Hello, it’s a slow news day out there for once. Which means there must be some exciting deals brewing…
For venture and private equity funds alike, it’s easier than ever to raise money and harder than ever to actually invest it, thanks to increasingly steep competition. Case in point:
CNBC reports that buyout firms are racing to strike big deals now, before any tax law changes means their corporate competitors can pay even more for deals. They’ve already been priced out of so many big deals. More corporate cash and a soaring stock market will only make it worse.
So far they haven’t succeeded in their race to strike deals before the tax windfall. Private equity firms didn’t strike any deals above $2.5 billion in the first quarter, CNBC reports. Apollo’s $5.1 billion (including debt) deal for West Corp., announced this week, is the biggest deal so far this year. As we’ve written before, the competition is forcing PE firms to get creative in their dealmaking, with more add-on deals, carve-outs, and an increased interest in new sectors like technology.
This narrative is not new: Here’s a New York Times in 2010, bemoaning the fact that buyout moguls have too much money and not enough deals. At the time, they were sitting on $500 billion in dry powder. Now they’ve got $747 billion, a record high.
MEANWHILE IN SILICON VALLEY, we are at a confusing time in the so-called Unicorn story. I’ve written about this plenty, perhaps too much, but it’s hard for people to get a handle on what’s going on when we’re not really in a bubble anymore, but not in a crash either. That’s how we get two stories like this on the same day:
Which is it? Can it be both? The tourists are gone, but the sovereigns are taking their place? The first story, from Bloomberg, notes that hedge funds and mutual funds invested 42% less in startups in Q1 compared to the same quarter last year. This downward trend has been going since 2015 (as I noted here) after mutual funds started marking down their startup holdings.
The second story, from Reuters, is more anticipatory. Sovereign wealth funds made 12 investments in U.S. startups last year to the tune of $12.4 billion. That’s an increase from just four deals the year prior. The check size is what makes this trend worth noting. It’s one we can expect to continue with funds like SoftBank’s Vision Fund (which just poured $500 million into a virtual reality startup, see below), Qatar, Temasek, Kuwait and OMERS taking an interest in startups.
And of course, traditional venture funds themselves (remember those?) continue to sit on an estimated $120 billion in cash reserves.
THE LATEST FROM FORTUNE...
• Only one in five Americans approve of the ACHA.
• Kushner family cancels China presentation amid controversy.
• Time is running out for Anthem-Cigna.
• Star Trek and IBM’s Watson.
• Why the term “fintech” is as dumb as “cleantech.”
• Improbable, a London-based technology company, raised $502 million in Series B funding. SoftBank led the round.
• Corning (NYSE:GLW), a Corning, New York-based specialty glass manufacturer, raised $200 million from Apple (Nasdaq:AAPL).
• Wealthsimple, a Toronto, Canada-based digital investment advisory services provider, raised $37 million in Series B funding from Power Financial Corporation.
• Podium, a Provo, Utah-based SaaS platform that manages online reviews for businesses, raised $32 million in Series A funding. Accel led the round, and was joined Summit Partners, GV and Y Combinator.
• Sidecar, a Philadelphia-based e-commerce marketing company, raised $11 million in Series C funding. Investors included Harbert Growth Partners, Ascent Venture Partners, Osage Venture Partners, The Yard Ventures, and Silicon Valley Bank.
• SeaBubbles, a Paris-based eco-friendly maritime transportation system developer, raised €10 million ($10.9 million) from MAIF Avenir.
• IoTium, a Santa Clara, Calif.-based secure network infrastructure developer, raised $8.39 million in Series A funding. March Capital Partners and GE Ventures co-led the round, and were joined by Pankaj Patel, OpenSource Ventures, and Juniper Networks.
• Axoni, a New York City-based provider of distributed ledger technology to the financial services industry, raised an additional $2 million in Series A funding from Citi. In December, Axoni raised $18 million from Wells Fargo, Euclid Opportunities, Goldman Sachs, J.P. Morgan, Thomson Reuters, Andreessen Horowitz, FinTech Collective, F-Prime Capital Partners, and Digital Currency Group as part of the same round.
• Replex, a Germany-based IT infrastructure software provider, raised €1.5 million ($1.6 million) in seed funding. Investors include High-Tech Gründerfonds, EnBW New Ventures, eValue AG, and Entrepreneurs Investment Fund.
• Sea Machines Robotics, a Boston, Mass.-based autonomous technology company, raised $1.5 million in seed funding. Launch Capital led the round, and was joined by Accomplice VC, LDV Capital, the Geekdom Fund and Techstars.
PRIVATE EQUITY DEALS
• Ctrip.com International, a China-based travel-booking website, is considering a bid for Germany-based media company ProSiebenSat.1 Media SE’s (XTRA:PSM) online travel business, according to Bloomberg. Blackstone Group is also mulling an offer for the unit. The company could fetch as much as €500 million ($544 million) in a sale. Read more.
• Calpine Corp (NYSE:CPN), a Houston, Texas-based wholesale power generation company, is exploring a sale, according to the Wall Street Journal. The company has an enterprise value of more than $16 billion. Read more.
• Gardner Denver Holdings, a Milwaukee, Wisc.-based industrial equipment maker raised $826 million in an offering of 41.3 million shares. The company priced its IPO belows its previously quoted range—$20 per share rather than between $23 to $26. Controlled by KKR’s near 99% stake, Gardner plans to list on the NYSE as “GDI.” Goldman Sachs and Citigroup are lead underwriters.
• Loton, a Beverly Hills, Calif.-based music streaming network filed for its IPO Thursday. Also known as LiveXLive, the company is saying for the time being that it plans to raise $100 million. The company is backed by Robert Ellin, a managing member of Trinad Advisors(50%), Sandor Capital(8.8%), and Primary Investments(6.1%). BMO Capital is listed as the sole underwriter for the IPO, which plans to list under “LIVX.” The company has yet to disclose pricing terms.
• Smart Global Holdings, a Newark, Calif.-based chip maker set a range for its IPO Thursday. The company plans offer 5.3 million shares between $13 to $15 a piece. The company plans to raise $74.2 million at the midpoint of their range, with Barclays as lead underwriter in the deal. In the fiscal year ending August, 2016, the company recorded sales of $523.4 million on loss of $17 million. Silver Lake holds a 90.1% stake in the company. The company plans to list on the Nasdaq under “SGH.”
• Real Matters, a Canada-based software company, listed on the Toronto Stock Exchange Thursday after a $114 million IPO. It was the first major tech IPO in Canada in about two years, but closed roughly 1% lower by the close of trading Thursday. The company is backed by Whitecap Ventures.
• Neptune Energy Group, which is backed by Carlyle Group and CVC Capital Partners, agreed to acquire ENGIE E&P International, a Paris-based oil and gas exploration company, for $3.9 billion. The seller was ENGIE Group (ENXTPA:ENGI).
• Equistone Partners Europe has agreed to sell its majority stake in EuroAvionics, a Germany-based civil avionics systems manufacturer, to HENSOLDT. Financial terms weren’t disclosed.
• Deutsche Beteiligungs agreed to sell Formel D, a Germany-based automotive industry service provider, to 3i. 3i will invest €247 million ($269 million) as part of the deal.
FIRMS + FUNDS
• SignalFire, a San Francisco-based venture capital firm, raised $330 million across two funds.
• Highland Capital Management Korea, an affiliate of Dallas, Texas-based alternative investment management firm Highland Capital Management, raised $147 million for its healthcare-focused private equity fund.
• Justin Reger joined PeakEquity Partners as a principal. Previously, Reger was at LLR Partners and Citigroup.