Nov 27, 2018

Axios Pro Rata

By Dan Primack
Dan Primack

Greetings from the home office, where animals are marching 2x2 outside my window. Please be sure to drop me tips and feedback at, or anonymously via Okay, here we go...

Top of the Morning
Source: Giphy

There was a lot behind yesterday's announcement that General Motors will idle five North American plants and lay off over 14,000 employees.

  • American car consumer tastes shifting away from sedans? Check.
  • Making good on a threat made when Trump first announced his tariff plans? Check.
  • Formally establishing that GM believes electric is how future cars will be powered (despite killing off the Volt)? Check.
  • Revealing that President Trump is more concerned with winning Ohio in 2020 than getting a repeat victory in Michigan (where most of the layoffs will occur)? Check.

But the biggest takeaway here should be how GM is indirectly predicting an economic slowdown.

GM, which declined to make senior executives available for interview, basically pledged coming out of bankruptcy that it would maintain profitability in good times and bad — something it has largely done (last year's GAAP loss was related to one-time changes from the tax law, and the Opal sale). Cutting these jobs and factories now is GM's way of saying that the consumer boom-times may have peaked (or nearly peaked), and that it must conserve resources in order to realize on its electric, autonomous future.

If GM is right, then Trump has much more to worry about than just Ohio.


VC scoop: Rob Hayes is stepping down as a general partner with First Round Capital, effective when the firm begins investing its seventh fund early next year.

  • He's best known for leading Uber's seed round in 2010.
  • Hayes will transition into a board partner role, similar to what Chris Fralic did over the summer. That means he maintains his existing board seats, but will not make new investments.
  • This represents almost an entire GP overhaul for First Round from its early days, with only co-founder Josh Kopelman remaining.
  • Kopelman tells me: "I don't see myself slowing down or stepping back for many funds to come. I've had amazing partners, and also think that I now have a group of amazing partners... Ultimately, I'd rather be known as a better picker of partners than a picker of companies."

Toys story: The blame game over Toys "R" Us has taken a new twist, with creditor Solus arguing that landlords were central to the liquidation decision.

  • Per a spokesperson, Solus says a widely-reported takeover proposal for the retailer's 200 or so performing stores "was conditioned on Toys “R” Us’ landlords agreeing to significant rent concessions on a sharply reduced store base, and the B4 lenders agreeing to subordinate their $1 billion secured claim. The company’s landlords – who were senior institutional lenders – refused to even discuss (let alone agree to) any possible concessions, including store closures."
  • Solus also seems to want some credit for the $35 million that lenders contributed "to compensate affected workers." Left unsaid there is that almost all of that cash was for Toys employees who kept the stores open during the 60-day liquidation period. Actual worker severance claims remain in bankruptcy court limbo.
  • Another B34 lender, Oaktree, is also eschewing blame, arguing (correctly) that it did not participate in the debtor-in-possession financing (unlike Solus), which means it didn't have a seat at the final table.
  • Neither Solus nor Oaktree plans to contribute to the employee compensation fund that last week received a total of $20 million from former Toys owners Bain Capital and KKR. Nor do any other B4 lenders or original buyout partner Vornado.

🎧 Pro Rata Podcast: Our new episode focuses on the future of self-driving, and if the technology will really prevent highway deaths. Listen via Apple or other podcast platforms.

Source: Giphy

United Technologies (NYSE: UTX) said that it will split into three separate companies by the end of 2020: Its flagship aerospace business (including the recent Rockwell Collins acquisition), the Carrier HVAC business, and the Otis elevator business. The company closed trading yesterday with a market cap of around $102 billion.

  • Why it's the BFD: Because this is yet another sign that industrial conglomerates are becoming an American anachronism, following the molasses-like dismantling of General Electric.
  • Bottom line: "The world has changed. Focused businesses tend to do better." — Greg Hayes, United Technologies CEO, during a Tuesday morning analyst call.
Venture Capital Deals

QuintoAndar, a Brazilian apartment rental platform, raised $64 million in Series C funding. General Atlantic led, and was joined by return backers Kaszek Ventures, Ruane, Cunniff & Goldfarb, Qualcomm Ventures and QED.

Deskera, a Singapore-based provider of business management SaaS for small and mid-sized businesses, raised $60 million in Series A funding from Jungle Ventures, Cisco Investments, Tembusu Partners, Susquehanna International Group and Innoven Capital.

Topica, a Vietnamese online adult education platform, raised $50 million in Series D funding led by Northstar Group.

🚑 Rheostat Therapeutics, a Cambridge, Mass.-based developer of treatments for neurodegeneration, cognition and rare diseases, raised $23 million in Series A funding. MRLV and AbbVie Ventures co-led, and were joined by seed backers SV Health Investors and the Dementia Discovery Fund.

🚑 Quip, a direct-to-consumer provider of dental products like electric toothbrushes , raised around $20 million in new equity funding led by Sherpa Capital. It also secured $20 million in debt financing from Triplepoint Capital.

Eko Communications, a Bangkok-based enterprise messaging startup, raised $20 million in Series B funding. SMD Ventures led, and was joined by Redbeat Ventures, Gobi Partners and East Ventures.

Corvus Insurance, a Boston-based insurance startup for the food and pharma sectors, raised $10 million in Series A funding from .406 Ventures, Hudson Structured and return backer Bain Capital Ventures.

MPower Financing, a Washington, D.C.-based provider of educational loans to international and DACA students,, raised $10 million in equity funding and a $100 million line of credit. The round was co-led by Gray Matters Capital and Community Investment Management.

Private Equity Deals

Bain Capital is considering a takeover bid for listed German lighting group Orsam, which has a market cap of around $4.4 billion, per Bloomberg.

The Carlyle Group agreed to buy three gas-fired power plants in New England from Emera (TSX: EMA) for $590 million.

🚑 Harbour Point Capital acquired InSight Telepsychiatry, a Marlton, N.J.-based provider of telepsychiatry services.

🚑 LGC North America, a portfolio company of KKR, acquired SeraCare, a Milford, Mass.-based provider of products for the diagnostic testing industry, from Linden Capital Partners.

PNC Riverarch Capital bought Pirtek Europe, a London-based on-site provider of hydraulic hose replacement services, from The Halifax Group.

Public Offerings

Lionbridge, a Waltham, Mass.-based translation software company owned by H.I.G. Capital, is considering an Australia IPO that could value the company north of A$500 million, per the Australian Financial Review.

Liquidity Events

Sovereign Capital Partners is seeking a buyer for British foster care agency Children’s Services, which could fetch around £100 million, per the FT.

More M&A

AccorHotels (Paris: ACCP) plans to acquire the 47% stake it doesn’t already own in Central European hotel operator Orbis (Warsaw: ORBP) for around $500 million.

🚑 Bayer is considering strategic options for parts of its consumer health and animal health units, according to Reuters.

Faroe Petroleum (LSE: FPM) rejected a hostile $781 million takeover bid from Norway’s DNO (Oslo: DN).

Fiat Chrysler is considering a sale process for its Comau robotics arm, which could fetch upwards of €2 billion, per Bloomberg.


Main Post Partners of San Francisco closed its second growth equity fund with $700 million.

Monroe Capital raised $1.33 billion for its third private credit fund.

Storm Ventures is raising its sixth fund, per an SEC filing. It currently invests out of a $180 million vehicle raised in 2015.

Triton is nearing a €5 billion final close for its fifth European buyout fund, per Financial News.

It's Personnel

🚑 Reid Huber joined Third Rock Ventures as a partner. He previously was chief scientific officer at Incyte (Nasdaq: INCY).

Marcus Schenck, former co-head of Deutsch Bank’s investment banking business, has joined Perella Weinberg Partners.

Final Numbers
Expand chart
Data: PwC Sports Outlook 2018; Chart: Lazaro Gamio/Axios
Dan Primack

If this was forwarded to you, please subscribe at