Axios Pro Rata

A green watering can with a dollar sign painted on it.

November 21, 2017

Top of the Morning

Private equity persistence is the theory that a firm's future returns can be predicted by its past returns. But persistence is declining, and it could threaten the entire asset class.

Why persistence matters: Limited partners in private equity funds are asked to invest in blind pools, so persistence gives them greater confidence. Particularly if they are new to the asset class. Moreover, persistence enables industry growth, as top performers are able to raise larger and larger funds.

What's new: MIT economist Antoinette Schoar, whose early aughts research helped popularize persistence, recently presented preliminary data that shows persistence is declining, particularly in terms of top-quartile performance. Here's the top-line, fund-over-fund, data:

Same-quartile persistence:

  • 1995-1999: 33%
  • 2000-2004: 33%
  • 2005-2009: 25%
  • 2010-2013: 22%

Top-quartile persistence:

  • 1995-1999: 31%
  • 2000-2004: 28%
  • 2005-2009: 13%
  • 2010-2013: 12%

Schoar says that her final data should be published within the next two months.

• "Founder friendly" update: The Wing, an all-women co-working and social club, this morning announced that it has raised an undisclosed amount of Series B funding from WeWork.

  • Backstory: This is the "founder friendly" deal we discussed in August, when we reported that WeWork had offered up a $40 million Series B term sheet, inclusive of two $10 million secondary purchases for the company's co-founders (who also would each receive $250,000 "advisor cash awards"). And we actually forgot to mention that it also included another $1 million in new shares for each co-founder.The actual round came in at $32 million, with much less secondary and no "advisor cash awards," per a source. Sounds like the disgruntled Wing shareholder(s) who leaked us the early term sheet also persuaded the co-founders to take a more vanilla deal.

• Brexit: New York-based buyout firm CCMP Capital will shutter its London office next year, telling Axios that it is "sharpening its focus on businesses that are based in North America." No word yet on if any of the London staffers, such as managing director Thomas Walker, will relocate.

• Antitrust ripple: FanDuel co-founder Nigel Eccles has stepped down as the fantasy sports company's chairman and CEO, in order to launch an e-sports startup.

Eccles actually began planning the e-sports venture when FanDuel was in the midst of merging with DraftKings, after which he would have become chairman of the combined entity (with DraftKings boss Jason Robins serving as CEO). But then federal regulators successfully blocked the merger, leaving Eccles in a tricky position. So tricky, in fact, that he lied to his own internal PR rep about the e-sports effort when Axios inquired last month. He also didn't inform his board, which struck the departure agreement late last week.

  • Next: The new CEO is Matt King, a former FanDuel CFO who previously was with FanDuel backer KKR. The new chairman is Carl Vogel (ex-Dish Networks exec) while David Nathanson (ex-21st Century Fox) also joins the board as an independent director.


The U.S. Department of Justice yesterday filed suit to block AT&T's proposed $85 billion takeover of Time Warner, claiming that the deal would increase prices for consumers and decrease competition in the streaming video market.

  • Why it's the BFD: Because big tech companies like Facebook, Netflix and Google — which provide both media content and distribution at a scale that dwarfs a merged ATT/TW — should be absolutely petrified. DoJ may officially be suing a legacy telco, but its complaint is doubling as a Trojan Horse at the gates of Silicon Valley.
  • Also: (1) The suit should effectively freeze 21st Century Fox's attempts to sell most of its assets to suitors like Disney and Verizon. (2) Past comments can come back to haunt you: Trump's campaign statements and anti-CNN screeds, DirecTV's conditional concerns about Comcast/NBCUniversal and DoJ antitrust head Makan Delrahim's positive disposition toward ATT/TW.
  • Bottom line: "If DoJ loses the case, it could spur a flood of consolidation. If it wins, it could set a new precedent that changes the conventional wisdom about the competitive impact of vertical mergers." - Kim Hart, Axios

Venture Capital Deals

• TuSimple, a Chinese maker of autonomous truck software company backed by Nvidia, has raised $55 million in Series C funding. Fuhe Capital led, and was joined by existing shareholders Sina Corp. and Zhiping Capital.

• Locus Robotics, a Wilmington, Mass.-based developer of autonomous mobile robots for use in e-commerce fulfillment warehouses, has raised $25 million in Series B funding led by Scale Venture Partners.

• Pixvana, a Seattle-based mixed reality production platform, has raised $14 million in Series A funding. Vulcan Capital led, and was joined by Raine Ventures, Microsoft Ventures, Cisco Investments, Hearst Ventures and return backer Madrona Venture Group.

• Peanut, a London-based community app for new mothers, has raised. Sweet Capital Investments and Female Founders Fund co-led, and were joined by Greycroft Partners, Sound Ventures, NEA, Felix and Partech International.

Private Equity Deals

• Ardian has agreed to acquire Revere Plastics Systems, a Clyde, Ohio-based designer and manufacturer of plastic injection molded parts, from Revere Industries, an Indiana-based portfolio company of Tennenbaum Capital Partners.

🚑 Avista Capital Partners has acquired Miraca Life Sciences, an Irving, Texas-based anatomic pathology lab operator, from Miraca Holdings (Tokyo: 4544).

• The Carlyle Group has acquired Benefit Mall, a Dallas-based employee benefits and payroll firm, from Austin Ventures.

• DexKo Global, an Elkhart, Ind.-based portfolio company of KPS Capital Partners, has agreed to acquire Henderson Wheel & Trailer Supply, a Salt Lake City-based manufacturer of sprung and torsion axles and fenders.

• EQT Partners has agreed to acquire around a 40% stake in Epidemic Sound, a Swedish company that licenses music to television, digital video and other content creators.

• GSR Capital is among the possible bidders for a 32% stake in Chilean lithium producer SQM, which is being divested by Potash Corp of Saskatchewan (NYSE: POT), per Reuters.

🚑 SK Capital has completed its previously-announced acquisition of the active pharma ingredients unit of Perrigo Co. (NYSE: PRGO) for $110 million, and renamed the business Wavelength Pharmaceuticals.

• Surge Private Equity has acquired Busy Bee Cleaning, a New York-based provider of commercial janitorial services.

• Warburg Pincus has launched a tender offer to acquire more than 31 million shares in Cyren (Nasdaq: CYRN), a McLean, Va.-based cybersecurity-as-a-service company, at $2.50 per share. This could increase its ownership to around 75%, following its recent purchase of a 21.3% position via a private placement.

• Washington Equity Partners has invested in Arc Drilling, a Cleveland-based provider of electrical discharge machining solutions to the industrial gas turbine and aerospace engine markets.

Liquidity Events

🍣 Bain Capital plans to divest its remaining 19.8% stake in Japanese restaurant chain Skylark (Tokyo: 3197) via a $562 million block trade.

More M&A

Affinion Group Holdings has hired Morgan Stanley to help it find a buyer for its accidental death and dismemberment business, which could be worth around $700 million, according to Reuters.

• DMM, a Japanese e-commerce company, has agreed to buy Japanese pawn shop app Cash for around $62.2 million.

• Kabbage, an Atlanta-based lending platform for individuals and small businesses, has secured a $200 million revolving credit facility from Credit Suisse. Kabbage earlier this year raised $250 million in Series F equity funding from SoftBank.

• Jana Partners disclosed an 8.7% stake in Outback Steakhouse owner Bloomin' Brands (Nasdaq: BLMN), making it the restaurant company's second-largest shareholder.

🚑 LivaNova (Nasdaq: LIVN) has agreed to acquire the cardiac rhythm management unit to joint venture partner Microport Scientific (HK: 00853) for $190 million in cash.

• Nestle is among several companies exploring a takeover offer for Hain Celestial Group (Nasdaq: HAIN), a Lake Success, N.Y.-based organic food and beverage maker, per Bloomberg. The report boosted Hain Celestial shares, giving it a market cap of around $4.4 billion.

• Starboard Value has amassed a 10.7% stake in Mellanox Technologies Ltd. (Nasdaq: MLNX), and wants the semiconductor company to explore a possible sale.


• Bridgepoint is planning to target €5 billion for its sixth flagship buyout fund, per Financial News.

• Francisco Partners has closed its fifth buyout fund with $3.98 billion in capital commitments.

It's Personnel

Mark Danchak has joined WorldQuant Ventures as a managing director. He previously was a partner with Carbon6 Ventures.

• John Swainson has joined Siris Capital Group as an executive partner. He is the former CEO of Computer Associates who most recently was president of software at Dell.

Janet Yellen will leave the Federal Reserve's board once her term as chairwoman expires in Feb. 3, 2018. That would leave just three members of the 7-person board, two of whom once worked for The Carlyle Group.

Final Numbers

We created this chart yesterday morning, when Tencent became Asia's first $500 billion company — and was approaching Facebook's market cap. Today, Tencent's market cap surpassed that of Facebook.

  • Data: Tencent shares are up nearly 127% in 2017, and more than 11,000% since its 2004 IPO.