Axios Pro Rata

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October 31, 2022

Top of the Morning

Illustration of a boardroom chair splitting into three overlapping chairs and reforming into one.

Illustration: Brendan Lynch/Axios

U.S. antitrust regulators may be coming for private equity.

Driving the news: Several large buyout firms have received Justice Department inquiry letters about partners sitting on multiple portfolio company board seats within the same industry, per Bloomberg.

  • DOJ's concern reportedly is that this overlap "could influence those companies to act in ways that maximize gains for all — instead of competing vigorously to provide the best services or lowest prices to consumers."
  • Letters have gone out to private equity firms of all sizes, including industry giants like Apollo, Blackstone and KKR.

The big picture: Private equity typically views each of its portfolio companies as discrete entities, even if majority owned and held within a single fund. That's one of the reasons it's successfully fought charges of systemic risk.

  • This also is true of venture capital and growth equity, albeit usually with minority stakes.

Why it matters: Were overlapping board seats to violate U.S. antitrust law, then the same argument could apply to overlapping investments.

  • That would blow a huge hole in the core investment strategies of many industry-focused PE firms. Plus of more diversified firms with robust industry practices.
  • It also could drive up the price of private equity deals, because of added regulatory uncertainty.

The bottom line: Private equity has a long history of fending off Washington, D.C., as best evidenced by its continued ability to treat carried interest as capital gains. And that probably will play out again this time, although firms are surely doublechecking board meeting notes to make sure they didn't give DOJ an opening.


Illustration of a bar chart made of air conditioning units

Illustration: Lindsey Bailey/Axios

Emerson (NYSE: EMR) agreed to sell a 55% stake in its climate technology business, which mostly sells Copeland-branded HVAC compressors and related products, to Blackstone at a $14 billion enterprise value.

Why it's the BFD: This is about both climate and cost, with Blackstone betting that residential and commercial building owners will pay to upgrade system efficiency.

  • It's also part of a broader divestiture push by Emerson, following the sale of its InSinkErator food-waste disposal business to Whirlpool and of its Therm-O-Disc thermostats unit to One Rock Capital Partners.

Details: St. Louis-based Emerson will retain a 45% stake in the climate tech business, which generated $5 billion of fiscal 2022 sales.

The bottom line: This is a large leveraged buyout, but Wall Street remains on the sidelines. WSJ reports that Blackstone placed the $5.5 billion of debt itself, in a process that took nearly a month.

Venture Capital Deals

🌎 Solugen, a Houston-based developer of plant-derived chemicals, raised $200m in Series D funding at a valuation north of $2b. Existing backers include Ballie Gifford, GIC and Lowercarbon Capital. BFD flashback.

Money Fellows, an Egyptian money circle digitization startup, raised $31m in Series B funding co-led by CommerzVentures, Middle East Venture Partners and Arzan VC co-led, and were joined by Partech, Sawari Ventures, Invenfin, National Investment Co., 4DX Ventures and P1Ventures.

🚑 Midi Health, an SF-based virtual women's hormone care clinic, raised $14m in seed funding. Felicis and SemperVirens co-led, and were joined by Emerson Collective, Icon Ventures, Operator Collective, Muse Capital, Steel Sky Ventures and Anne and Susan Wojcicki.

Invygo, a long-term car subscription service in the UAE and Saudi Arabia, raised $10m in Series A funding. MEVP led, and was joined by Al Rajhi Partners, Arab Bank, Amana Capital and Palm Drive Capital.

Lama AI, a New York-based business lending platform, raised $9m in seed funding. Viola Ventures and Hetz Ventures led and were joined by Foundation Capital and SixThirty.

Topline Pro, an online scaling service for home services businesses, raised $5m in seed funding. Bonfire Ventures led, and was joined by TMV and BBG Ventures.

Zebralabs, a Chinese metaverse service for celebrities, raised $5m co-led by NetDragon and Sumitomo.

Apply Design, an Israeli "Shopify for property listings," raised $3.3m from Urban Innovation Fund, Cathexis Ventures, Goodwater Capital and YC.

Fursure, a Miami-based pet insurance marketplace and neobank, raised $3m in seed funding. MaC Ventures led, and was joined by Sure Ventures, Scrum VC, Western Tech Investment, Slope Fund, Winklevoss Capital, Streamlined Ventures, Upside Partnership.

Private Equity Deals

Gaw Capital Partners is in talks to pay around $540m for a portfolio of Tokyo-area warehouses from Blackstone, per Bloomberg.

🚑 Lee Equity Partners acquired Bradford Health Services, a Birmingham, Ala.-based substance use disorder treatment provider, from Centre Partners.

Mediawan, a French media group owned by KKR, Groupe MACSF and Bpifrance, is in talks to buy a stake in Plan B Entertainment, the Brad Pitt-founded production firm whose tiles include "12 Years a Slave" and "Moonlight," per Bloomberg.

Resolution Economics, an LA-based portfolio company of LLCP, acquired Berkshire Associates, a Columbia, Md.-based provider of outsourced affirmative action plan consulting and software.

Verisk (Nasdaq: VRSK) agreed to sell its Wood Mackenzie energy business to Veritas Capital for $3.1b.

Public Offerings

No companies expect to go public on U.S. exchanges this week.

SPAC Stuff

🚑 Intrinsic Medicine, a Seattle-based gut-brain axis biotech seeded by SOSV and CRCM Ventures, agreed to go public at an implied $136m pre-merger equity value via Phoenix Biotech Acquisition Corp. (Nasdaq: PBAX).

zTrip, a Pittsburgh-based taxi fleet operator, agreed to go public at an implied $251m pre-merger valuation via Spree Acquisition 1 (NYSE: SHAP).

Liquidity Events

🚑 Blackstone is considering a sale process for up to a 50% stake in HealthEdge Software, a Burlington, Mass.-based provider of software to health insurers, per Bloomberg. A deal could value HealthEdge at around $3b.

🚑 Thermo Fisher Scientific (NYSE: TMO) agreed to buy British medical diagnostics firm Binding Site from Nordic Capital and Five Arrows for £2.25b in cash.

🚑 Tyree & D'Angelo Partners is seeking a buyer for Denver-based veterinary platform Western Veterinary Partners, per Axios Pro.

More M&A

Allwyn Entertainment, the U.K.’s incoming National Lottery operator which recently called off a SPAC merger, is in talks to buy former operator Camelot’s U.K. operations for up to £100m, per Sky News.

Campari (Milan: CPR) agreed to buy Kentucky-based bourbon maker Wilderness Trail Distillery at an implied equity value of $600m.

Citigroup’s (NYSE: C) Russian unit agreed to sell a portfolio of personal installment loans to Russian commercial bank Uralsib.

The Della Valle family scrapped its takeover offer for luxury footwear maker Tod’s (Milan: TOD), after failing to secure a 90% ownership threshold.

Stellantis (Milan: STLA) and Guangzhou Automobile Group said that their joint venture making Jeeps in China would file for bankruptcy.

It's Personnel

Josh Cohen has left Golden Gate Capital after a 13-year run, most recently as a managing director and co-head of consumer tech investments, per an email sent to friends and colleagues.

Lauren Cummings stepped down as Morgan Stanley’s head of tech equity capital markets in the Americas to join Hellman & Friedman, per Bloomberg. She’ll be succeeded at MS by Diana DiBernardo Doyle and Lauren Garcia.

GTCR promoted Luke Marker, Stephen Master and KJ McConnell to managing directors.

Warburg Pincus laid off seven China dealmakers, including partners Vera Yang and Gordon Ding, per Bloomberg.

David Sacks, co-founder and partner at Craft Ventures, is among those helping Elon Musk in the early days of his Twitter transition. He even has a Twitter email address now. But Sacks tells Axios that he has no plans to leave his fulltime venture gig.

  • Other VCs at Twitter HQ in recent days include Sriram Krishnan (a16z partner/ex-Twitter product exec) and Jason Calacanis.

EquityZen, a New York-based marketplace for startup equity, last week laid off 27% of its workforce, or around 30 employees, per Axios.

Final Numbers

PitchBook chart on university founders
Source: PitchBook's university rankings report

No changes to the Top 10 in PitchBook's annual ranking of undergrad programs by the number of VC-backed founders among their alumni. In fact, the only difference is that Tel Aviv University and the University of Michigan swapped spots.

  • There were, however, significant shifts among MBA programs. Stanford snagged the top spot from Harvard, while a pair of U.K. schools — University of Cambridge (#7) and University of Oxford (#8) — cracked the Top 10.
  • The rest of the top five MBA programs were MIT, Columbia and UC Berkeley.

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