Axios Pro Rata

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November 29, 2021

🚨 Breaking: Jack Dorsey is expected to step down as CEO of Twitter, as first reported by CNBC. No word on timing or who would replace Dorsey, who also leads Square.

Top of the Morning

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Illustration: Eniola Odetunde/Axios

Simon Clark is frustrated. The Wall Street Journal reporter is five months removed from the publication of his well-received book on Abraaj Group, a private equity pioneer turned Ponzi scheme, but tells me the industry has turned a blind eye to the cautionary tale he co-authored with Will Louch.

  • "The book has been widely read. I've been invited by academic institutions to talk about the issues raised, and one of the major limited partners has privately asked for a conversation. But, largely, the private equity and impact investing industries still don't want to even utter the word 'Abraaj,' ... ostriches with their heads in the sand, hoping to whole thing will go away."

Backstory: Abraaj was one of the world's most celebrated PE firms. Backers included the U.S. and U.K. governments. Its leader, Arif Naqvi, was a Davos regular who preached the gospel of impact investing n emerging markets; almost always with a mention of his own rags-to-riches bio, a jet-setting billionaire born of very modest means in Pakistan.

  • Naqvi also appears to have been a crook, allegedly stealing money from Abraaj and its investors. He'd fill the holes he created by raising new capital, with fundraising bolstered by falsified valuations. If that failed, he'd surreptitiously borrow money so that Abraaj's bank accounts looked "full" in quarterly statements sent to LPs.
  • Naqvi's con was first called by an investment officer named Andrew Farnum at the Bill and Melinda Gates Foundation, which had committed $100 million to an Abraaj healthcare fund. In short, Farnum noticed that capital calls weren't being matched by actual investments, and he then caught Abraaj in a lie about where they money was being kept.
  • Clark and Louch also played a major role, enabled by a whistleblower who was seemingly ignored by LPs.

Two big takeaways from the book, a page-turner that could be stuffed into stockings:

  1. A lot of LPs fell down on the job. If Farnum found the fraud, others could have too. It's a big reminder of how so much of private equity is based on trust, despite the billions of dollars at risk. The lack of other large-scale frauds may be more by luck than by design.
  2. Naqvi's key insight was that many investors are uncomfortable with the amoral nature of textbook capitalism. He promised that Abraaj would make money while doing good, a combo so intoxicating that red flags were ignored.

The fallout: Abraaj investors have stayed quiet, contributing to Simon Clark's consternation. Some of it is surely due to embarrassment. Some is at the request of law enforcement, including American officials who have spent years trying to get Naqvi extradited from the U.K., where he's under house arrest.

  • One tangible industry change, per a source familiar, is that LPs are now paying much more attention to the individual relationships between private equity and accounting firms. There were some personal ties between Abraaj and KPMG, although the accounting giant insists that it too was defrauded.

The bottom line: "I do believe impact investing can help solve some of the world's problems, so the pitch itself isn't necessarily bogus," Clark says. "But the bigger the promise an investor makes, the bigger the questions that should be asked of them."


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Illustration: Brendan Lynch/Axios

Clearlake Capital Group agreed to buy Quest Software, an Aliso Viejo, Calif.-based provider of enterprise management software, from Francisco Partners for $5.4 billion (including debt).

  • Why it's the BFD: This reflects ongoing private equity bounty from Dell's 2013 decision to go private, and its subsequent merger with EMC. In this case, Quest Software was born via Francisco's $2.4 billion carveout in 2016 of Dell's software unit, which was then split into two companies (the other, SonicWall, has been rumored to also be for sale).
  • The bottom line: "It is the latest big buyout in software, whose steady cash flow has become a major draw for private-equity firms, as they set their sights on bigger and bigger deals .... The price Clearlake is paying amounts to 10.9 times Quest's EBITDA for the last 12 months." — Miriam Gottfried, WSJ

Venture Capital Deals

Armis, a Palo Alto-based asset visibility and security platform, raised $300 million from One Equity Partners at a $3.4 billion valuation.

Slice, an Indian digital credit card provider, raised $220 million in Series B funding at a valuation north of $1 billion. Insight Partners and Tiger Global co-led, and were joined by Sunley House Capital, Moore Strategic Ventures, Anfa and insiders Gunosy, Blume Ventures and 8i.

Thought Machine, a London-based B2B banking platform, raised $200 million in Series C funding at a valuation north of $1 billion. Nyca Partners led, and was joined by ING Ventures, JPMorgan Chase Strategic Investments and Standard Chartered Ventures.

Motorway, a British auction platform for used cars, raised $190 million in Series C funding. Index Ventures and Iconiq co-led, and were joined by insiders Latitude, Unbound and BMW i Ventures.

🚑 Quell Therapeutics, a London-based developer of T-reg cell therapies for immune system conditions, raised $156 million in Series B funding co-led by Jeito Capital, Ridgeback Capital Investments, SV Health Investors, Fidelity and founding backer Syncona. Other new investors include British Patient Capital, Janus Henderson, Monshee Investment Management, Point72 and Tekla Capital.

🚀 Astroscale, a Japanese developer of orbital debris reduction solutions, raised $109 million in Series F funding. The Fund led, and was joined by Seraphim Space.

FJDynamics, a Chinese maker of agricultural robots, raised $70 million in Series B funding from an undisclosed investor.

Forest, a Japanese e-commerce brand acquirer, raised $8 million co-led by UTEC and Nordstar Partners.

Sabi, a Nigerian B2B e-commerce services startup, raised $6 million led by CRE VC.

TabTrader, a crypto exchange data aggregation app, raised $5.8 million in Series A funding from 100X Ventures, Hashkey Capital, Spartan Capital, SGH Capital, SOSV and Artesian Venture Partners.

Vauban, a London-based VC fundraising platform, raised £4.7 million. Pentech and Outward co-led, and were joined by 7percent Ventures and MJ Hudson.

Weld, a Copenhagen-based business data modeling startup, raised $4.6 million in seed funding co-led by Frontline Ventures and Cherry Ventures.

Perfeggt, a Berlin-based alt-egg startup, raised $2.8 million from EVIG Group, Stray Dog Capital, E2JDJ, Tet Ventures, Good Seed Ventures, Sustainable Food Ventures and Shio Capital.

🚑 Longevica, a Princeton, N.J.-based biotech focused on longevity, raised $2.5 million led by Xploration Capital.

🚑 Suzhou Abogen Biosciences, a Chinese mRNA vaccine developer, is raising around $300 million led by from backers like SoftBank and Mirae Asset Securities, per Bloomberg.

Private Equity Deals

Fenway Sports Group, the PE-backed owner of the Boston Red Sox and Liverpool F.C., will seek to buy an NBA team in 2022, Axios reports. We also note that FSG's pending purchase of the Pittsburgh Penguins hockey club will be valued at around $875 million.

🚑 Galderma, a Swiss dermatology company backed by EQT, bought Alastin, a Carlsbad, Calif.-based maker of anti-aging skincare products that had raised over $20 million (plus a PPP loan) from firms like Mesa Verde Venture Partners, Sage Venture Partners and Ropart Asset Management.

GSCM Group, a French portfolio company of Equistone, acquired Deltamod, a French modular building reuse company.

Ionity, a German EV charging group, raised €700 million led by BlackRock. Existing backers include Daimler, Volkswagen, Hyundai, Ford and BMW.

Juggernaut Capital Partners acquired L'Anza, a Santa Monica, Calif.-based hair care brand, from WestView Capital Partners.

NEO Energy, a London-based platform of HitecVision, will pay $1.7 billion for the U.K. North Sea assets of JX Nippon Oil & Gas Exploration, a unit of Eneos Holdings (Tokyo: 5020).

KKR invested in Taylor’s Schools, owner and operator of international schools in Southeast Asia.

Public Offerings

🚑 Nuvectis Pharma is the only company expected to price an IPO on U.S. exchanges this week. Several other companies, including HashiCorp and Rue Gilt Group, can launch their road shows.

SPAC Stuff

Battery Future Acquisition, an electrification SPAC, filed for a $250 million IPO.

The Growth For Good Acquisition, a sustainable business SPAC led by Yana Watson Kakar (Dalberg Advisors), filed for a $220 million IPO.

Heartland Media Acquisition, a SPAC led by local TV vet Robert Prather, filed for a $200 million IPO.

Southport Acquisition, a financial software SPAC led by Jeb Spencer (TVC Capital) and Jared Stone (Northgate Capital), filed for a $200 million IPO.

Spree Acquisition, a mobility-related tech SPAC, filed for a $175 million IPO.

Virtuoso Acquisition 2, a media SPAC, filed for a $200 million IPO.

Liquidity Events

Beijing Capital Group is seeking a buyer for ECO Special Waste Management, a Singaporean waste management group that could fetch up to $500 million, per Bloomberg.

Blackstone next year plans to seek a buyer for British resort chain Butlin's, which could fetch around £3 billion, per Sky News.

Next Capital of Australia is seeking a buyer for NZ Bus, a New Zealand urban bus transport business that could fetch over NZ$40 million, per Bloomberg.

Sun European Partners hired JPMorgan to find a buyer for Flamingo Horticulture, a British fresh flower and vegetable supplier that could fetch £750 million, per the Telegraph.

More M&A

Berry Global (NYSE: BERY), an Evansville, Ind.-based packaging manufacturer with around a $9 billion market cap, is being pushed to explore a sale by activist investor Ancora Holdings (which holds around a 1% stake), per the WSJ.

Privalia, a Spanish fashion e-commerce company, put its Brazilian operations on the block, per Reuters.

Software AG, a listed German business software company with a €2.6 billion market cap, is exploring strategic options that could include a sale, per Bloomberg.

Talent Garden, a VC-backed coworking space operator in Europe, acquired a 54% stake in online course provider Hyper Island.


Nextalia of Italy held a €563 million first close on a new midmarket PE fund that has an €800 million hard cap.

It's Personnel

Zoë Chambers joined Frontline Ventures as partner. She previously led the deeptech investing team at Octopus Ventures.

Bank of America Merrill Lynch promoted Shawn Hoyer to managing director. He continued to be global head of VC coverage for the tech investment banking group.

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