Apr 1, 2019

Axios Pro Rata

Top of the Morning

Illustration: Lazaro Gamio/Axios

Big buyout investors don't normally sound alarms over debt, but we also don't normally see so many high leverage multiples mixed with prostrated covenants and momentary due diligence.

  • The fund size tail is wagging the deal dog so hard that firms are rationalizing to the point of self-deception.

Here's Bain Capital co-managing partner Jonathan Lavine, speaking the the FT:

“I’m 5' 8", but I change the scale and make myself 6' 2" on a pro forma basis. I’m not actually 6' 2" on a pro forma basis, but I can make adjustments like standing on a box, maybe trying to stretch.”
“Even in the absence of a recession, if growth slows down a lot, people will treat it like a recession and it could have some of the self-fulfilling negative effects that an actual recession does have."

The new big blue: Facebook is beginning to lay out its response to Sen. Elizabeth Warren's proposal to break up the company, per comments made by U.S. public policy VP Kevin Martin to Axios' David McCabe.

  • In short: Facebook believes it is better equipped to handle issues like privacy, content moderation and campaign interference as a unified company, rather than as three. Go deeper.

Overdrive: Lyft shares this morning broke their $72 per share IPO price, down below $70 per share by 9:45 am.

  • Shares closed at $78.29 per share on their first day of post-IPO trading on Friday, a 8.74% bump over the IPO price but a 10.26% decline from their first open-market trades.
  • Lyft was the most-traded stock Friday on Robinhood, where the average user age is 32 years-old. Kia has more.
  • Pro Rata Podcast digs into Lyft's IPO and the future of ride-hail. My guest is Paul Hudson, founding partner of Glade Brook Capital Partners, a pre-IPO investor in both Lyft and Uber. Listen here.
  • Speaking of Uber: I don't have any inside intel on when it plans to drop its S-1 filing, but it would have to be this week if it cares about pricing in April (as earlier reports suggested).

🏀 March Madness: Our current leader goes by the username Irish98VA, but he or she also picked Duke to win it all. So let's instead focus on our three-way tie for second place, including their final game picks:

  • Brendan Burke (Capstone Headwaters, UVA>Mich St), Drew Roeder (Kirkland & Ellis, Mich St>UVA) and a user going by Sthoward (UVA>Mich St).
  • Plus some Cinderella kudos to Paula Chong of LP Analyst, who has Auburn winning it all.

Source: Giphy

Toast, a Boston-based restaurant management platform, raised $250 million in Series E funding co-led by TCV and Tiger Global Management at a $2.7 billion post-money valuation.

  • Why it's the BFD: Because restaurant margins continue to be stagnantly narrow, despite the industry's top-line revenue growth.
  • Returning investors include Bessemer Venture Partners and T. Rowe Price. The company now has raised a total of around $500 million, including a $115 million Series D round last summer at a $1.4 billion post-money valuation.
  • Bottom line: "As with the likes of Square, Lightspeed POS, and TouchBistro, Toast is much more than a simple point-of-sale technology provider: it’s essentially a one-stop shop restaurant management platform, spanning front-of-house, back-of-house, online, and customer loyalty programs. It also serves up data and analytics covering trends such as sales patterns." — Paul Sawers, VentureBeat
Venture Capital Deals

🚑 SpringWorks Therapeutics, a Stamford, Conn.-based developer of treatments for rare diseases and cancers, raised $125 million in Series B funding. Perceptive Advisors led, and was joined by Tavistock Group, HBM Healthcare Investments, BVF Partners, Surveyor Capital, Samsara BioCapital, ArrowMark Partners, GlaxoSmithKline, Laurion Capital Management and return backers OrbiMed, Bain Capital, Pfizer and LifeArc. http://axios.link/wDjO

CollegeVine, a Cambridge, Mass.-based college prep platform , raised $24 million in Series B funding from Maywood Street Investments, Fidelity, Morningside Technology Ventures and University Ventures. http://axios.link/sKBj

Academia.edu, a San Francisco-based academic research access platform, raised $16 million in Series C funding. Tencent led, and was joined by Social Discovery Ventures. http://axios.link/dLb5

BillionToOne, a Menlo Park, Calif.-based developer of a molecular counter platform, raised $15 million in Series A funding. Hummingbird Ventures and NeoTribe Ventures co-led, and were joined by YC, Civilization Ventures, Fifty Years, 500 Startups Istanbul and HOF Capital. http://axios.link/5NW0

Fliit, a German fresh foods logistics startup, raised €10 million in Series A funding from Maersk Growth, the Maschmeyer Group and Berlin Technologie Holding. http://axios.link/ywVO

Novo, a New York-based online business banking platform, raised $4.8 million in seed funding. Crosslink led, and was joined by Red Sea Ventures, RRE, Hack VC, Rainfall and the Stanford Law School Venture Fund. http://axios.link/LhEb

eHang, a Chinese drone-maker, is seeking to raise around $200 million in growth equity funding instead of going public in the U.S. this year, per Reuters (which had previously reported on the IPO ambitions). http://axios.link/ZoCu

Private Equity Deals

Advent International and Goldman Sachs have teamed up to bid on the Epsilon marketing unit of Alliance Data Systems (NYSE: ADS), per Bloomberg. France’s Publicis Groupe also is in the auction, which could fetch around $5 billion. http://axios.link/H4xU

Centre Partners acquired a majority stake in One World Fitness, an operator of 18 Planet Fitness gyms in the Philadelphia and New Jersey markets.

Intapp, a Palo Alto-based portfolio company of Great Hill Partners and Temasek, acquired Gwabbit, a contact capture platform for professional services firms. www.gwabbit.com

One Rock Capital Partners completed its purchase of Nexeo Plastics, a The Woodlands, Texas-based distributor of polymer products and prime engineering resins, from a subsidiary of Univar (NYSE: UNVR). www.nexeoplastics.com

Worley Claims Services, a Hammond, La.-based portfolio company of Aquiline Capital Partners, acquired Alacrity Services, a Eugene, Ore.-based provider of managed home and commercial property repair and emergency services, from Lowe’s (NYSE: LOWE). www.worleyco.com

Public Offerings

Four companies expect to go public this week on U.S. exchanges: Tradeweb, Silk Road Medical, NGM Biopharmaceuticals and Ruhnn Holding. http://axios.link/2cIU

🎬 Endeavor, the Los Angeles-based entertainment firm and talent agency backed by Silver Lake, is prepping an IPO for late 2019, per the WSJ. http://axios.link/eiJ2

PagerDuty, a San Francisco-based incident resolution platform, set IPO terms to 9.07 million shares at $19-$21. It would have an initial market cap of around $1.47 billion, were it to price in the middle, and plans to trade on the NYSE (PD) with Morgan Stanley as lead underwriter. The company reports a $41 million net loss on $118 million in revenue for 2018, and had raised over $170 million from firms like Andreessen Horowitz (18.4% pre-IPO stake), Accel (12.3%), Bessemer Venture Partners (12.2%), Baseline Ventures (6.7%), Harrison Metal (5.3%) and T. Rowe Price. www.pagerduty.com

Liquidity Events

🚑 Arteaus Therapeutics, a Cambridge, Mass.-based portfolio company of Atlas Venture and OrbiMed, has sold its royalty interest in Eli Lilly & Co.’s Emgality, a monthly self-injection for treating migraines, to Royalty Pharma for $260 million.

Brandwatch, a London-based social media monitoring company, acquired Qriously, a London-based market research SaaS startup that had raised around $9 million from venture firms like Accel, Raptor Group and Spark Capital. Brandwatch has raised nearly $70 million from firms like Highland Europe, Nauta Partners and Partech. http://axios.link/hayx

Willis Towers Watson (NASDAQ: WLTW) has acquired Tranzact, a Fort Lee, N.J.-based provider of digital marketing and sales solutions for health insurers, from Clayton, Dubilier & Rice. http://axios.link/ZU5W

More M&A

DSV, a Copenhagen-listed freight transport company, agreed to buy rival Panalpina (Swiss: PWTN) for $4.6 billion, following protracted negotiations. http://axios.link/zMsR

🍪 Ferrero Group, the Italian maker of Nutella, agreed to buy a group of cookie brands, including Keebler and Famous Amos, from Kellogg Co. (NYSE: K) for $1.3 billion. http://axios.link/ZNbZ

It's Personnel

Alok Sama is stepping down as president and CFO of SoftBank Group, per the FT. http://axios.link/MLvZ

Linda McMahon is stepping down as head of the U.S. Small Business Administration. http://axios.link/Iffp

Frank van den Bosch stepped down as a partner with London-based buyout firm Charterhouse Capital Partners, 15 years after joining from Goldman Sachs. http://axios.link/UEAO

GIC, the Singapore sovereign wealth fund, said that deputy CIO Tay Lim Hock will also now serve as the fund’s COO, following the retirement of Goh Kok Huat. http://axios.link/aGH8

Thrive Capital, a New York-based VC firm, promoted both Kareem Zaki and Miles Grimshaw to partner. www.thrivecap.com

Final Numbers
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Data: Yahoo Finance; Chart: Andrew Witherspoon/Axios

Per Axios' Felix Salmon:

The stock market loves nothing more than to climb a wall of worry, and it duly posted a spectacularly good first quarter. Bond investors were happy too, with the 10-year bond yield falling to levels not seen since 2017. That in turn created new optimism for mortgage origination. The macroeconomic concerns are real, but the bull market rages onward.