On deals and dealmakers.
Good morning, Term Sheet readers.
Earlier this week, we highlighted venture capital spending in 2017. Now, it’s time to shine the spotlight on private equity.
Things are looking sluggish here too. U.S. private equity firms invested $163.4 billion across 959 private equity deals during the third quarter, bringing the year’s total investment to approximately $401.7 billion.
Even with all this capital, it looks like there might be a deal drought. PE firms are sitting on $545.5 billion of dry powder (the money they’ve raised but have yet to invest). Although fundraising levels surged to an all-time high in 2017, deal volume is down 11% when compared to last year, according to PitchBook’s Q3 U.S. PE report.
Here are some more key findings from the report.
• PE exits continue to slow: We’ve got all the ingredients for a seller’s market — record high valuations, PE firms with lots of capital, a healthy corporate market and a growing, aging portfolio company inventory. But alas, activity continues to decline. It’s been a sluggish exit market in the last few years, and the third quarter was no different. There was $40.8 billion in value exited across 224 companies in Q3, marking a 20% decrease from Q2.
• There have been fewer mega-deals: 2017 has certainly not been spectacular when it comes to mega-deals we’ve seen in years past, like Dell’s acquisition of EMC for $67 billion or Heinz’s acquisition of Kraft Foods for $55 billion. The largest U.S. PE deal to close this year was BDT Capital Partners’ $7.16 billion buyout of Panera Bread. We’re seeing more and more mega-deals move overseas.
• Capital is accumulating across fewer funds: U.S.-based funds raised $62.4 million in commitments across only 58 vehicles in the third quarter. The star of Q3’s fundraising frenzy was Apollo Global Management. It raised $24.7 billion for its ninth flagship fund, making it the largest buyout fund ever raised.
• Software is hot: PE’s appetite for software is growing. Dealmaking may have slowed, but activity has been strong in the software sector. PE firms completed 345 software deals in the third quarter, totaling $39.5 billion. The reason for this is due in part from a flurry of firms, such as KKR, Silver Lake, and Thoma Bravo, closing tech-focused PE funds.
ONE FUN THING: In an earnings call this morning, J.P. Morgan CEO Jamie Dimon said, “I’m not going to talk about Bitcoin anymore.” If you missed yesterday’s Q&A with Blockchain Capital’s Bart Stephens, read it here. He had a few things to say about Dimon’s remarks on Bitcoin.
THE LATEST FROM FORTUNE...
• Meet the spaceship that will take you on vacation to Mars (by Jen Wieczner)
• Paris wants to ban the combustion engine by 2030 (by Geoffrey Smith)
• Will Sally Yates run for office? (by Beth Kowitt)
• PayPal releases its diversity report (by Grace Donnelly)
• Kellyanne Conway calls for ‘full and free press’ (by Claire Zillman)
Bitcoin is trading above $5,000. Facebook sets a goal of a billion virtual reality users. The prophet of Germany’s new right. Self-driving cars will be allowed in California in 2018. Trump is about to start undercutting Obamacare by relaxing insurance rules.
• SecurityScorecard, a New York-based security rating company, raised $27.5 million in Series C funding. Nokia Growth Partners led the round, and was joined by investors including Moody’s Corporation, AXA Strategic Ventures, and Intel Capital. Existing investors Sequoia Capital, Google Ventures (GV), Boldstart Ventures, Two Sigma Ventures, and Evolution Equity Partners participated.
• Attivo Networks, a Fremont, Calif.-based provider of deception solutions for cybersecurity defense, raised $21 million in Series C funding. Trident Capital Cybersecurity led the round, and was joined by investors including Bain Capital Ventures and Omidyar Technology Ventures.
• HappyOrNot, a Finland-based company developer of the ‘smiley’ feedback system, raised $14.5 million in Series A funding. Northzone led the round.
• Grover, a Berlin-based subscription tech rental platform, raised $11.7 million in financing. Investors include Varengold Bank AG.
• ROSS Intelligence, a Palo Alto, Calif.-based legal research services platform, raised $8.7 million in Series A funding, according to TechCrunch. iNovia Capital led the round, and was joined by investors including Comcast Ventures Catalyst Fund, Y Combinator Continuity Fund, Real Ventures, and Dentons’ NextLaw Labs. Read more.
• True Link Financial, a San Francisco-based financial services provider for seniors, raised $8 million in Series A funding. QED Investors led the round, and was joined by investors including Radicle Impact and Initialized Capital.
• MioTech, a Hong Kong-based financial tech startup, raised $7 million in Series A funding, according to TechCrunch. Horizons Ventures led the round, and was joined by investors including Zhenfund. Read more.
• CloudZero, a Boston-based site reliability management platform for cloud computing, raised $5 million in Series A funding. Matrix Partners and Underscore VC co-led the round.
• Tooshlights, a Los Angeles-based smart restroom traffic management system, raised $3 million in Series A funding. Buc-ee’s, LTD led the round.
• 250ok, an Indianapolis-based email analytics and deliverability company, raised $2.6 million in Series A funding. Arthur Ventures led the round.
• NumberAI, an Oakland, Calif.-based ‘smart landline’ company, raised $1.6 million in seed funding from DFJ Venture Capital.
• Appear Here, a U.K.-based online marketplace for retail space, raised funding of an undisclosed amount from Fifth Wall. Financial terms weren’t disclosed.
• XFactor Ventures invested in e-commerce company Everywear, cooking device startup Nomiku, community platform about sex O.School, financial planning platform The Beans, crop yield forecaster Vinsight, cloud platform Ellen & Paul’s New Startup, virtual assistant Clara, and legal tech platform Court Buddy. Read more.
PRIVATE EQUITY DEALS
• Lexitas, a portfolio company of Trinity Hunt Partners, acquired NextGen Reporting, a Wayne, Penn.-based provider of deposition reporting, legal videography and trial support services. Financial terms weren’t disclosed.
• Vista Equity Partners agreed to acquire a majority stake in Jamf, a Minneapolis-based provider of Apple device management solutions. Financial terms weren’t disclosed.
• Bawag, an Austrian bank, is seeking the country’s largest IPO. The company plans to raise about $2.4 billion or 2 billion euros in an offering of 40.3 million shares between 47 euros to 52 euros ($55.60 to $61.51). Cerberus Capital Management backs the company. Reuters.
• CarGurus, a Cambridge, Mass.-based car marketplace, set the terms of its IPO. The company raised $150 million in an offering of 9.4 million shares (73% insider) at $16 a piece, above its previously stated range. The company posted revenue of $198.1 million in 2016, with earnings of $6.5 million. CarGurus is backed by Allen & Co. (5.4% post-offering), Spinnaker Capital’s Anastasios Parafestas (13%), and T. Rowe Price (11.1%) back the company. Goldman Sachs, Allen & Company, RBC Capital Markets, JMP Securities, Raymond James and William Blair are underwriters in the deal. The company plans to list on the Nasdaq as “CARG.”
• OrthoPediatrics, a Warsaw, In.-based company for pediatric orthopedic implants, raised $52 million in an offering of 4 million shares at $13 a piece, the midpoint of its previously stated range. In 2016, the company posted $37.3 million in revenue and loss of $12.5 million. Piper Jaffray and Stifel and joint bookrunners in the deal. Squadron Capital (44.6% post-offering) backs the company. The company plans to list on the Nasdaq as “KIDS.”
• Restoration Robotics, a San Jose, Calif.-based company focused robotics that assist doctors in hair transplant surgery, says it raised $25 million in an upsized offering of 3.6 million shares priced at $7—the low end of its range. In 2016, the company posted revenue of $15.6 million and loss of $21.8 million. National Securities is sole bookrunner in the deal. It plans to list on the Nasdaq as “HAIR.”
• An investment group led by Bessemer Venture Partners and Fifth Wall Ventures acquired a majority share of WiredScore, a New York-based rating system for technological capacity in commercial buildings, from Jared Kushner. Financial terms weren’t disclosed, but Forbes pegs the value of Kushner’s stake between $5 million and $25 million. Read more.
• L Catterton acquired Uncle Julio’s, an Irving, Texas-based operator of Mexican food restaurants. Financial terms weren’t announced. The seller was J.H. Whitney & Co LLC.
• Cinven agreed to sell CeramTec GmbH, a Germany-based manufacturer of high performance ceramics, to a BC Partners-led consortium including the Public Sector Pension Investment Board and Ontario Teachers’ Pension Plan. Financial terms weren’t disclosed.
• Equistone Partners Europe Limited acquired a majority stake in Inspired Thinking Group, a U.K.based technology-led provider of outsourced marketing services, from Bridgepoint Development Capital. Financial terms weren’t disclosed.
• Welltok acquired Tea Leaves Health, a Roswell, Ga.-based SaaS based analytics and marketing technology platform provider, from Ziff Davis, a subsidiary of j2 Global, Inc. FInancial terms weren’t disclosed.
• Montagu Private Equity and Astorg Partners agreed to sell the remaining majority stake in Sebia, a France-based manufacturer of instruments and reagents for in-vitro diagnostics, to CVC Capital Partners Strategic Opportunities and Téthys Invest. Financial terms weren’t disclosed.
FIRMS + FUNDS
• Brightstar Capital Partners, a New York-based private equity firm, raised $51.92 million for its newest fund, according to an SEC filing. Clarification: Brightstar Capital Partners Strategic Fund I (per the filing) is a separate side-by-side vehicle to Brightstar Capital Partners Fund I (the main vehicle).
• KKR appointed Iñaki Cobo Bachiller to lead the healthcare franchise for Europe, Africa and the Middle East. Previously, Bachiller was at CVC Capital Partners.
• Ben Narasin joined New Enterprise Associates, Inc. as a venture partner.
• Financial Technology Partners named Vijay Sondhi as a managing director. Previously, Sondhi was at Visa.
• Scale Venture Partners promoted Alexander Niehenke to partner, Susan Liu to principal, and Jeremy Kaufmann to senior associate.