PE DATA, PE SCAMS, PE HEARINGS, PE STRATEGY…AND JETER
PE DATA: This morning PitchBook released its report on 2016 private equity activity. It’s not great. Deal volume is down. Deal multiples are up. Equity contributions are up. Exit values are down. Fundraising is down. PitchBook calls this a “return to normalcy” from the record-breaking highs of 2014 and the “turning point” of 2015. The breakdown:
• Deals: Private equity firms invested $649 billion into 3,538 deals last year. That’s down 12% by value and 14% by volume from the year prior.
• Multiples: Median enterprise value hit 10.9x EBITDA for M&A transactions last year, up from 10x in 2015 and 8x in 2010. Why? Too few feasible investment opportunities, PitchBook posits.
• Debt-to-equity: The median debt percentage for private equity and M&A deals fell to 50.5% of the enterprise value, compared to 56.8% in 2015. Buyout shops are having to contribute more equity to deals.
• Exits: Buyout firms pulled $316 billion on 1,097 exits in 2016. That's down 22% by value and 18% by volume from 2015.
• Fundraising: 11% fewer private equity funds raised money last year than the year prior, and commitments were down 12%.
The Recruiting Scam That Won’t Quit: Last year Fortune unveiled a strange scam aimed at the private equity and venture capital industries involving fake recruiting firms called Prelude Recruiting and Renaissance Recruiting. (A separate but related scam involved fake VC firms called Sienna Ventures and Asenqua Ventures.) The idea was to get digital signatures from job-seekers through NDAs, likely for identity theft. These were elaborate schemes, involving press releases on PR Newswire, and fake employees using stolen bios and headshots with fake LinkedIn accounts.
In November the scam resurfaced. A firm called Lynn Recruitment used a fake press release, a thrown-together site with plagiarized blog posts, stock photos, and fake LinkedIn accounts to lure in job-hunters. After Term Sheet reported on the scam, the site disappeared.
It's back again, using the exact same email wording as before. But the scammers are taking a different tact: association with government programs. A man named James Bernard has emailed multiple Term Sheet readers from a company called Workplace Recruitment (“a reputable Global Recruitment Firm”). The email uses the logo of WRP.gov, a government program that connects federal sector employers nationwide with students with disabilities. Except it links to WRP.jobs. That site claims to be an agency that collaborates between EARN, a government jobs program, and a compliance recruiting site called DirectEmployers, though it is careful to note it is not the same as WRP.gov. Be careful out there…
PE in DC: Wilbur Ross, who once told Fortune that government is investors’ biggest concern, agreed to divest 90% of his holdings and resign from 40 different professional titles in his commerce secretary cabinet confirmation hearing yesterday.
My colleague Jen Wieczner has the details on what he said about cybersecurity (bad!), job displacement from driverless trucks (also bad!), the cloud (good!), the privatizing the Internet (eh?). She notes that Ross’ approval seemed imminent:
By the end of the nearly four-hour hearing, there seemed little doubt that Ross would be approved for the job. "This hearing is a piece of cake compared to some of the other nominees that are going through the process," Sen. Bill Nelson, the raking Democratic member of the Senate Commerce Committee, said in wrapping up the proceedings. Read more. Mnuchin is up today, here are the biggest questions for him.
Buy, Squeeze, Repeat: My colleague Geoff Colvin has a feature story out this morning that shows that the “buy, squeeze, repeat” playbook for private equity firm 3G, which has worked great for the past 30 years, may not be working on its portfolio company Kraft-Heinz. The industry is expecting Kraft-Heinz to make another giant acquisition (the “buy” part of the playbook), but the available options are either too big, or have already done the “squeeze” part on their own. He writes:
The entire food industry is “3G-ing” itself before Kraft Heinz can do it to the companies. Ever since 3G bought Heinz, every major U.S. foodmaker has announced an initiative to reduce its overhead significantly. 3G embraces a demanding discipline called zero-based budgeting, in which every unit’s budget is assumed to be zero at the beginning of each year, and every proposed expense must be justified anew. What do you know? Soon after the Heinz deal, Mondelez adopted zero-based budgeting, trumpeting the expected savings to Wall Street. When Kraft Heinz was closing down plants and laying off workers last summer, General Mills announced it would close five plants and eliminate 1,400 jobs. Read the rest here.
Jeter: The Player’s Tribune, Derek Jeter’s content startup, has raised $40 million in new funding led by IVP alongside existing investors and GV. In an interview with my colleague Michal Lev-Ram, Jeter touted the site’s brand and plans for scaling.
[The site] now has more than 1,200 athletes generating content for the site, including NASCAR driver Danica Patrick, Carolina Panthers quarterback Cam Newton, and the Golden State Warriors’ Kevin Durant. What’s more, the site’s monthly average “content views” has hit 100 million, and users are spending an average of about five minutes on each page.
The company, like all content companies, believes the next area of growth is video. Read more.
Correction: Yesterday’s Term Sheet included the Bain Capital Private Equity acquisition of PSA Healthcare but left out a rather important part (the “Bain” part) of the buyer’s name. Apologies.
THE LATEST FROM FORTUNE...
• Mark Zuckerberg will spend billions more on virtual reality.
• Yellen: The U.S. is close to full employment.
Fretting about inequality over vintage wine and canapés. Censorship via app stores. Self-driving cars at Amazon? $1000 an hour for fake news. Ten times Trump spread fake news. Rick Perry’s “learning curve.” Palantir protest. Potential grizzlies.
• The Players’ Tribune, a New York City-based online site featuring content written by athletes (Derek Jeter is a co-founder), raised $40 million in funding. IVP led the round, and was joined by NEA, GV, and individual angel investors. Read more at Fortune.
• Flirtey, a Reno, Nev.-based drone delivery startup, raised $16 million in Series A funding, according to TechCrunch. Investors include Menlo Ventures, Qualcomm Ventures, Lowercase Capital, Y Combinator, World Innovation Lab, Goodwater Capital, Amity Ventures, and Partech Ventures. Read more.
• Two Bit Circus, a Los Angeles-based entertainment company that installs circuses, raised $15 million in Series B funding. JAZZ Venture Partners led the round, and was joined by Foundry Group, Techstars Ventures, Intel Capital, Dentsu Ventures, and Georgian Pine.
• Iyzico, a Turkish fintech startup, raised $13 million in a Series C funding, according to Tech.eu. Vostok Emerging Finance led the round, and was joined by World Bank’s International Finance Corporation, and 212. Read more.
• Amra, a Swedish-based digital health company, raised $9 million in funding. Pfizer Venture Investments and Novo Seeds led the round.
• Split, a Redwood City, Calif. platform for controlled rollouts, raised $8 million in Series A funding. Accel led the round, and was joined by Lightspeed Venture Partners and Sway Ventures.
• FLYR, a San Francisco data science company that predicts flight fare changes, raised $8 million in Series A funding. Peter Thiel led the round, and was joined by JetBlue Technology Ventures, Streamlined Ventures, AXA Strategic Ventures, Amadeus, Western Technology Investment, Plug and Play and Chasm Capital Management.
• Bankin’, a Paris, France-based finance app, raised €7 million ($7.4 million) in funding. Omnes Capital led the round, and was joined by CommerzVentures, Generation NewTech, and angel investors.
• ID DataWeb, a Vienna, Va. provider of cloud broker services for identity security, raised $3 million in funding from Strategic Cyber Ventures.
• Fabric, a New York City-based digital life insurance company, raised $2.5 million in funding. Bessemer Venture Partners led the round, with participation from Box Group, Brainchild, Maveron, Red Sea Ventures, and RGAx.
• Headset, Inc., a Bellevue, Wash.-based retail analytics firm for cannabis-related businesses, raised $2.5 million in funding from Hypur Ventures and Salveo Capital.
• Laugh.ly, a San Francisco streaming mobile app built for stand-up comedy, closed its seed round at $2.25 million. New York Angels led the round, and was joined by Barbara Corcoran, the Wharton Alumni Angel Network, Social+Capital, Backstage Capital, Treehouse Capital, Accelerator Ventures and Atlas Holdings.
• Iris Automation, a San Francisco-based developer of collision avoidance systems for industrial drones, raised $1.5 million in funding, according to TechCrunch. Bee Partners led the round, and was joined by Social Capital, GGV Capital, Liquid 2, Kevin Moore and Pau Bucheit. Read more.
• Biowatch SA, a Swiss biometric identification system designed to be integrated into a watchband, raised CHF 1.2 million ($1.19 million) in funding. Angel investor Patrick Delarive led the round, and was joined by Polytech Ecosystem Ventures and SICPA Finance.
PRIVATE EQUITY DEALS
• Elliott Management and Bluescape acquired a respective 5.4% and 2.5% stake in NRG Energy Inc (NYSE:NRG), according to Reuters, and plan to use their combined investment to pressure the company to make strategic changes. Read more.
• Sentinel Capital Partners has hired Piper Jaffray Cos as it prepares to sell Checkers Drive-In Restaurants, a Tampa, Fla.-based burger chain operator, in a deal that could value the company at around $500 million, according to Bloomberg. Sentinel Capital Partners bought Checkers in 2014. Read more.
• San Francisco Equity Partners acquired a majority stake in Red Monkey Foods, a Springfield, Mo.-based organic spices and seasonings company. Financial terms were not disclosed.
• BV Investment Partners invested in C-4 Analytics, LLC, a Saugus, Mass.-based digital marketing firm. C-4 Analytics’ founders Michael Weiss and Justin Cook will maintain a majority interest in the company.
• Consort, the French outsourcing applications and infrastructures company backed by Ardian, acquired Altea, a French software testing and certification company, and Estia, a data intelligence consultant.
• Partners Group has acquired Curvature, a Santa Barbara, Calif.-based provider of equipment routers and switches, from Quad-C and merged the business with its portfolio company SMS Maintenance Services, a Charlotte, N.C.provider of managed IT asset lifecycle support services. Financial terms were not disclosed.
• Modere, a Springville, Utah-based manufacturer of nutrition and wellness products backed by Z Capital, agreed to purchase Jusuru International, an Anaheim, Calif.-based maker of anti-aging products. Financial terms were not disclosed.
• The Abraaj Group acquired a majority stake Casaideas, a Chile-based home design and decorations company.
• ServiceNow (NYSE: NOW) acquired of DxContinuum, a Fremont, Calif.-based provider of predictive analytics services for sales teams. Terms were not disclosed. DxContinuum raised $1.6 million in venture funding from an undisclosed investor.
• Bega Cheese, an Australian dairy product manufacturer, has agreed to buy the majority of Mondelez International's (Nasdaq:MDLZ) Australian and New Zealand grocery brands, including Vegemite, for A$460 million ($345 million). Read more at Fortune.
• HNA Group Co. and RON Transatlantic EG agreed to purchase a majority stake in SkyBridge Capital, a New York City-based investment manager founded by incoming White House adviser Anthony Scaramucci, according to Bloomberg. Read more.
• Laureate Education, a Baltimore-based for-profit provider of high-education degree programs, set its IPO terms. It plans to offer 29 million shares priced between $17 to $20. Credit Suisse Morgan Stanley Barclays are the lead underwriters on the offering. Laureate is backed by KKR (NYSE:KKR).
• Apax Partners is planning to take portfolio company Evry ASA, a Norwegian provider of IT services. The IPO could value the business at up to 16 billion krones ($1.88 billion) according to a report by Finansavisen. Apax bought Evry for 3.4 billion krones ($401 million) in 2015. Read more.
• MBB has hired Citi,Berenberg and Hauck & Aufhaeuser as it prepares to take German automation machinery manufacturer Aumann public, according to a report by Reuters. Read more.
• Oracle (NYSE:ORCL) agreed to buy Apiary, a Prague and San Francisco-based API platform. Terms of the deal were not disclosed. Apiary raised $8.5 million from investors including Baseline Ventures, Credo Ventures, Flybridge Capital Partners, and angel investors such as Esther Dyson and James Lindenbaum. Read more at Fortune.
• Hyatt Hotels Corporation acquired Miraval Group, a Tuscan, Ariz.-based operator of wellness spas and resorts, from KSL Capital. Under terms of the deal, Hyatt will pay $215 million for the Miraval brand and two resorts. Read more at Fortune.
• PNC Riverarch Capital sold Goldco, which operates 46 Burger King restaurants in Southeast Florida, to Seven Hospitality. Terms were not disclosed.
FIRMS + FUNDS
• Rocket Internet (XTRA:RKET) raised $1 billion for its latest fund, Rocket Internet Capital Partners Fund, which will invest in Internet startups in Europe.
• Jason Urband has been promoted to principal and Josh Sartisky has been promoted to senior associate at Lariat Partners.
• Scott McCorkle joined the venture firm High Alpha as an executive-in-residence. Previously, McCorkle was CEO of Salesforce Marketing Cloud.
• Joseph M. Fortunato joined J.W. Childs Associates as an operating partner.
• Lenny Pruss joined Amplify Partners as a partner, and Ted Stinson and Evan Sparks joined the firm as an executive-in-residence and an entrepreneur-in-residence, respectively. In addition, David Beyer has been promoted to partner.
• Tom Shehab is now a managing director at Arboretum Ventures. Previously he was a principle at the firm.