Jan 24, 2017

Axios Pro Rata

By Dan Primack
Dan Primack

Greetings from the home office, where an icy Nor'easter means there's a 6 year-old regularly contributing her thoughts on this morning's issue of Pro Rata. In short, she finds it boring. Hopefully you disagree...

Top of the Morning

• Happy trails: Since Donald Trump's surprise electoral victory, there has been a lot of attention paid to a book called Hillbilly Elegy, because it seemed to encapsulate the economic and social despair of many in America's Rust Belt. The memoir's author is J.D. Vance, who also happens to double as an investor at Peter Thiel's growth equity firm, Mithril Capital (which just raised $850 million for a new fund). Or did double, since he tells the Mercury News that he's leaving Silicon Valley and investing behind, in order to do something more civic-minded in his home state of Ohio.

• New fund alert: Motive Partners recently came out of stealth mode, as a "next generation investment firm focused exclusively on the technology enabled companies that power the financial services industry." Some of the founding partners each previously worked at Fidelity National Information Services, which was PE-backed before going public, while Andy Stewart also is coming over after having led BlackRock's alternative investment platform.

What the firm hasn't said publicly, however, is that it's looking to basically become the financial services version of Silver Lake. It's raising upwards of $1 billion for its debut fund, with plans to invest $100 million or more of equity in each of its deals (utilizing LP co-invests), many of which will be carve-outs from established financial institutions. It also also has been bulking up via sales of small pieces of its infant management company. There had been a TechCrunch report that Motive was only seeking $150 million for its debut fund, but that was based on a misreading of a Form D.

• Another new fund alert: Winter Partners is one of the VC firms to emerge from the wreckage of Formation 8, with a focus on early-stage business technology companies. Ex-F8 pros Shirish Sathaye and Chris Kelley are joined by TJ Rylander, who previously was with CIA-backed investment group In-Q-Tel. Word is that the trio is seeking $125 million for its debut fund.

• Unicorn watch: The year's first big tech IPO just got a bit bigger, as AppDynamics this morning boosted its expected price range from $10-$12 per share to $12-$14 per share. Pricing is still expected for tomorrow night, which means the company would begin trading Thursday.

• Clarification: Yesterday's discussion of private equity tax policy mistakenly left the impression that Paul Ryan supports a change to carried interest treatment.In reality, Ryan has not taken a public position on the matter, and carried interest is not included in his "Better Way" blueprint. Support for such a change has mostly come on the GOP side from President Trump. For more on all this, I've posted a breakdown.

It's also worth noting that Americans for Tax Reform this morning chimed in on the carried interest issue, with an argument for keeping the status quo. It's not terribly compelling, but could hold some legislative sway among those who haven't been paying attention.

• Don't believe the hype: I've read a few times how a successful Snap IPO will prompt other tech startups to go public. No it won't. This is an outlier, both in terms of size and (to a lesser extent) industry vertical. AppDynamics will be more impactful in this regard. Also, I'm told there was little to no discussion of the IPO during Snap's internal employee Q&A last Thursday.

• From Kia K: Folks focused on China/U.S. M&A say that while Trump's tough trade talk has not dampened cross-border deal activity, there is some concern that we could end up with a much more conservative CFIUS. She adds that there continues to be major Chinese interest in U.S. companies that help boost manufacturing and industrial efficiency (e.g., robotics, automation, etc.).

• Who is Kia K? An introduction is long overdue. Kia Kokalitcheva is an excellent Axios reporter based in San Francisco, with a particular focus on tech and deals. Like me, she's ex-Fortune. You can email her at kia@axios.com, or follow her on Twitter @imkialikethecar.

The BFD: Aetna can't buy Humana

Aetna (NYSE: AET) yesterday had its proposed $37 billion purchase of Humana (NYSE: HUM) blocked by a federal judge, who said that the merger was "likely to substantially lessen competition" in U.S. health insurance markets. Aetna, which had agreed to sell certain assets to Molina Healthcare in order to gain regulatory approval for the deal, says that it is considering an appeal.

• Why it's the BFD: Very few folks saw this coming, particularly after Aetna's divestiture concession. But it seems that a key Aetna strategy ― pulling out of Obamacare markets for 2017, in order to reduce its competitive presence ― was viewed by the judge as little more than a ruse.

• Bottom line: "Because Aetna's withdrawal from the public exchanges in the 17 complaint counties was to avoid antitrust scrutiny, the court gives that evidence little weight in predicting whether Aetna will continue to compete on the exchanges in the future." -- Judge John Bates.

Venture Capital Deals

• Koubei, an Alibaba affiliate focused on enabling local commerce, has raised $1.1 billion (not a typo) from Silver Lake, CDH Investments, Yunfeng Capital and Primavera Capital. http://tcrn.ch/2koHMH6

• Turbonomic, a Boston-based provider of autonomic performance solutions for the hybrid cloud, has raised $50 million in new VC funding. General Atlantic led the round, and was joined by return backers Bain Capital Ventures, Highland Capital Partners, Globespan Capital Partners and Iconiq Capital. http://bit.ly/2jVYtx8

• EquipmentShare, a Columbia, Mo.-based "Airbnb of construction rentrals," has raised $26 million in Series B funding from Insight Venture Partners, Romulus Capital and Y Combinator. http://tcrn.ch/2kn0YJk

• Atlas Genetics Ltd., a UK-based "test and treat" molecular diagnostics company that has developed tests for chlamydia and gonorrhea, has raised $35 million in fourth-round funding. Wondfo Biotech was joined by return backers include RMI Partners, Novartis Venture Funds, Consort Medical, Johnson & Johnson Innovation, LSP, BB Biotech Ventures and South West Ventures Fund. http://bit.ly/2jSwOMU

• Whistle Sports, a New York-based digital sports media content company focused on millennials, has raised $27.5 million in new VC funding. Beringea was joined by return backers like TENGA Inc., NBC Sports Ventures, Sky Media and Emil Capital. http://bit.ly/2jL7bvr

• Cuemath, an India-based provider of afterschool learning solutions, has raised $15 million in Series B funding from Sequoia India and CapitalG. http://bit.ly/2j7OJuV

• EasyMile, a French developer of electric driverless shuttles, has raised €14 million in minority equity funding from Alstom (Paris: ALO). http://bit.ly/2k740RT

• Seerene, an SaaS analytics platform for CIOs, has raised $14 million in Series A funding. Lakestar led the round, and was joined by return backer Earlybird Venture Capital. www.sereene.com

• Fuse, a British provider of user experience solutions for app developers, has raised $12 million in new VC funding from Northzone Ventures and Alliance Venture. http://tcrn.ch/2ko4jUg

• Secret Double Octopus, an Israel-based provider of keyless multi-shield connectivity and authentication solutions, has raised $6 million in Series A funding. Backers include Jerusalem Venture Partners, Liberty Media, Iris Capital and Benhamou Global Ventures. www.doubleoctopus.com

• Edeniq, a Visalia, Calif.-based company that has developed a process for converting cellulosic biomass to industrial sugars, has raised $7 million in new VC funding. Return backers include Flint Hills Resources, Angeleno Group, I2BF Global Ventures and Cyrus Capital. Also participating on the equity tranche was existing Edeniq lender Trinity Capital Investment, which also amended and restated its debt facility for the company. Edeniq had agreed last year to be acquired by Aemetis (Nasdaq: AMTX), but it later terminated the deal and is now the defendant in related litigation. www.edeniq.com

• Lumus, an Israeli maker of augmented reality lenses, has raised $6 million in new VC funding from Alibaba, according to Calcalist. This comes nearly a month after the company raised $30 million in Series C funding from HTC and Quanta Computer. http://bit.ly/2jLgNGL

• TrustPilot, a Denmark-based provider of a multi-language online merchant review platform, has raised £5.5 million in new VC funding led by existing backer Draper Esprit. http://bit.ly/2kbgwg4

• Habito, a UK-based online mortgage broker, has raised £5.5 million in Series A funding led by Ribbit Capital. http://bit.ly/2iWfoQw

• The Noodle Cos., a New York-based family of ed-tech companies, has raised $5 million in Series A funding from SWaN & Legend Venture Partners. http://bit.ly/2j9nrEO

• Careship, a Berlin-based platform for finding caregivers, has raised $4 million in VC funding led by Spark Capital. http://tcrn.ch/2jmd1VH

• Talentoday, a San Francisco-based provider of talent assessment software, has raised $3.49 million in Series A funding from HR staffing company Adecco Group (SWX: ADEN). www.talentoday.com

• Adaptemy, a Dublin, Ireland-based adaptive learning startup, has raised over €3 million in new VC funding from Enterprise Ireland and Folens Publishers. www.adaptemy.com

• Lobster, a UK-based licensing marketplace for user-generated content, has raised £1 million in Series A funding from backers like KL10CH. http://tcrn.ch/2k9S9hZ

• Illusive Networks, an Israeli cybersecurity startup that builds "deception" frameworks, has raised an undisclosed amount of strategic funding from Microsoft Ventures. TechCrunch reports that the company has now raised more than $30 million overall, from firms like NEA, Cisco, , Innovation Endeavors, Bessemer Venture Partners, Citi Ventures, Marker and Team8. http://tcrn.ch/2jX6Ng9

Private Equity Deals

• Aldevron, a Fargo, N.D.-based contract development and manufacturing organization focused on plasmid DNAs, proteins and antibodies, has secured an undisclosed amount of growth equity funding from TA Associates. www.aldevron.com

• Amerigo Education, a provider of support services for international students at American prep schools, has raised an undisclosed amount of private equity funding from Sterling Partners. www.amerigoeducation.com

• Clearlake Capital has completed its previously-announced acquisition of Landesk, a South Jordan, Utah-based systems lifecycle management company, from Thoma Bravo. No financial terms were disclosed. Following the deal, Clearlake will merge Landesk with existing portfolio company Heat Software, under a new corporate name Ivanti. www.ivanti.com

• Industrial Service Solutions, a Fort Myers, Fla.-based portfolio company of Edgewater Funds and JZ Advisors, has acquired both IPEC LLC (industrial mechanical contractor) and Industrial Scaffolding Group (full-service scaffolding company) of Grayling, Michigan. No financial terms were disclosed. www.iss-na.com

• Ottobock, a German maker of artificial limbs, is considering the sale of around a 20% equity stake to private equity for approximately €250 million, according to Reuters. Interested suitors reportedly include Advent International, BC Partners, CVC Capital Partners and KKR. http://reut.rs/2kbejRH

• The Riverside Co. has acquired Nustef Foods, an Ontario-based maker of Italian-inspired cookies and crackers under the Reko brand. No financial terms were disclosed. http://bit.ly/2jMY7pR

• RLJ Equity Partners and SJ Partners have acquired Native Maine, a fresh foodservice distributor, for an undisclosed amount. www.nativeme.com

Public Offerings

• AppDynamics, a San Francisco-based app intelligence software platform, has increased its IPO price range from $10-$12 per share to $12-$14 per share. It still plans to offer 12 million shares, and list on the Nasdaq under ticker symbol APPD. The first three banks listed are Morgan Stanley, Goldman Sachs and J.P. Morgan. AppDynamics reports a $95 million net loss on $158 million in revenue for the nine months ending October 31, 2016. www.appdynamics.com

• IC Power, a Peru-based operator of gas and power facilities in South and Central America, has set its IPO terms to 29.5 million shares being offered at between $12 and $15 per share. It plans to trade on the NYSE under ticker symbol ICP, with BofA Merrill Lynch serving as lead underwriter. The company is being spun out of Kenon Holdings (NYSE: KEN). http://bit.ly/2jNdjU1

Liquidity Events

• Chan Zuckerberg Initiative has acquired Meta, a startup that uses artificial intelligence to help scientists parse through scientific papers. No financial terms were disclosed. Meta had raised over $7 million in VC funding from firms like Rho Canada Ventures, iGan Partners and Highline.vc. http://bit.ly/2jsCoCL

• Warburg Pincus has agreed to sell Accriva Diagnostics, a San Diego-based provider of point-of-care diagnostic products for coagulation testing and antiplatelet therapy response, to Instrumentation Laboratory, a Bedford, Mass.-based subsidiary of Spain's Werfen. No financial terms were disclosed. http://bit.ly/2j9qrkx

• Wix.com (Nasdaq: Wix) has agreed to acquire Flok, a New York-based customer loyalty and engagement platform. No financial terms were disclosed. Flok had raised around $12 million in VC funding from firms like General Catalyst, Founder Collective and Gemini Israel Ventures. http://tcrn.ch/2iPk4ma

More M&A

• HSH Nordbank, a German shipping finance company, has formally launched its planned sale process, which is being managed by Citigroup. http://reut.rs/2jN11ef

• IBM has acquired Agile 3 Solutions, a San Francisco-based provider of a cybersecurity analytics dashboard. No financial terms were disclosed. http://zd.net/2jTz3A9


• The Blackstone Group is planning to raise at least $5 billion for its next Asia-focused real estate fund, according to Reuters. http://cnb.cx/2kc0y54

• Incline Equity Partners has closed its fourth middle-market private equity fund with $601 million in capital commitments. Sixpoint Partners served as placement agent. www.inclineequity.com

• Merus Capital has closed its third venture capital fund with $85 million in capital commitments. www.meruscap.com

• Northleaf Capital Partners has closed its second OECD-focused infrastructure fund with $950 million in capital commitments. www.northleafcapital.com

It's Personnel

• Kenneth Borton has joined WhiteHorse Capital, the direct lending affiliate of H.I.G. Capital, as a London-based managing director. He previously was with Citi as a managing director in the firm's EMEA credit opportunities group.

• Phil Fernandez, co-founder and former CEO of enterprise cloud software company Marketo, has joined Shasta Ventures as a venture partner. www.shastaventures.com

• Greg Fleming, the former head of Morgan Stanley's investment and wealth management units, has joined Axiom Capital Management as a part-time consultant. http://reut.rs/2j7Jj36

• Joseph Salley, former CEO of Milliken & Co., has joined Arsenal Capital Partners as an operating partner in its specialty industrials group. www.arsenalcapital.com

• StepStone Infrastructure and Real Assets has made three new hires: Todd Lapenna (ex-CalPERS) as a New York-based partner; Varun Kapoor (ex-Hastings Fund Management) as Australia-based head of investment operations and Sid Chandrasekaran (ex-GIC) as a London-based investment manager.

• John Van Etten has joined HSBC as SVP for government affairs, based in Washington, D.C. He previously held a similar role with New York Life. www.hsbc.com

• Liney Fagan has joined the M&A group of Anchors Aweigh Equity, a Dallas-based provider of I-banking advisory services for the maritime, industrial, and alternative energy. She previously was with Tech Wildcatters.

• Wayne Yang has joined Layer 7 Capital as a director. He previously was a principal with Visor Investment Partners.

• Summit Partners has promoted Jay Pauley and Thomas Tarnowski to managing directors, and Antony Clavel and Peter Francis to principal. www.summitpartners.com

Final Numbers: U.S. Leveraged Buyouts

Dan Primack