fubon Technology Co., OurCrowd and Gefen Capital. www.medaware.com

LVL Technologies, an Austin, Texas-based developer of sensor platforms for wearables, has raised $6.75 million in Series A funding. Samsung Catalyst Fund led the round, and was joined by Maxim Integrated Products. www.onelvl.com

Codacy, a Portugal-based automated code review platform, has raised $5.1 million in Series A funding. EQT Ventures led the round, and was joined by return backers Faber, Caixa Capital, Join Capital and Seedcamp. http://tcrn.ch/2w5a171

Private Equity Deals

CDH Investments has agreed to acquire an undisclosed equity stake in SharkNinja, a Needham, Mass.-based maker of blenders and vacuum cleaners. Earlier reports suggested that the deal could value SharkNinja at around $1.5 billion, including debt, with Goldman Sachs managing the process. www.sharkninja.com

Centerbridge Partners has completed its $1.26 billion acquisition of enterprise software companies Syncsort and Vision Solutions from Clearlake Capital. http://axios.link/1Htr

⛽ Hasting Equity Partners has acquired Reach Wireline, a Fort Worth, Texas-based provider of cased hole wireline services in oilfields. No financial terms were disclosed. www.reachwireline.com

• Oliver Printing & Packaging, a Twinsburg, Ohio-based portfolio company of Pfingsten Partners, has acquired Pholig Packaging, a Richmond, Va.-based manufacturer of folding cartons, micro-fluted corrugated boxes and setup boxes. http://axios.link/v7wr

• Options, a London and New York-based provider of cloud services to the global capital markets, has raised nearly $100 million in equity funding from Bregal Sagemount. http://axios.link/ePxz

• SecureLink, an Austin, Texas-based provider of third-party access and remote support, has raised an undisclosed amount of funding from Vista Equity Partners. www.securelink.com

• SK Capital Partners has plugged an undisclosed amount of new equity into majority-owned Archroma, a Swiss provider of specialty chemicals for industries like performance textiles. www.archroma.com

• Technology Crossover Ventures has acquired EtQ, a Farmingdale, N.Y.-based provider of environmental health and safety and compliance management software. No financial terms were disclosed. www.etq.com

• Togetherwork, a Columbus, Ga.-based portfolio company of Aquiline Capital Partners, has acquired Group Interactive Networks, a Gainesville, Fla.-based provider of technology and financial solutions to fraternities. No financial terms were disclosed. www.togetherwork.com

• Wine.com, a San Francisco-based online wine retailer, has raised $15 million in new funding from existing backers like Baker Capital.

Public Offerings

• Youon Bike, a Chinese bike-rental company, raised around $87 million via an IPO in Shanghai. Shares climbed 44% in their first day of trading. Company backers include Ant Financial and Shenzhen Capital. http://axios.link/g84R

Liquidity Events

Goode Partners is considering a sale process for Mexican restaurant chain Rosa Mexicano, which could be valued north of $100 million, according to Bloomberg. https://bloom.bg/2uG9xEF

• Google has acquired AIMatter, a Belarus-based AI startup focused on detecting and processing images on mobile devices. No financial terms were disclosed. AIMatter had been seeded by Haxus Venture Fund. http://tcrn.ch/2fNQ52l

More M&A

⛽ Berkshire Hathaway Energy said that it will not incrase its $18 billion bid for the bankrupt parent company of electric grid giant Oncor, despite pressure to do so from Oncor creditor Elliott Management. http://reut.rs/2w5d4Ms

DRW Holdings of Chicago has agreed to acquire RGM Advisors, an Austin, Texas-based principal trading firm. No financial terms were disclosed. http://on.wsj.com/2fLABMh

• ShapeShift, a Swiss digital currency exchange platform, has acquired KeepKey, a Kirkland, Wash.-based hardware wallet for digital assets such as Bitcoin and Ethereum. No financial terms were disclosed. ShapeShift recently raised over $10 million in Series A funding led by Earlybird Venture Capital. http://axios.link/cmYG

• United Rentals (NYSE: URI) has agreed to acquire Neff Corp. (NYSE: NEFF), a Miami, Fla.-based equipment rental company, for around $1.3 billion — topping a $1.2 billion offer from H&E Equipment Services (Nasdaq: HEES). http://reut.rs/2v4NHpB

Fundraising

Advent International is building up a debt investment team and plans to raise a dedicated debt fund, according to Bloomberg. https://bloom.bg/2wgt12c

• Round 13, a Canadian VC firm, has closed its debut fund with C$95 million in capital commitments. http://axios.link/LePe

It's Personnel

Charles Chau has joined Jones Day as a Hong Kong-based partner in the law firm's M&A practice. He previously was with Morrison Foerster. www.jonesday.com

• Brooks Entwistle, former chairman of Goldman Sachs Southeast Asia, has joined Uber as chief business officer for the Asia Pacific region. http://tcrn.ch/2vFYQ3M

Phil Rotner, chief investment officer at Boston Children's Hospital, has joined the investment committee of the Massachusetts Pension Reserve Investment Management Board. Prior to joining Boston Children's in 2010, Rotner spent 18 years as a private equity portfolio manager at MIT's endowment.

Final Numbers

Data: Brookings Institution; Chart: Andrew Witherspoon / Axios

Featured

Blackstone bails on controversial cybersecurity deal

World's Direction / flickr

The Blackstone Group has ended talks to acquire a 40% stake in Israeli cybersecurity company NSO Group for around $400 million, Reuters reports. The deal, which also would have involved a 10% stake purchase by ClearSky, was expected to provide a partial exit for current NSO majority owner Francisco Partners. An NSO spokesperson says the company is not currently involved in investor talks.

  • Why it matters: NSO is the company whose software was allegedly used by the Mexican government to spy on opposition lawmakers, journalists and human rights lawyers (something that Mexican President Peña Nieto denies). It also once employed former U.S. National Security advisor Michael Flynn as a paid advisor. Blackstone's possible involvement had sparked some complaints from digital privacy advocates, although it's unclear if those efforts contributed to Blackstone's decision to back away.
  • Bottom line: "Serious investors who have done their due diligence may be thinking twice about just how problematic this category of investments could be to their image and their bottom line." – Citizen Lab researcher John Scott-Railton, via Reuters.
Featured

Private equity's canary in the coalmine

Valuation advisor Murray Devine is out with a new first-half private equity report, which shows that buyout firms continue to pay up for blue-chip assets but have become gun-shy when it comes to question marks. Key takeaway:

Deal volume and valuation trend lines have begun to diverge, a tendency that's typically more common near the end of a market cycle.

Go deeper: Swiss consulting firm Wellershoff & Partners this week released new research hitting on a similar theme, arguing that the large-cap U.S. private equity market is way over-capitalized when compared to disbursement activity. Moreover, it believes it is understating the problem, given the boom in private equity's shadow capital market of big sovereign wealth funds and others who are diving deep into both private equity directs and co-invests.

Wellershoff suggests one solution would be for large-cap firms to cut existing fund sizes or break them up into smaller sub-funds – something we saw over-capitalized VC firms do in 2001/2002– but acknowledges that such an outcome is highly unlikely.

Featured

Pro Rata


Top of the Morning

Canary watch: Valuation advisor Murray Devine is out with a new first-half private equity report, which shows that buyout firms continue to pay up for blue-chip assets but have become gun-shy when it comes to question marks. Key line: "Deal volume and valuation trend lines have begun to diverge, a tendency that's typically more common near the end of a market cycle."

  • Swiss consulting firm Wellershoff & Partners this week released new research hitting on a similar theme, arguing that the large-cap U.S. private equity market is way over-capitalized when compared to disbursement activity. Moreover, it believes it is understating the problem, given the boom in private equity's shadow capital market of big sovereign wealth funds and others who are diving deep into both private equity directs and co-invests. It suggests one solution would be for large-cap firms to cut existing fund sizes or break them up into smaller sub-funds – something we saw over-capitalized VC firms do in 2001/2002–- but acknowledges that such an outcome is highly unlikely.

Trumpland: Michael Dell, CEO of Silver Lake-backed Dell EMC, and BlackRock CEO Larry Fink both reaffirmed that they will remain on presidential economic councils.

  • Bridge to nowhere: Yesterday's presidential press conference was supposed to be about infrastructure, the construction and maintenance of which likely would involve many union workers. It resulted in two union leaders breaking ties with the White House.
  • Dell statement, which came after President Trump re-equivocated on the weekend's events in Charlottesville.
  • Fink's letter to employees, which came earlier.

As Uber turns: Uber shareholder and Sherpa Capital co-founder Shervin Pishevar sent a letter to Benchmark Capital late last night, reiterating his request that the VC firm divest from Uber and leave its board of directors. Included were claims that Benchmark has been working in cahoots with Chris Sacca's Lowercase Capital – not surprising, given that Lowercase signed off on asking Travis Kalanick to resign – and that Benchmark wants Arianna Huffington booted from the Uber board alongside Kalanick (again, no surprise, given Huffington's close relationship with Kalanick).

Publishing note: Pro Rata will be dark next week, as I'm taking a week off to do some summer stuff with the family. So if you've got interesting stuff to tell me – such as anonymous scoop via http://axios.com/tips – now would be a good time to do so...

The BFD

Source: Giphy

The Blackstone Group has ended talks to acquire a 40% stake in Israeli cybersecurity company NSO Group for around $400 million, Reuters reports. The deal, which also would have involved a 10% stake purchase by ClearSky, was expected to provide a partial exit for current NSO majority owner Francisco Partners. An NSO spokesperson says the company is not currently involved in an investor talks.

  • Why it's the BFD: As we've discussed previously, NSO is the company whose software was allegedly used by the Mexican government to spy on opposition lawmakers, journalists and human rights lawyers (something that Mexican President Peña Nieto denies). It also once employed former U.S. National Security advisor Michael Flynn as a paid advisor. Blackstone's possible involvement had sparked some complaints from digital privacy advocates, although it's unclear if those efforts contributed to Blackstone's decision to back away.
  • Bottom line: "Serious investors who have done their due diligence may be thinking twice about just how problematic this category of investments could be to their image and their bottom line." – Citizen Lab researcher John Scott-Railton, via Reuters.

Venture Capital Deals

Puls (f.k.a. CellSavers), a San Francisco-based on-demand smartphone and tablet repair service, has raised $25 million in new VC funding. Red Dot Capital Partners led the round, and was joined by Samsung Next, Maverick Ventures, Kreos Capital and return backers Sequoia Capital and Carmel Ventures. http://tcrn.ch/2x0UEcD

🚑 Artemis Health, a Salt Lake City-based benefit optimization data platform for employers, has raised $16 million in Series B funding. F-Prime Capital led the round, and was joined by return backers Maverick Ventures and Kickstart Seed Fund. This comes just months after the company announced $8.3 million in Series A funding. www.artemishealth.com

• HiScene, a Beijing-based developer of AR hardware and software, has raised around $14 million in Series B funding. Shanghai Cableway Investment led the round, and was joined by Meitu, Sincere Capital and Vstar Capital. http://axios.link/NrZu

• Haiyun Data, a Beijing-based provider of enterprise data visualization solutions, has raised around $14 million in Series B funding. IDG Capital and Jingsheng Jiacheng Investment co-led the round, and were joined by Oriental Fortune Capital and Shanggu Capital. http://axios.link/9N3i

• Phil Inc., a San Francisco-based end-to-end prescription management and delivery service, has raised $10 million in new VC funding. Crosslink Capital led the round, and was joined by Eniac Ventures, Softtech VC, Forerunner Ventures, SV Angel, Silicon Valley Bank and Transmedia Capital. www.phil.us

• Filld, a Mountain View, Calif.-based mobile fueling service for both individual and commercial customers, has raised $9.65 million in Series A funding. Shea Ventures led the round, and was joined by Cedana Capital and return backers PivotNorth Capital, Javelin Venture Partners, Lightspeed Venture Partners and Lucas Venture Group. www.filld.com

• NuOrder, a West Hollywood, Calif.-based wholesale optimization platform for the fashion industry, has raised $8 million in new VC funding. Argentum led the round, and was joined by return backers Upfront Ventures, Greycroft Partners, Cowboy Ventures, Box Group and Novel TMT. http://axios.link/e0xW

• OneSignal, a San Francisco-based push notification delivery platform, has raised $7 million in Series A funding led by SignalFire. http://tcrn.ch/2i2kgmO

• Tianjin YangTian Technology, a Chinese developer of industrial robotics, has raised around $7 million in Series A funding. Lenovo Capital and the Incubator Group co-led the round, and were joined by GSR Ventures and Yinxinggu Capital. http://axios.link/jru1

🚑 Flo Health, a women's health platform known for its period-tracking app, has raised $5 million in Series A funding led by Flint Capital. http://axios.link/qmY0

🚑 Happify, a New York-based behavioral health assessment platform, has raised $5 million in new VC funding led by TT Capital Partners. http://axios.link/L3Wt

• Lightneer, a Finnish gaming studio, has raised $5 million in seed funding. GSV Acceleration led the round, and was joined by IPR.vc, Brighteye VC and Reach Capital. http://axios.link/L9zJ

• Minibar Delivery, a New York-based online marketplace for alcohol, has raised $5 million in new VC funding. Corgin Ventures led the round, and was joined by Female Founders Fund, Winklevoss Capital, LaunchCapital and RiverPark Ventures. http://tcrn.ch/2i2l0IO

• Smilio, a direct-to-consumer baby products brand, has raised $3.25 million in seed funding from Brand Foundry and Norwest Venture Partners. http://tcrn.ch/2uXG4RG

Private Equity Deals

• H.I.G. Capital has completed its $283 million acquisition of NCI, a Reston, Va.-based IT and professional services company for federal agencies like the U.S. Department of Defense. http://axios.link/YhsP

The Results Cos., a Fort Lauderdale, Fla.-based business process outsourcing company owned by One Equity Partners, has acquired call-center services business USA800 for an undisclosed amount. www.theresultscompanies.com

Rotunda Capital has acquired IF&P Foods, an Indianapolis-based distributor of produce, dairy and flowers. No financial terms were disclosed. www.rotundacapital.com

Public Offerings

Despegar.com, an Argentina-based online travel booking site, has filed for a $100 million IPO. It plans to trade on the NYSE under ticker symbol DESP, with Morgan Stanley and Citigroup serving as lead underwriters. The company reports around $18 million in net income on $248 million in revenue for the first half of 2017. Shareholders include Tiger Global (57.3% pre-IPO stake), Expedia (16.4%) and General Atlantic (5.4%).

MongoDB, a New York-based open source database system, has confidentially filed for an IPO, according to TechCrunch. The company has raised over $300 million in VC funding, most recently at a post-money valuation of around $1.7 billion, from firms like Sequoia Capital, NEA, Fidelity, Altimeter Capital Management and T. Rowe Price. http://tcrn.ch/2vGr6Sj

🚑 Zai Lab, a Shanghai-based developer of drugs for the China market, has filed for a $115 million IPO. It plans to trade on the Nasdaq under ticker symbol ZLAB, with J.P. Morgan as the left lead underwriter. Shareholders include Kleiner Perkins Caufield & Byers, OrbiMed Advisors, Vivo Capital, Cormorant Pharmaceuticals and Rock Springs Capital. www.zailaboratory.com

Liquidity Events

Mashable, a New York-based tech news site, has hired LionTree Advisors to find a buyer. Around five years ago, the company held failed talks to be acquired by CNN. Mashable has raised nearly $60 million in VC funding from backers like Time Warner Investments, Updata Partners and R&R Venture Partners – most recently at a post-money valuation of around $200 milion. https://bloom.bg/2x3TXiX

• Microsoft (Nasdaq: MSFT) has agreed to acquire Cycle Computing, a Stamford, Conn.-based provider of cloud orchestration solutions, for an undisclosed amount. Cycle Computing backers include Western Technology Investment and WorldQuant Ventures. http://zd.net/2vYZyKm

• Netsertive, a Morrisville, N.C.-based marketing technology company, has acquired Mixpo, a Seattle-based creative management platform. No financial terms were disclosed. Netsertive has raised around $38 million in VC funding from RRE Ventures, Babson Capital Management, Harbert Management, Harbert Venture Partners and Greycroft Partners. Mixpo had raised around $10 million from Madrona Venture Group, Growthworks Capital and Yaletown Venture Partners. http://axios.link/amMw

• Summit Park has sold Control Co., a Webster, Texas-based provider of private label and branded lab equipment, to Cole-Larmer. No financial terms were disclosed. www.coleparmer.com

• Wynnchurch Capital has sold Senco Brands, a Cincinnati-based maker of fasteners and tools for the powered fastening industry, to Kyocera Corp. (NYSE: KYO) for an undisclosed amount.

More M&A

Air Belin, Germany's second-largest air carrier, has filed for bankruptcy protection. http://reut.rs/2fKBbJY

• Elliott Management has increased its stake in mining giant BHP Billiton (ASX: BHP) to 5%. http://reut.rs/2uOeYxv

• KeyBanc Capital Markets, a unit of KeyCorp (NYSE: KEY), has agreed to acquire New York-based healthcare investment bank Cain Brothers & Co. No financial terms were disclosed. http://axios.link/zfHl

• Prudential (LSE: PRU) has agreed to sell its U.S. broker-dealer network to LPL Financial (Nasdaq: LPLA) for $448 million. http://reut.rs/2vDlg5V

Fundraising

Charlesbank Capital Partners is targeting $2.75 billion for its ninth flagship buyout fund, plus another $700 million for an overage fund, per Massachusetts pension fund docs.

KKR is developing a customized private equity portfolio for insurer Aflac (NYSE: AFL), according to Bloomberg. https://bloom.bg/2weQl07

It's Personnel

Deutsche Bank has promoted global equities head Tom Patrick to CEO of the Americas, according to an internal memo spotted by the WSJ. He succeeds Bill Woodley, who is leaving the company. http://on.wsj.com/2v16Poq

Ron Liberman has joined Chicago-based private equity firm Wind Point Partners as director of IR, marketing and communications. He previously was with Sterling Partners. www.windpointpartners.com

S. Brian Mukherjee has joined Periscope Equity as a partner. He had been an executive advisor to the private equity firm since it was launched, and most recently served as CEO of RhythmOne plc (LSE AIM: RTHM). www.periscopeequity.com

Nicole Sanchez, co-founder and CEO of Credit Hero, has joined female founder-focused seed fund XFactor Ventures. www.xfactor.ventures

Final Numbers

Note: Some countries place further restrictions on asylum seekers' right to work; Data: OECD; Chart: Chris Canipe / Axios