Twelve hours ago, I was prepared to write a straightforward, borderline boring analysis of the AppDynamics IPO, slated for this morning. Then …a catalyst changed things. Specifically, Qatalyst Group.
While AppDynamics was putting the finishing touches on its road show pitch decks, Nadir Shaikh, an M&A banker at Qatalyst Group, was discussing an acquisition with potential buyers. To be clear: This was not a dual-track process. (TechCrunch first noted this last night.) AppDynamics had not yet retained Qatalyst, according to a person familiar with the deal. But Qatalyst doesn’t underwrite IPOs, so drumming up interest from a buyer — in this case, Cisco — is one way to turn someone else’s IPO deal into a Qatalyst M&A deal. In other words, the firm lived up to its name.
Last night Cisco announced it acquired AppDynamics for $3.7 billion. Somewhere, a box of Lucite deal trophies is going straight to the garbage.
Shaikh also worked on Cisco’s acquisitions of Sourcefire, OpenDNS, and Jasper. AppDynamics’ underwriters Morgan Stanley and Goldman Sachs advised the company alongside Qatalyst in the deal.
A few notes:
Timing: The deal came together in about 72 hours. Cisco decided late last week to aggressively go after the company. The AppDynamics team didn’t think there was enough time, but after “maddening negotiations,” according to one person familiar with the deal, it came together.
Documents were signed yesterday afternoon. That means CEO David Wadhwani was pitching the stock to road show investors as late as yesterday morning, just hours before selling the company. Whoops, nevermind!
Demand: The IPO was “crazily oversubscribed,” one person familiar with the deal said, because of pent-up institutional demand for IPOs. That bodes well for whichever company takes the plunge next.
Pricing: The 11th hour timing gave AppDynamics a lot of negotiating power. If Cisco had approached the company a few months earlier, it likely could have gotten it at a much lower price. But because AppDynamics had nothing to lose if the deal didn’t happen, it could negotiate a cash deal with no escrows or terms. “They had to buy it like it was a public company,” one source says.
Rob Salvagno, Cisco’s head of M&A, told my colleague Jonathan Vanian, “Timing is always something that you can debate.”
Whiplash: The vote to sell was unanimous, but some board members took a little convincing. I’m guessing Wadhwani had some whiplash — he joined the company a year and a half ago, with founder Jyoti Bansal becoming chairman. The plan was for Wadhwani to build out the management team, streamline operations, and take it public.
Returns: This is a very good outcome for AppDynamics’ investors, who poured $314 million into the company over nine years. The company’s last valuation was $1.9 billion.
Greylock and Lightspeed co-led the Series A and Series B rounds. They each made more than 100x their money, according to people familiar with the deal. Greylock says the deal more than returned its entire twelfth fund, a $500 million vehicle that closed in 2005.
Kleiner Perkins Caufield & Byers, which led the Series C, made more than 10x. Later investors include IVP, Battery Ventures, Sands Capital Ventures, ClearBridge Investments, Altimeter Capital, Adage Capital and General Atlantic. The latter three were planning to invest in a private placement alongside the IPO.
What does AppDynamics do, you ask? According to its now-irrelevant S-1, the company operates an “innovative, enterprise-grade application intelligence software platform that is uniquely positioned to enable enterprises to accelerate their digital transformations by actively monitoring, analyzing and optimizing complex application environments at scale.” According to its extremely relevant press release, the company “helps many of the world’s largest enterprises translate this data into business insights and empowers them to drive value for their customers in today’s digital world.” For more on the deal, read Vanian’s analysis here.
In other IPO news: The Jose Cuervo IPO is back on track after a Donald Trump-related delay, Bloomberg reports. The company is reportedly preparing to raise $1 billion. No word on the ticker symbol, but I submit SHOT or LIME…
Activism gets results: Bob Evans’s activist investor has successfully pushed the company to transform itself. Golden Gate Capital is acquiring the company’s restaurants for $565 million, while the company’s packaged foods business, a smaller but faster-growing segment, will stay listed. (That business also announced it bought a potato company.) It wasn’t exactly the outcome activist Thomas Sandell had been pushing for – he wanted Bob Evans to sell off the packaged food business, not the other way around. My colleague John Kell notes:
Restaurant companies can make ripe targets for activists, as most are tiny by market-cap standards so amassing a sizable stake doesn’t cost too much. Buffalo Wild Wings (BWLD, +1.81%) and Chipotle Mexican Grill (CMG, +2.49%) have both seen activist investors jump into their stocks in recent months. Read more here.
Deal advisor to dealmaker: Cowboy Ventures, founded in 2012 by Aileen Lee, has hired Fenwick & West partner Ted Wang as its second partner. Wang is well-known in the Bay Area for providing legal counsel to many top startups, including Facebook, Twitter, Dropbox and Square. He’s also known for leading the effort to standardize fundraising documents, having created Series Seed Documents.
It’s not terribly common for lawyers to make the jump to the deal-making side in venture capital. Lee tells Term Sheet: “What’s most important, especially with a really small firm, is not to hire someone who is just like me – ‘culture fit’ – but to hire someone who was different from me but had common values.”
THE LATEST FROM FORTUNE...
• U.K. lawmakers want employers to stop forcing women to wear high heels.
• Peter Thiel is a New Zealand citizen?
• The techie behind Monkey 47 gin.
• How Sonoma’s mayor “Googled” her way into office.
The future of meme warfare. Generational trolling: Millennials are baffled by the act of writing checks. The AI threat to banking jobs (subscription required). Why women quit working. The bite of India’s cash shortage. Snap’s big ad sales push. The biggest ever IPO. Crowdfunding doubts.
• Ring, a Santa Monica, Calif.-based neighborhood security company, raised $109 million in funding. Investors include Goldman Sachs Investment Partners, DFJ Growth, Qualcomm, Richard Branson, American Family Insurance, Shea Ventures and True Ventures.
• SentinelOne, a Mountain View, Calif.-based cybersecurity startup, raised $70 million in Series C funding. Redpoint Ventures led the round, and was joined by Ashton Kutcher, Sound Ventures, Third Point Ventures, Data Collective, Granite Hill Capital Partners, Westly Group, and SineWave Ventures. Read more at Fortune.
• Vestiaire Collective, a Paris-based marketplace for premium secondhand clothing, raised €58 million ($62.3 million), according to VentureBeat. Vitruvian Partners led the round, and was joined by Eurazeo and Idinvest Partners. Read more.
• Aryaka, a Milpitas, Calif.-based provider of software-defined network connectivity and application delivery to enterprises, raised $45 million in Series D funding. Third Point Ventures led the round.
• OfferPad, a Gilbert, Ariz.-based company that buys houses, raised $30 million in equity and $230 in debt from LL Funds. (This item has been corrected to state that OfferPad buys houses. It does not sell housing data.)
• Divergent 3D, a technology development and licensing company focused on the automotive sector, raised $23 million in Series A funding. Horizons Ventures led the round.
• Button, a New York City-based company that helps businesses make it easier for consumers to discover and purchase items via mobile devices, raised $20 million in Series B funding. Norwest Venture Partners led the round, and was joined by Redpoint, DCM, and Greycroft.
• Sourcepoint, a New York City-based compensation platform for digital publishers, raised $16 million round in Series B funding. Northzone led the round, and was joined by Spark Capital, Foundry Group, Accel Partners, and Greycroft Partners.
• TripActions, a Menlo Park, Calif.-based travel booking company for corporations, raised $14.6 million in Series A funding. Zeev Ventures led the round, and was joined by Lightspeed Venture Partners.
• Seerene, a German SaaS analytics platform for software, code, and teams, raised $14 million in Series A funding. Lakestar led the round, and was joined by Earlybird Venture Capital.
• Bluesmart, a Mountain View, Calif.-based maker of Internet-connected luggage, raised $12 million in Series A funding. Tsing Capital led the round, and was joined by Monashees Capital, Endeavor Catalyst, and XG Ventures.
• Ozy Media, a Mountain View, Calif.-based daily news and culture site, raised $10 million in funding. GSV Capital led the round.
• Redox, a Madison, Wi.-based API for healthcare providers, raised $9 million in Series B funding. RRE Ventures led the round, and was joined by 406 Ventures, HealthX Ventures, and Flybridge Capital Partners.
• Dalia, a Berlin-based company that generates market and opinion data from smartphone users, raised $7 million in a Series A funding. Balderton Capital led the round, and was joined by Wellington Partners and IBB-Bet.
• Habito, a U.K.-based digital mortgage broker, raised £5.5 million ($6.9 million) in Series A funding. Ribbit Capital led the round, and was joined by Mosaic Ventures.
• Secret Double Octopus, an Israeli maker of keyless multi-shield connectivity and authentication devices, raised $6 million in Series A funding. Investors include Jerusalem Venture Partners, Liberty Media’s Israel Venture Fund, Iris Capital, Benhamou Global Ventures, and angel investor Yaniv Tal.
• Eight, a New York City-based smart mattress cover company, raised an additional $5 million in Series A funding, closing the round at $11 million. Investors include Yunqi Partners, Azure Capital, Y Combinator, Stanford StartX fund, Comcast Ventures, and Sinovation Ventures.
• Vioguard Inc., a Bothell, Wash.-based maker of keyboard and mousing systems that self-sanitize using the germicidal properties of ultraviolet light, raised $5 million in Series A funding from Imagen Capital Partners.
• Prattle, a St. Louis, Mo.-based data provider, raised $3.3 million in seed funding. GCM Grosvenor led the round, and was joined by New Enterprise Associates, Correlation Ventures, Plug and Play Ventures and unnamed angel investors.
• Community Elf, a Pittsburgh-based content marketing company, raised $2 million in Series A funding. Topanga Partners led the round.
• Voodoo Manufacturing, a New York City-based 3D printing company, raised $1.4 million in seed funding. KPCB Edge led the round, and was joined by angel investors including Tumblr CEO David Karp.
• Illusive Networks, an Israeli cyber security startup, raised an undisclosed amount in funding from Microsoft Ventures.
• Kopari Beauty, an e-commerce beauty brand, raised an undisclosed amount in funding. L Catterton led the round, and was joined by angel investors including Karlie Kloss, Shay Mitchell, Hilary Duff, Mila Kunis, and Ashton Kutcher.
• CUneXus Solutions, a Santa Rosa, Calif.-based financial technology startup, has raised an undisclosed amount of Series A funding led by CMFG Ventures, the venture capital entity of CUNA Mutual Group.
HEALTH + LIFE SCIENCES DEALS
• Connect Biopharmaceuticals, a Taicang, Suzhou-based clinical-stage company that develops novel immune modulators for the treatment of autoimmune diseases and cancer, raised $20 million in Series A funding. Qiming Venture Partners led the round, and was joined by Northern Light Venture Capital, Lapam Capital and Cowin Venture Capital.
• Shore Capital Partners has made an investment of undisclosed size in Argentum Medical, a Geneva, Ill.-based maker and seller of wound care products and assets.
PRIVATE EQUITY DEALS
• Bob Evans Farms (Nasdaq:BOBE) agreed to sell its restaurant unit to Golden Gate Capital for $565 million, including debt, following pressure from activist investor Sandell Asset Management. Read more at Fortune.
• Innotech Capitals acquired Ad-Juster, a Poway, Calif.-based provider of third-party reporting and discrepancy management tools. Terms weren’t disclosed, but AdExchange values the deal within the eight-figure range.
• Court Square Capital Partners is nearing a deal to acquire Infogroup, a Papillion, Neb.-based provider of data, analytics and marketing services backed by CCMP Capital Advisor, for about $600 million, according to a report by Reuters. Read more.
• Inflexion has backed the £40 million ($50.4 million) management buyout of MyPolicy, a U.K.-based specialist provider of telematics insurance for first-time drivers.
• Winona Capital invested in Incredible Foods, a Boston-based food company that makes allergen-friendly products.
• Dermatology Associates, backed by ABRY Partners, acquired Austin DermCare, an Austin, Texas-based provider of clinical, surgical, and cosmetic dermatology services. Financial terms were not disclosed.
• The Abraaj Group has agreed to purchase a majority stake in Jhimpir Power Limited Holdings, a wind power project in Southeast Pakistan, from Burj Capital.
• Textron (NYSE:TXT) agreed to buy Arctic Cat (Nasdaq:ACAT), an all-terrain vehicle maker, for $247 million in cash. At $18.50 per Artic Cat share, Textron’s offer represents a 41.3% premium to the company’s Tuesday close. Read more at Fortune.
• Airbnb is close to acquiring Tilt, a San Francisco-based social payments company, for somewhere between $10 million and $20 million, according to a report by The Information. Tilt raised $62 million in VC funding, including a $25 million Series B round in 2015 that reportedly valued the company at $400 million. Read more.
FIRMS + FUNDS
• Blackstone Group’s (NYSE:BX) secondaries unit, Strategic Partners Fund Solutions, raised $7.5 billion for its seventh fund, Strategic Partners Fund VII LP.
• Northleaf Capital Partners, a Toronto-based private equity firm, raised $950 million for its second OECD-focused pooled infrastructure fund, Northleaf Infrastructure Capital Partners II.
• Atomic Management, a San Francisco-based startup studio that founds and funds companies (limited partners include Marc Andreessen and Peter Thiel), raised $20 million for its first fund, according to the WSJ. Read more.
• T.J. Whalen has joined FreshTracks Capital as a general partner and managing director. Whalen was the chief strategy office at Green Mountain Coffee Roasters.
• Andy Tse has joined Baird Capital as a partner to help lead the firm’s investment efforts in Asia. Tse was previously a managing director at AIF Capital.
• Ryan Roberts has joined Pritzker Group Private Capital as an investment partner and co-head of the group’s growing services team. Previously Roberts was a director on the technology, media and telecom services team at Madison Dearborn Partners.
• Ted Wang has joined Cowboy Ventures as an investment partner. Previously Wang was previously a partner at Fenwick & West.
• Kenneth Borton has joined H.I.G. Capital as managing director of WhiteHorse Capital, the direct lending affiliate of H.I.G. Capital. Previously he was a managing director at Citi.
• Bradford Berenson, vice president and senior counsel for litigation and legal Policy for General Electric, will join TPG as General Counsel.