Axios Pro Rata
March 13, 2019
Situational awareness: Brookfield Asset Management (NYSE: BAM) just agreed to acquire 62% of Oaktree Capital Group (NYSE: OAK) for around $4.8 billion.
Top of the Morning
Yesterday the U.S. Department of Justice indicted 32 individuals on felony fraud charges, accusing them of participating in a college admissions bribery scheme.
- Why it matters: They cheated to get their kids into elite universities, thus depriving more deserving students of highly-coveted spots.
- Why it matters to Pro Rata: Several of the defendants are big-names in the investment industry, and their grift now puts their colleagues and clients at risk. None of them ever appeared on Full House or Desperate Housewives (to my knowledge... If that's incorrect, please let me know).
Bill McGlashan: A longtime private equity executive at TPG Capital, where he founded and runs both TPG Growth and The Rise Fund.
- McGlashan allegedly participated in two different schemes. One involved flying with his son to a "controlled" ACT test site, and then having a "proctor" correct many of his son's answers after they flew home. He also faked an athletic profile for his son, in coordination with someone on the take at USC. The combined cost was $300,000.
- His son apparently was unaware. Well, until yesterday.
- Yes, he was caught on tape by the FBI.
- McGlashan also allegedly expressed interest in similar efforts for his two younger children. Like the other defendants, he seems to have been unaware of his pending arrest (in fact, I'm told he had a ski trip planned for this coming weekend).
- TPG has put McGlashan on indefinite administrative leave, with firm co-founder Jim Coulter assuming his responsibilities. It also sent a note last night to investors, which says in part: "The firm's leadership takes this matter very seriously... Over the next few days, expect to hear more from us as we learn more."
- If this case holds, I see no way TPG can bring McGlashan back. This may be a personal issue, not a professional one, but felony fraud is felony fraud. Plus, it's possible that he'll go to jail.
- Oh, and remember that The Rise Fund is all about social responsibility, including education (portfolio companies include EverFi).
- No word yet on what TPG plans to do about its current efforts to raise $3.5 billion for a second Rise Fund — given that McGlashan is listed as CEO and a key-man on all the relevant documents. But so far I'm told there has been no effort to amend any active fund docs.
- "People are rightfully asking, ‘Is the system working?" That's McGlashan, speaking just weeks ago to Forbes. No Bill, it clearly isn't.
Manuel Henriquez, founder and CEO of Hercules Growth Technology Capital.
- He and his wife (also a defendant) are accused of paying a total of over $500,000 to fraudulently aid both of their daughters (at least one of whom knew about the scheme). This included cheating on standardized tests, faking athletic profiles and bribing a women's tennis coach at Georgetown University.
- Yes, he was caught on tape by the FBI.
- Henriquez also allegedly used his connections at Northeastern University to help get another kid accepted, in lieu of another fee, for which that kid's parents paid $250,000 to the fraud's coordinator.
- He's already out at chairman and CEO of HGTC, whose stock fell 9% on the news.
- But he remains on the company's board of directors. Per a statement to Axios: “As the Board considered all of Hercules’ constituencies—including its many shareholders—it felt that having consistent access to Mr. Henriquez would be very helpful particularly during this transition period. Mr. Henriquez will have no day-to-day management responsibilities and his role is purely in an advisory capacity.”
Gordon Caplan, co-chairman of law firm Wilkie Farr & Gallagher. He also is a partner in its private equity practice and corporate services department.
- He allegedly paid $75,000 for the standardized test fraud on behalf of his daughter, who was unaware her answers would be changed later.
- Yes, he was caught on tape by the FBI.
- His wife expressed unease over part of the ruse, but Caplan expressed no such moral compunctions once she got off the phone.
- Wilkie Farr has issued no statement about Caplan, despite numerous requests. He also remains listed on its website, despite being an attorney accused of felony fraud.
The bottom line: I've seen lots of commentary about how rich folks have always used their bank accounts to help progeny attend top schools, primarily through large donations. But at least in those cases, all students get to benefit from the largesse. Not true here. Instead, the schools and their students got defrauded. Disgusting and disgraceful.
Jumia, a pan-African e-commerce platform, filed for an IPO that would see it trade on the NYSE (JMIA) with Morgan Stanley as lead underwriter. The filing is for $100 million, but Renaissance Capital estimates that it may seek to raise five times that amount.
- Why it's the BFD: Jumia is considered to be Africa's first tech unicorn, even though it was founded by two Frenchmen and is headquartered in Germany. And, like so many U.S. unicorns, it has massive losses without a visible road to profitability.
- Major shareholders include Rocket Internet, with a 20.6% pre-IPO stake.
- Bottom line: "Jumia’s move to go public comes as several notable consumer digital sales startups have faltered in Nigeria — Africa’s most populous nation, largest economy and unofficial bellwether for e-commerce startup development on the continent." — Jake Bright, TechCrunch
Venture Capital Deals
• Cloudflare, a San Francisco-based provider of content delivery network services, raised $150 million in new funding led by Franklin Templeton. http://axios.link/mZfP
• CXA Group, a Singapore-based employee benefits platform, raised $25 million in Series C funding from HSBC, Singtel Innov8, Telkom Indonesia, Sumitomo, Muang Thai Fuchsia Ventures, Humanica, Heritas Venture Fund and return backers B Capital, EDBI and Openspace Ventures. http://axios.link/pEEI
• Glia (fka SaleMove), a New York-based digital customer service platform for financial services companies, raised $20 million. Insight Venture Partners led, and was joined by return backers Tola Capital, Wildcat Capital Management and Grassy Creek. www.glia.com
• ZayZoon, a Canadian provider of “on-demand wages” for employees, raised C$15 million from backers like Prairie Merchant Corp. and Bluesky Equities. http://axios.link/kTDj
• Blackbird, a short flight-hail startup, raised $10 million in Series A funding led by NEA. http://axios.link/3vKJ
• Gem (fka ZenSourcer), a San Francisco-based recruiting platform, raised $9 million in Series A funding led by Accel. http://axios.link/2vk7
Private Equity Deals
🚑 Abry Partners invested in Dr. Dental, a Framingham, Mass.-based provider of management and administrative services to branded dental offices. www.mydrdental.com
• The Carlyle Group acquired a 40% stake in Jeanologia, a Spanish maker of denim manufacturing equipment, at a reported enterprise value of €150 million. http://axios.link/oDSj
• ImagineSoftware, a Charlotte-based portfolio company of Mountaingate Capital, acquired ProviderAlly, a Slingerlands, N.Y.-based provider of accounting reconciliation services to the healthcare revenue cycle management space. www.imagineteam.com
• LightBay Capital and Freeman Spogli have acquired FastSigns International, a Carrollton, Texas-based signage and visual graphics franchisor, from Levine Leichtman Capital Partners. www.fastsigns.com
• PeopleFacts, a San Diego-based portfolio company of SNH Capital Partners, acquired Universal Background Screening, a Phoenix-based provider of background screening products and services. www.peoplefacts.com
• TSG Consumer Partners acquired CorePower Yoga, a Denver-based yoga fitness studio operator, from L Catterton. http://axios.link/TyzB
🚑 BioNTech, a German immunotherapies company that has raised around $700 million in VC funding, hired BAML and JPMorgan to lead an IPO on the Nasdaq late this year or early next year, per Reuters. It could value the company at around $4 billion. Investors include Fidelity, Redmile Group, Sanofi, Pfizer, Janus Henderson Group and Invus Group. http://axios.link/mx7x
• First Data (NYSE: FDC) agreed to acquire Software Express, a Brazilian provider of electronic funds transfer solutions. http://axios.link/fD7r
• Motorola Solutions (NYSE: MSI) acquired Avtec, a Lexington, S.C.-based provider of dispatch solutions for public safety and commercial customers. http://axios.link/utaS
🚑 Smith & Nephew (LSE: SN) agreed to buy Osiris Therapeutics (Nasdaq: OSIR), a Columbia, Md.-based regenerative medicine maker, for $660 million in cash, or $19 per share. http://axios.link/pX03
• EQT Partners raised €9 billion for its fourth private equity infrastructure fund. www.eqt.se
• FTV Capital, a San Francisco-based growth equity manager, is targeting more than $800 million for its sixth flagship fund, per PE International. http://axios.link/d3u1
• Osage University Partners raised $273 million for its third VC fund focused on startups that commercialize university research. www.oup.vc
• Jason Franklin will lead the Wisconn Valley Venture Fund, a $100 million early-stage effort formed by Aurora Health, Foxconn, Johnson Control and Northwestern Mutual. He previously was with Andreessen Horowitz. http://axios.link/Q0Do
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