Feb 24, 2020

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Illustration: Aïda Amer/Axios

U.S. private equity returns fell just below S&P 500 returns for the 10-year period ending last June, according to a report released this morning by Bain & Company.

Why it matters: Private equity markets itself as beating public markets over the long term, and usually providing an illiquidity premium to boot. These performance figures not only dent such claims, but provide fresh ammunition to critics of public pension investment in private equity funds.

Specific numbers: U.S. private equity fund IRR was 15.3% for the 10-year period, versus 15.5% for the S&P 500 public market equivalent.

Bain & Co. writes: "While a 15% average annual return net of fees is impressive even by private equity’s own high standard, parity with public markets is not what PE investors are paying for."

Private equity's defense would be fourfold:

  • U.S. PE returns were strong over the past decade, and top-tier funds outperformed the S&P 500.
  • U.S. PE returns outperformed the S&P 500 over most other time periods.
  • European private equity returns are higher than their public market comp.
  • The last time we saw this sort of inversion was for the 10 years ending March 2000, and private equity easily outpaced public equity over the subsequent 10 years.

The real question is if private equity will be held accountable for the relatively lackluster results by limited partners, particularly in an era of rising progressive politics and progressively lower buyout fund returns. Not by blanket failure to support new funds, but by demanding more LP-favorable terms.

The bottom line: Private equity promises alpha. It hasn't delivered over the past decade. Expect that to be a major bone of contention this week in Berlin, where the world's largest private equity fund managers and limited partners meet for the annual Super Returns conference.


Illustration: Aïda Amer/Axios

Intuit (Nasdaq: INTU) reportedly is nearing a $7 billion deal to buy Credit Karma, a San Francisco-based provider of consumer credit-score checks and monitoring services, as first reported by the WSJ.

  • Why it's the BFD: The combined company would hold a staggering amount of personal financial information. For consumers, that means much better recommendations and much bigger privacy concerns.
  • ROI: Credit Karma raised around $370 million in VC funding from firms like Ribbit Capital, Felicis Ventures, CapitalG, QED Investors, and Susquehanna Growth Equity. Silver Lake purchased a 12.5% stake from insiders in early 2018 at an estimated $4 billion valuation.

The bottom line: "Intuit could try to match all the tax data its TurboTax customers provide with the credit-scoring data that Credit Karma holds. That could let Intuit serve up better customer prospects to credit card issuers — and eventually let Intuit charge lenders more for access to its hoard of data." — Nathaniel Popper & Michael de la Merced, NY Times

Venture Capital Deals

🚑 Karius, a Redwood City, Calif.-based startup that tests for and identifies infectious diseases, has raised $165 million in a new funding round led by SoftBank Vision Fund 2. http://axios.link/4Tn4

BharatPe, an Indian lender and digital payments infrastructure enabler for small businesses, raised $75 million in Series C funding. Coatue Management and return backer Ribbit Capital co-led, and were joined by Amplo, Streadview Capital, and Insight Partners. http://axios.link/pZBA

Laiye, a Chinese provider of robotic process automation solutions, raised $42 million in Series C funding. Lightspeed Venture Partners and Lightspeed China Partners co-led, and were joined by return backers Cathay Innovation and Wu Capital. http://axios.link/mAUA

🚑 HealthJoy, a Chicago-based employee benefits platform, raised $30 million in Series C funding. Health Velocity Capital led, and was joined by USVP, Chicago Ventures, and Epic Ventures. http://axios.link/ElCE

🚑 Invetx, a Boston-based veterinary medicine startup, raised $15 million in Series A funding led by Anterra Capital. www.invetx.com

Sokowatch, a Kenya-based B2B platform for connecting local merchants to local and multinational suppliers, raised $14 million in Series B funding. Quona Capital led, and was joined by Amplo, Breyer Capital, Vertex Ventures, Timon Capital, and return backer 4DX Ventures. http://axios.link/LHUf

Ayenda, a Colombian hotel chain, raised $8.7 million. Kaszek Ventures led, and was joined by Irelandia Aviation, Kairos, Altabix, and BWG Ventures. http://axios.link/2sBM

Chattermill, a London-based provider of customer feedback insights, raised $8 million in Series A funding. DN Capital led, and was joined by Ventech, btov Partners, and SVB. http://axios.link/wh5r

Techspert.io, a UK-based platform for connecting companies to tech experts, raised £3.76 million in Series A funding led by Nauta Capital. www.techspert.io

Cobee, a Spanish employee benefit management startup, raised €2.1 million co-led by Speedinvest and Target Global. http://axios.link/OHxs

Private Equity Deals

Ardian is the front-runner for a 25% stake in top Italian mobile towers firm INWIT (Milan: INWT), per Reuters. http://axios.link/aYBo

🚑 The Carlyle Group invested in Mak-System, a Brussels-based provider of blood management software http://axios.link/UDbQ

🏉 CVC Capital Partners is in talks to invest £300 million for around a 14% stake in rugby tournament operator Six Nations, per the FT. http://axios.link/yrWP

Polaris Growth Fund invested in TransAct Communications, a Lynwood, Wash.-based provider of parent engagement software for K-12 schools. www.transact.com

🚑 Stada, a generic drugmaker owned by Bain Capital and Cinven, agreed to buy 15 consumer healthcare products from GlaxoSmithKline (LSE: GSK), per Reuters. http://axios.link/TbQ9

Public Offerings

🚑 Passage Bio, a Philadelphia-based developer of gene therapies for rare CNS disorders, is the only company expected to price a U.S. IPO this week. http://axios.link/a1cR

🚑 Inari Medical, an Irvine, Calif.-based maker of medical devices for treating venous diseases, filed for a $100 million IPO. It plans to trade on the Nasdaq (NARI) with BAML as lead underwriter, and reports a $1 million net loss on $51 million in 2019 revenue. Inari raised $53 million in VC funding from such firms as USVP (20% pre-IPO stake), Gilde Healthcare (19.6%), Versant Ventures (14.9%), and Crown Venture Fund (8.9%). http://axios.link/h8nc

SelectQuote, an insurance policy comparison site, filed for a $100 million IPO. It plans to trade on the NYSE (SLQT) with Credit Suisse and Morgan Stanley as lead underwriters. The company reports $37 million of profit on $241 million in revenue for the last six months of 2019. Brookside Equity Partners holds just over a 20% pre-IPO stake. http://axios.link/BqjI

Liquidity Events

New Mountain Capital is seeking a buyer for OneDigital, an Atlanta-based employee benefits and insurance broker that could fetch more than $2 billion (including debt), per Reuters. http://axios.link/egv4

Thomas H. Lee Partners is seeking to sell its majority stake in HighTower Advisors, a Chicago-based registered investment advisor that could fetch more than $2 billion, per Reuters. www.hightoweradvisors.com

More M&A

EBay (Nasdaq: EBAY) is seeking bids for its classified-ads unit, which could fetch around $10 billion with indications of interest due in March, per the WSJ. Interested suitors reportedly include Blackstone Group, TPG, Naspers, and Axel Springer. http://axios.link/9jBx

Metis Ventures, a Delaware LLC led by Tom Lacey and Amir Ansari, offered to buy San Jose, Calif.-based tech licensing firm Xperi (Nasdaq: XPER) for $1.16 billion in cash, or $23.30 per share (20% premium to Friday close). Xperi previously had agreed to an all-stock merger with TiVo (Nasdaq: TIVO). http://axios.link/GYZl

PepsiCo (Nasdaq: PEP) agreed to buy Be & Cheery, a Chinese snack-maker focused on nuts and dried fruits, from Haoxiangni Health Food (SZ: 002582) for $705 million. http://axios.link/ydll


Target Global, a Berlin-based VC firm, raised €120 million for its second early-stage fund. http://axios.link/zUzt

🚑 Town Hall Ventures, a New York-based firm focused on healthcare solutions for underserved communities, raised $260 million for its second fund, per an SEC filing. www.townhallventures.com

It's Personnel

Sara Gilbert joined Northern Trust as a Luxembourg-based senior exec responsible for alternatives business development. She previously was with AltaReturn in Hong Kong. www.northerntrust.com

Jon Kelly joined Blackstone Infrastructure Partners as a senior managing director and head of Europe. He previously was a managing partner and head of Europe for Brookfield Infrastructure. www.blackstone.com

White Wolf Capital, a Miami-based private equity firm, promoted Richard Leggio II to managing director, Andres Gutierrez to VP and Alon Debbi to senior associate. www.whitewolfcapital.com

Final Numbers
Source: Bain & Co. Global Private Equity Report. Data from Thomson LPC.
Dan Primack

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