Axios Pro Rata
January 23, 2023
🚨 Breaking: ChatGPT maker OpenAI announced a "multi-year, multi-billion dollar investment" from Microsoft.
Top of the Morning
Tech layoffs continued this morning, with Spotify announcing plans to fire around 600 employees. That brings the monthly total to over 56,000, per tracking site Layoffs.fyi. including last week's monster cuts at both Alphabet and Microsoft.
The big question: Could this spark a surge in tech entrepreneurship? A sort of upside to the downturn?
- The answer is muddled.
Bull case: There are plenty of would-be founders now on the proverbial street. If you've always had the itch to launch a company, perhaps because your ex-employer was making an obvious mistake, what better time than when you're already unemployed?
- Particularly if you get to cash severance checks for the next few months, and know of potential co-founders in the exact same position?
Bear case: Today's job market is much tighter than what we saw after past market messes like the dotcom bust or Great Financial Crisis. Even if tech is shedding headcount, there are plenty of non-tech companies that will salivate over the prospect of hiring former Google or Facebook engineers.
- There also can be a flip side to relative financial security, in terms of the drive to start something new. And perhaps negative perceptions from venture capitalists, since being part of a 10% layoff is viewed differently than being unemployed because the entire company went under.
Speaking of venture capitalists: They are a major variable. There currently seems to be plenty of dry powder and willing check-writers, including at the seed stage, but any significant changes to disbursement levels — up or down — could be viewed as a signal by potential entrepreneurs.
The bottom line: Layoffs are misery. Even if it's clear that a company overhired, the pink slips are still painful. The hope is that, eventually, some creation can come from the destruction.
Elliott Management has built a multibillion-dollar position in Salesforce (NYSE: CRM), the world's largest SaaS company with a market cap north of $150 billion.
Why it's the BFD: Marc Benioff might be able to slough off co-CEOs, but Elliott won't be quite so easy to shake.
- We've said it before, but it bears repeating: Elliott usually gets what Elliott wants, even if the activist investor isn't yet disclosing specific demands.
The big picture: Salesforce stock is down around 50% since its November 2021 high water mark, has experienced significant C-suite turnover, has implemented multiple rounds of layoffs, and was unable to get cultural integration right with its priciest acquisition (Slack).
The bottom line: There only are a few tech companies large enough to even attempt a takeover of Salesforce, or of one of its major business units, and they'd all face severe antitrust scrutiny. But that doesn't mean someone won't try, now that Elliott has arrived.
Venture Capital Deals
• Zift, a Cary, N.C.-based provider of partner relationship management and through-channel marketing automation software, raised over $70m. Investcorp Technology Partners led, and was joined by insiders Arrowroot, Oxx, SSM, and AshGrove Capital. www.ziftsolutions.com
• Bremont, a luxury British watchmaker, raised £48.4m from Bill Ackman and insider Hellcat. https://axios.link/3D9Tmk2
• Zenfi, a Mexican financial health startup, raised $8.5m. Magma Partners led, and was joined by Cometa, Redwood Ventures, Polígono and Conny & Co. https://axios.link/3WwvQEV
• Architect, a provider of crypto trading infrastructure led by ex-FTX US president Brett Harrison, raised $5m from Coinbase Ventures, Circle Ventures, SV Angel, SALT Fund, P2P, Third King Venture Capital, Anthony Scaramucci, Shari Glazer and Motivate Venture Capital. https://axios.link/3XNo9uU
Private Equity Deals
• Ardian acquired around a 60% stake in Assist Digital, a provider of customer experience services in Europe. www.assistdigital.com
• Dignity (LSE: DTY), a British funeral services provider, agreed to be acquired for £281m by SPWOne V, Castelnau Group and Phoenix Asset Management Partners. https://axios.link/3XwtI1g
• Inside Real Estate, a Salt Lake City-based portfolio company of Lovell Minnick Partners and Genstar Capital, acquired BoomTown, a Charleston, S.C.-based provider of real estate sales and marketing automation software. BoomTown backers included Adams Street Partners and Susquehanna Growth Equity. https://axios.link/3weP8UF
• Kudu Investment Management acquired a minority stake in Variant Investments, a Portland, Ore.-based alternative credit specialist and interval fund manager. www.variantinvestments.com
• Thoma Bravo agreed to buy Magnet Forensics (TSC: MAGT), a Canadian provider of digital investigation solutions, for C$1.8b. https://axios.link/3D5rkWS
🚑 TPG Growth agreed to invest in MedQuest Associates, an Alpharetta, Ga.-based chain of outpatient diagnostic imaging facilities that's owned by nonprofit health system Novant Health. The joint venture is aimed at expanding MedQuest. www.mqimaging.com
• Waterland Private Equity acquired a majority stake in Markettiers4DC, a London-based strategic communications firm. www.Markettiers4DC.com
• Eight companies plan to go public on U.S. exchanges this week. The only one seeking to raise at least $100m is TXO Energy Partners, a Fort Worth, Texas-based oil and gas producer. https://axios.link/3GTn1is
• TAM Development, a Saudi management consultancy, is prepping a local IPO in the first half of 2023, per Bloomberg. https://axios.link/3R0B2Qf
🚑 Bausch + Lomb (NYSE: BLCO) bought AcuFocus, an Irvine, Calif.-based maker of intraocular lenses for people with cataracts. AcuFocus raised around $26m from firms like KKR, SV Health Investors, Flying L Partners, Friendly Hill Capital and Three Arch Partners. https://axios.link/3GYVoow
• Apex Group agreed to acquire the Irish depository business of Bank of America (NYSE: BAC). www.apexgroup.com
⚡ Iberdrola (Madrid: IBE) may seek a minority investor for its U.S. renewables business, per Bloomberg. https://axios.link/3kzDn8K
• Merriam-Webster acquired Quordle, a Wordle clone. https://axios.link/3GOcDbW
• Ritchie Bros. Auctioneers' (NYSE: RBA) amended its $7.3b takeover agreement with vehicle auction site IAA (NYSE: IAA), following pressure from activist investor Ancora, by changing the cash/stock mix to 29%/71% from 22%/78%. www.rbauction.com
• Xylem (NYSE: XYL) agreed to buy water treatment firm Evoqua (NYSE: AQUA) for around $7.5b in an all-stock deal. https://axios.link/3XQZplz
• Jamil Jaffer joined Paladin Capital Group as a venture partner. His prior positions include associate counsel to the president in the Bush administration, and a senior staffer on the House Intelligence Committee. www.paladincapgroup.com
• Pantheon promoted Stephen Branagan (global ops head, head of Ireland), Dianne Remanous (chief human resources officer) and Akitoshi Yamada (head of Japan for Asia IR) to partners. It also hired Dean Maines (ex-Affiliated Managers Group) as a partner and CFO. www.pantheon.com
• Swander Pace Capital promoted Alex Litt and Robert Vassel to directors. www.spcap.com
• Transformation Capital promoted Akhi Samant to vice president. www.transformcap.com
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