Feb 7, 2019

Axios Pro Rata

By Dan Primack
Dan Primack

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Top of the Morning
Source: Giphy

Listed private equity firms have begun to downplay "economic net income," the self-styled metric they previously claimed would best reflect their overall earnings — by including fee income, private equity distributions and changes to underlying portfolio valuations.

  • It's that last part that has introduced unwelcome volatility, causing KKR, Blackstone and Carlyle to drop the metric in recent earnings releases. Instead, they're now highlighting distributable earnings.
  • Apollo Global Management, which just posted its largest quarterly loss in eight years as a public company, plans to make the shift for Q1 reporting. So will Oaktree Capital Group.
  • All of this is really about PE titan complaints that the public markets treat them far too harshly, and comes after certain firms tried to rectify the disconnect by converting from partnerships to C-corps.
  • It's the sort of undervaluing that would otherwise lead to take-private buyouts...

Risk assessment: Venture capital firm is Accel is currently fundraising, and two LPs had similar explanations for why they're committing, despite some concerns over leadership transition:

"Remember that Harvard was all angry at Accel from how it acted after the dotcom crash, so it didn't invest in what ultimately became the Facebook fund. We just can't take a chance of history repeating itself."

New firm alert: Former AOL honcho Tim Armstrong today launched The DTX Co., whose mission will include investing in direct-to-consumer startups. It also will produce direct-to-consumer pop-up experiences, which he horrifyingly describes as "a cross between the Consumer Electronics Show and Coachella."

Update: Last month we noted that Eclipse Ventures had raised $500 million for its third fund, and that it soon would announce two ex-Fortune 500 CEOs as full-time partners. Now the names are public: Mike McNamara (Flex) and Sanjay Jha (GlobalFoundries and Motorola Mobile Devices).

Happy trails: Leigh Gallagher, a former colleague of mine at Fortune, is joining Google as its first director of external affairs. She'll be based in NYC, working with senior editors to both deepen relationships and organize small events. Two quick notes:

  1. Leigh is awesome.
  2. She says: "It's bittersweet, but the chance to go to Google and help shape a new role that plays so well to the unique basket of things that I do was an opportunity and new adventure that I couldn't pass up."

🎧 Podcast: Our new episode focuses on America's rising economic anxiety, and in age of strong economic data. Listen here.

The BFD

BB&T (NYSE: BBT) agreed to buy SunTrust Banks (NYSE: STI) for $28.24 billion in stock, thus creating the country's sixth largest bank based on assets and deposits.

  • Why it's the BFD: Because it would be the biggest U.S. bank merger since the 2008 financial crisis.
  • Bottom line: "The Trump administration is pushing for easing crisis-era regulations that restricted expansion and added increased regulatory scrutiny on big banks. Added to that, changes in the U.S. tax laws that lowered corporate tax also freed up capital and Wall Street has long been expecting a wave of deal-making in the banking sector." — Aparajita Saxena, Reuters
Venture Capital Deals

Raisin, a Berlin-based financial marketplace for term deposits, raised $114 million in Series D funding from return backers Index Ventures, PayPal, Ribbit Capital and Thrive Capital. http://axios.link/DNJf

Goat, a Culver City, Calif.-based secondary marketplace for sneakers, raised $100 million from Footlocker (NYSE: FL). No details on valuation, but a source puts it "way above" the $250 million post-money from Goat's February 2018 round. http://axios.link/YjW0

🚑 Health Catalyst, a Salt Lake City-based health data analytics company, raised $100 million in Series F equity and debt funding at a valuation north of $1 billion, led by OrbiMed Advisors. http://axios.link/qC75

🚑 HiberCell, a New York-based biotech focused on preventing cancer relapse and metastasis, raised $60.75 million in Series A funding led by Arch Venture Partners. www.hibercell.com

Tink, a Sweden-based open banking platform, raised €56 million. Insight Venture Partners led, and was joined by Sunstone, SEB, Nordea Ventures and ABN AMRO Digital Impact Fund. http://axios.link/WI0O

Gong.io, a San Francisco-based sales conversation intelligence platform, raised $40 million in Series B funding. Battery Ventures led, and was joined by Norwest Venture Partners, Shlomo Kramer, Wing Venture Capital, NextWorld Capital and Cisco Investments. www.gong.io

Cluno, a Munich-based “car subscription” startup, raised $28 million in Series B funding. Valar Ventures led, and was joined by Acton Capital Partners and Atlantic Labs. http://axios.link/rDzN

Jetty, a New York-based provider of renter’s insurance, raised $25 million in Series B funding. Khosla Ventures led, and was joined by Valar Ventures and Ribbit Capital. http://axios.link/iEU5

🚣 Hydrow by CREW, an at-home rower with live workouts (i.e., Peloton, on the “river”), raised over $20 million led by L Catterton. www.hydrow.com

• ChartIQ, a Charlottesville, Va.-based data visualization and integration platform for capital markets, raised $17.4 million in Series B funding led by Germany’s Digital Partners. www.chartiq.com

• Zoovu, an Austria-based digital sales assistant platform, raised $14 million in Series B funding co-led by Target Global and Beringea. www.zoovu.com

🚑 Recida Therapeutics, a Menlo Park-based drug startup focused on serious antibiotic-resistant infections, raised $8.5 million in Series A funding from Frazier Healthcare Ventures. www.frazierhealthcare.com

Pretto, a Paris-based online mortgage broker, raised €8 million in Series A funding co-led by Alven Capital and Blackfin Tech Fund. http://axios.link/m48U

DataSine, a London-based automated content-creation platform, raised $5.2 million co-led by Pentech and Propel Venture Partners. www.datasine.com

Deepomatic, a French platform for building computer vision apps for industrial needs, raised $5.1 million in new equity funding led by Hi Inov. It also secured $1.1 million in debt. http://axios.link/tdIK

Netography, a San Francisco-based autonomous network security platform, raised $2.6 million in seed funding from Andreessen Horowitz. www.netography.com

Private Equity Deals

BV Investment Partners acquired Intelliteach, an Atlanta-based outsourced services provider of the legal and accounting markets, from Dominus Capital. www.intelliteach.com

Corrum Capital sponsored a management buyout of AvAir, a Chandler, Ariz.-based supplier of aviation aftermarket parts. www.avair.aero

Grupo MYT, a portfolio of restaurant brands in Mexico, raised an undisclosed amount of equity funding from L Catterton. http://axios.link/Pdv0

OneStream Software, a Rochester, Mich.-based provider of corporate performance management software, raised an undisclosed amount of equity funding from KKR at a valuation north of $1 billion. www.onestreamsoftware.com

Protective Industrial Products, a Latham, N.Y.-based portfolio company of Audax Private Equity, agreed to buy West Chester Protective, a Cincinnati-based provider of personal protective equipment for the retail and industrial markets. www.pipglobal.com

Thoma Bravo agreed to buy Aucerna, a Canadian provider of software for the upstream oil and gas markets. Sellers include Rubicon Technology Partners. www.aucerna.com

🚑 Topix, an Amityville, N.Y.-based portfolio company of New Mountain Capital, acquired ClarityRx, a Newbury Park, Calif.-based provider of spa-dispensed skincare products.
http://axios.link/MhjJ

Public Offerings

🚑 Alector, a South San Francisco-based immuno-neurology company, raised $175 million in its IPO. The company priced 9.25 million shares at $19 (middle of range), for an initial market cap of around $1.37 billion. It willl trade on the Nasdaq (ALEC), used Morgan Stanley as lead underwriter, and had raised over $200 million from firms like Polaris Venture Partners (21.7% pre-IPO stake) and OrbiMed (21.4%). http://axios.link/oxXO

EQT Partners is seeking to raise around €1 billion in a Stockholm IPO that is expected to come in Q3, per Reuters. http://axios.link/75sl

Lightspeed POS, a Montreal-based maker of payments software, filed for a C$200 million Toronto IPO. The company has raised over $300 million in VC funding from firms like Accel Partners, Caisse de dépôt et placement du Québec, iNovia Capital, Teralys Capital, Investissement Québec and Silicon Valley Bank. http://axios.link/lrMF

Liquidity Events

CI Capital Partners agreed to sell Tech Air, a Connecticut-based distributor of industrial gases and welding supplies, to Air Liquide (Paris: AI). http://axios.link/aXTz

• Nutrien (TSX: NTR) agreed to buy Actagro, a Fresno, Calif.-based maker of plant nutrient products for the agriculture industry, from Norwest Equity Partners for $340 million. http://axios.link/ZTxq

🎧 Spotify (NYSE: SPOT) agreed to buy podcasting networks Anchor and Gimlet. Anchor had raised over $14 million from firms like Accel and GV, while Gimlet had raised around $27 million from firms like Stripes Group and WPP. http://axios.link/E6do

More M&A

EU regulators formally blocked Alstom (Paris: ALSO) from merging its rail operations with those of Germany's Siemens. http://axios.link/G7oo

Aphria (TSX: APHA), a Canadian cannabis company, rejected a revised hostile takeover offer from cannabis retailer Green Growth Brands. http://axios.link/on8r

Liberty Global (Nasdaq: LBTY) is in talks to sell its Swiss business, UPC Schweiz, to Sunrise Communications Group (Swiss: SRCG). http://axios.link/zuef

Uniper, an $11.1 billion Germany energy company, said it has reopened talks with 47% shareholder Fortum, whichh could possible lead to a sale of the full company. http://axios.link/kSZ2

Yelp (NYSE: YELP) has hired Evercore to help defend it against activist investor SQN, which holds 4% stake in the local review site and which recently called for board changes and a possible sale.

Fundraising

Bernhard Capital Partners, a Louisiana-based private equity firm focused on industrial services companies, raised $1.2 billion for its second fund. http://axios.link/E2yc

It's Personnel

Bob Diamond, the former CEO of Barclays, is stepping down as chairman of Atlas Mara, the pan-African financial firm he founded six years ago. http://axios.link/QhLW

H.I.G. Capital promoted Fabio Saad to head of the Andean region. He’s been with the private equity firm since 2014, and is based in Bogotá. www.higcapital.com

Final Numbers
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Adapted from a BDO report; Chart: Axios Visuals
Dan Primack