Nov 12, 2018

Axios Pro Rata

Dan Primack
Top of the Morning

Illustration: Rebecca Zisser/Axios

When Thoma Bravo last month completed its acquisition of Apttus, it was getting much more than a Silicon Valley "quote to cash" software company that had been valued at $1.8 billion by its venture capitalists. It was also getting an HR nightmare.

  • Business Insider reports that Apttus founding CEO Kirk Krappe's sudden July departure was the result of alleged sexual assault during a company retreat.
  • There also reportedly were allegations from several employees that Krappe had misled them about the company's performance, and that this "culture of dishonesty" extends to at least one senior executive who currently remains with Apttus (which is now being led by Thoma Bravo operating partner David Murphy).
  • VC backers included Iconiq Capital, Premji Invest, Salesforce Ventures, K1 Capital, IBM Ventures, Tower Equity and the Kuwaiti Investment Authority.
  • Thoma Bravo has declined to comment directly on what it did or didn't know going into the deal. But, in an emailed statement to Axios, the firm said it: "saw an opportunity to make a significant contribution to its business through the operational expertise and stability that we have a track record of bringing to bear. In a short period of time, we have made notable positive enhancements at Apttus by adding new employee talent, installing a proven executive leadership team, and changing company procedures. We are committed to supporting an ongoing process of improvement by introducing new and talented staff and insisting on best corporate practices – both of which will serve Apttus' employees, customers and investors well."

Why it matters: Private equity firms conduct due diligence on all prospective investments, but readily admit that there are things they don't learn until the deal is actually closed. Sometimes it's a complete surprise, sometimes it's the extent of a known issue. The #MeToo era will only heighten that discovery gap for many buyers — particularly given that so many purchase processes are kept in confidence within the C-suite, without the rank-and-file getting advance word.

Also...

Moderna Therapeutics on Friday filed for a $500 million IPO. If successful, it would be the largest-ever IPO for a VC-backed biotech startup.

  • The Cambridge, Mass.-based company, which creates synthetic mRNA that is then injected into patients so that they can create their own therapies, has raised nearly $2 billion in VC funding, most recently at a $7.5 billion valuation.
  • Shareholders include Flagship Pioneering, AstraZeneca, Abu Dhabi Investment Authority, BB Biotech, Julius Baer, EDBI, Sequoia Capital China, Fidelity, Pictet, Viking Global Investors, ArrowMark Partners and Alexandria Venture Investments.

• Sand Hill: Kleiner Perkins is pre-marketing its next early-stage fund, with early talk in the $700 million to $750 million range, per an LP source. Official fundraising will begin in January.

  • This is a big bump from the $400 million that KPCB raised for Fund XVII in 2016, perhaps reflecting a need for more follow-on firepower, with the firm's growth-stage group spinning out into an independent firm.
  • The growth group plans to target around $1.25 billion for its new fund, per Business Insider. That's 25% more than it raised last time around.

• Dewey defeats Truman? On Wednesday I noted that Josh Harder, who left Bessemer Venture Partners to run for California's 10th Congressional seat against Republican incumbent Rep. Jeff Denham, had come up short. But California counts ballots quite slowly, and Harder has now taken a 3,300 vote lead.

  • Note: This still isn't over, as there are still over 20,000 unprocessed ballots.

• Vape calendar: Expect the FDA to unveil its new e-cigarette sales rules tomorrow.

• Cover story: Meredith Corp. on Friday announced an agreement to sell Fortune Magazine, my former employer, to Thai businessman Chatchaval Jiaravanon for $150 million. Three quick notes:

  • That is way more money than most outsiders had expected Meredith to fetch for Fortune, which I'm told had 2017 EBITDA of around $10 million.
  • The deal came together in just the past month. Earlier interest had come from Marc Benioff (who opted to just buy Time Magazine) and a Wall Street CEO (whose board was worried about the appearance of conflict).
  • Meredith is said to be in exclusive talks to sell both Money and Sports Illustrated, the final two titles it plans to divest from its Time Inc. takeover.
The BFD
Source: Giphy

SAP has agreed to buy Qualtrics, a Provo, Utah-based maker of survey software that had been expected to go public this week, for $8 billion in cash.

  • Why it's the BFD: Because it's the priciest purchase ever of a VC-backed enterprise software company. It's also the second time this year that a "unicorn" has been taken out just days before its planned IPO. The first was Workday's deal in June for Adaptive Insights.
  • In context: Qualtrics was valued at $2.5 billion in its most recently round of VC funding, in April 2017, and was set to approximately double that in the IPO. So this is a big premium on that expected premium, which represents a massive return for major shareholders like Accel, Insight Venture Partners and Sequoia Capital.
  • Bottom line: SAP CEO Bill McDermott said in a conference call that this deal will be as transformative for SAP as buying Instagram was for Facebook — with SAP being able to merge its trove of operational data with Qualtrics' collection of user experience data.
Venture Capital Deals

• Nested, a London-based provider of cash advances to float new home purchases before selling an old home, raised £100 million in new equity funding co-led by Northzone and Balderton. It also secured £20 million in new debt funding. http://axios.link/KiPW

• Clearbanc, a San Francisco-based provider of revenue-share financing solutions to new online businesses, raised $70 million in seed and Series A funding from Emergence Capital, Social Capital, CoVenture, Founders Fund and 8VC. http://axios.link/kz9y

• Spin Memory, a Fremont, Calif.-based MRAM developer, raised $52 million in Series B funding. Applied Ventures led, and was joined by return backers Allied Minds, Woodford Investment Management and Invesco Asset Management. www.spinmemory.com

• Framer, an Amsterdam-based interactive design platform, raised $24 million in Series B funding. Atomico led, and was joined by Accel and AngelList. http://axios.link/6iE7

4iQ, a Los Gatos, Calif.-based identity intelligence startup, raised $18 million led by C5 Capital. www.4iq.com

• Hmlet, a Singapore-based co-living platform, raised $6.5 million in Series A funding led by Sequoia Capital India. http://axios.link/XzKQ

• Looxid Labs, a South Korean developer of biometric-based “emotion AI,” raised $4 million in Series A funding from Hastings Asset Management, Daesung Private Equity, Sejong Venture Partners and Samsung Ventures. www.looxidlabs.com

• Idelic, a Pittsburgh-based data and analytics platform for transportation safety, raised $2 million. Bain Capital Ventures led, and was joined by TDF Ventures, SaaS Venture Capital and return backers Birchmere Ventures and M25 Group. www.idelictech.com

• ShopUp, an online sales and credit assessment automation platform for small business owners in Bangladesh, raised $1.6 million in seed funding led by Omidyar Network. www.hummingbird.co

Private Equity Deals

• Aurelius acquired Norwegian auto aftermarket wholesaler Hellanor from Hella. www.hellanor.no

• Kofax, an Irvine, Calif.-based portfolio company of Thoma Bravo, agreed to buy the imaging unit of Nuance Communications (Nasdaq: NUAN) for around $400 million. http://axios.link/1LZF

• Mercer Advisors, a Santa Barbara, Calif.-based portfolio company of Genstar Capital, acquired Portland, Ore.-based wealth manager Sigma Investment Management Co. www.merceradvisors.com

• Montagu Private Equity agreed to buy the Flexographic packaging unit of Eastman Kodak Company. www.montagu.com

• Motive Partners acquired a control stake in LPA, a German provider of process optimization and regulatory compliance software for capital markets and wealth management companies.

• Navitas (ASX: NVT), an Australian adult education company, rejected a sweetened A$2 billion takeover offer from BGH Capital and company founder Rod Jones. http://axios.link/IdEZ

• NSO Group, an Israeli cybersecurity company owned by Francisco Partners, reportedly is in talks to buy Fifth Dimension, an Israeli developer of intelligence prediction software that has raised VC funding from CerraCap Ventures, Columbus Nova Technology Partners and UST Global US News & World Report. http://axios.link/t6IS

🚑 PWP Growth Equity invested in Quick Med Claims, a Pittsburgh-based provider of revenue cycle management services to the emergency medical transport market.

🚑 Veritas Capital and Elliott Management reportedly agreed to buy healthcare software company Athenahealth (Nasdaq: ATHN) for $5.5 billion in cash, or $135 per share — well below the $160 per share offer from Elliott that Athena rejected earlier this year. http://axios.link/h5Vf

• Vista Equity Partners agreed to buy Apptio (Nasdaq: APTI), a Bellevue, Wash.-based provider of tech business management software, for $1.94 billion in cash, or $38 per share (53% premium to Friday’s closing price). http://axios.link/kfw5

• Vitrek, a Poway, Calif.-based portfolio company of Branford Castle Partners, acquired XiTRON Technologies, a San Diego-based maker of power test and measurement equipment, from ImpediMed (ASX:IPD). www.vitrek.com

Public Offerings

• Five companies expect to go public on U.S. exchanges this week: Alzheon, Contrexion Therapeutics, Vapothem, Weidai and Uranium Trading. Two SPACs also plan to price. http://axios.link/fs2h

Liquidity Events

• BlackBerry (TSX: BB) is in talks to buy Irvine, Calif.-based cybersecurity company Cylance for upwards of $1.5 billion, per Business Insider. Cylance has been viewed as an IPO candidate, and has raised over $320 million from firms like The Blackstone Group, Insight Venture Partners, Capital One Growth Ventures, Citi Ventures, KKR, Asadel Venture Partners, In-Q-Tel, Draper Nexus, Ten Eleven Ventures, Khosla Ventures, Fairhaven Capital Partners, DFJ Growth and Founders Equity Partners. http://axios.link/5GEZ

• Graycliff Partners sold Impakt Holdings, a Santa Clara, Calif.-based contract manufacturer of equipment and systems for IP protection, to Celestica (NYSE: CLS) for $329 million. www.impaktholdings.com

• Permira is seeking a buyer for Teraco, a South African data center operator that could fetch between $600 million and $1 billion, per Bloomberg. http://axios.link/BDbG

More M&A

• Air Zimbabwe, a state-owned airline that was placed into administration last month, is seeking takeover bids. http://axios.link/PLci

🍔 Blue Harbor Group, an activist hedge fund, disclosed a 6.8% stake in fast-food operator Jack in the Box (Nasdaq: JACK). http://axios.link/PuKF

• Daily Mail and General Trust (LSE: DMGO) is prepping a bid for British newspaper brand “i” from Johnston Press (LSE: JPR), per Sky News. http://axios.link/w1J5

• Mawer Investment Management, a Canadian asset manager with more than C$50 billion in AUM, is considering a sale process that could fetch upwards of C$2 billion, per Reuters. http://axios.link/F4Td

• Third Point, the activist hedge fund led by Dan Loeb, has acquired a stake of unknown size in American Express (NYSE: AXP). http://axios.link/LyzY

Fundraising

• Mantra raised €120 million for its second private equity secondaries fund, and also held a first close on a new fund-of-funds focused on primary opportunities. www.mantrainvest.com

It's Personnel

• Alexander Fraser has left GI Partners to open a San Francisco office for London-based private equity firm Bridgepoint. http://axios.link/JKcn

• Charles Lemon joined private equity placement agent Triago as a London-based partner. He previously spent seven years with Agilitas Private Equity. www.triago.com

Final Numbers
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Data: Analysis of FactSet corrected transcripts; Chart: Andrew Witherspoon/Axios
Dan Primack

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