So, is this it? Is this the market correction that many investors have been publicly expecting, while privately hoping things are really different this time? Or is it just short-term volatility related to knee-jerk Ebola fears and confusion over falling oil prices.
Obviously it’s too early to draw conclusions, except for this: What we’ve seen over the past few days has put a major chill in the IPO pipeline. Not quite cold enough to block it completely, but certainly the opening has narrowed.
Leslie Pfrang, a principal with IPO advisory Class V Group, says that she can’t imagine too many new issuers moving forward if the volatility persists, save for large outliers (i.e., sub-Alibabas). Too little stability, too many valuation worries and widened IPO discounts. Plus, when markets bottom, investors tend to sell down positions in smaller holdings (i.e., recent IPO issuers) in order to raise cash for buttressing core positions in larger companies.
“If the market is too volatile, you can’t just project the standard 15% IPO discount going forward, because banks and investors are going to be nervous about bringing it to market or buying it,” she says. “What’s important to keep an eye on, though, is that the companies that keep preparing and are ready to go first when the market reopens are able to benefit the most. Maybe they don’t get the best valuation, but they are able to access the market multiple times for capital and it gives new investors more liquidity opportunities.”
• More volatility: Another open question is what a major correction would do to the legion of pre-IPO "unicorns," which have raised huge equity rounds at high valuations. Namely, if they need to delay IPOs and haven't properly managed burn rates, who is going to step up for the next round (even if it comes with a valuation haircut)? When public SaaS valuations tanked earlier this year, the mutual/hedge fund community stopped back such companies on a dime, only returning once the public markets stabilized. If this is a broader-based downturn, I could see them walking away from all sorts of sectors. And given that most of these companies already worked through the traditional later-stage VC class, it would seem that an unexpected M&A rush could be on the horizon (including some major disagreements between "entrepreneur-friendly" VCs and their actual entrepreneurs).
• The Blackstone Group said during its Q3 media call this morning that formal fundraising for the firm’s next flagship private equity fund will begin near year-end. This is the vehicle that no longer will permit accelerated monitoring or transaction fee payments but, as of last check, no decision had been made on what the LP/GP split will be for ongoing monitoring fees. Tony James did say, however, that the firm's most recent energy fund had a 100% LP share, and that we could "extrapolate from that" for the new buyout fund.
James also dismissed an argument that the conflicts of interest that prompted Blackstone to spin off its advisory business could also apply to other parts of the firm, such as GSO Capital Partners. "Around the edges there's some overlap... but actually I more often view that as synergistic than competitive. GSO's ability to bring capital and market knowledge is a huge advantage to the private equity guys."
• On the docket: With AbbVie formally bailing out on its tax inversion deal for Shire PLC, it may be time to add up the aggregate bank fees that have been eliminated by Obama's revised rules for such deals. You know, given how some on the left accuse the Administration of being in Wall Street's back pocket.
• Where in the world? This afternoon I’ll be interviewing Ben Fischman, co-founder and former CEO of Rue La La, at the Inner City 100 Symposium in Boston. In addition to Rue La La, Ben founded hat retailer Lids and currently runs an ecommerce incubator called Launch. For more information on the event, please go here.
• #GetLiquid: I'm looking forward to seeing more than 750 of you next Tuesday night in San Francisco, at our sold-out Liquidity Event. Big thanks to our sponsors, who foot the bill for our open bar and food trucks (since the ticket proceeds go to charity). Those sponsors are: Andreessen Horowitz, Gunderson Dettmer, NEA, Preqin and TriplePoint Capital. Also excited to announce which local nonprofit will get the >$10k in ticket proceeds.
THE BIG DEAL
• TPG Capital is in talks to increase its stake in Hollywood talent agency CAA to a 51% control position, according to the NY Post. TPG originally invested in CAA four years ago, including the formation of a JV investment fund focused on tech and sports. Read more.
VENTURE CAPITAL DEALS
• MID Labs Ltd., a San Leandro, Calif.-based developer of medical devices for vitreoretinal surgery, has raised $51 million in new VC funding. OrbiMed Advisors and Frontline BioVentures co-led the round, and were joined by Softbank China Venture Capital, Sungent BioVenture and Allen Chao. www.midlabs.com
• Quantopian, a Boston-based browser-based algorithmic trading platform, has raised $15 million in Series B funding. Bessemer Venture Partners led the round, and was joined by return backers Khosla Ventures and Spark Capital. www.quantopian.com
• Brainly, a Poland–based social learning network, has raised $9 million in Series A funding. General Catalyst Partners led the round, and was joined by Point Nine Capital, Learn Capital and Runa Capital. http://brainly.co
• Checkr, a san Francisco-based system for automating background screenings and driving records, has raised $9 million in Series A funding led by Accel Partners. www.checkr.io
• Idibon, a San Francisco-based provider of unstructured language data analytics, has raised $5.5 million in Series A funding. Backers include Altpoint Ventures, Khosla Ventures, Morningside Ventures, Samsung and Inventec. www.ibidon.com
• Wilshire Axon Sports, a Los Angeles-based developer of sports fan engagement solutions, has raised $2 million in Series A funding. Mosaik Partners led the round, and was joined by KGC Capital and Albrekca LLC. www.wilshireaxonsports.com
• Indicative, New York-based web and mobile analytics platform for marketers and product managers, has raised $2 million in seed funding from Acadia Woods Ventures, Bertelsmann Digital Media Investments and individual angels. www.indicative.com
• PaintZen, a New York-based on-demand home painting service, has raised $1.8 million in seed funding. Backers include Angelpad, Lerer Hippeau Ventures, NextView Ventures, Quotidian Ventures, Angelpad and Barbara Corcoran. www.paintzen.com
PRIVATE EQUITY DEALS
• Albireo Energy LLC, an acquisition platform focused on the building automation and energy services sector, has acquired two companies: Electronic Controls Systems and Green Total Solutions, both of Poway, Calif. No financial terms were disclosed. Albireo Energy is a portfolio company of Huron Capital Partners. www.huroncapital.com
• Alphabroder, a Trevose, Penn.– based distributor of imprintable sportswear and accessories, has acquired Ash City, a Lenexa, Kansas-based maker of promotional apparel for the corporate and casual markets. No financial terms were disclosed. Alphabroder is a portfolio company of Littlejohn & Co. www.broderbros.com
• Arago AG, a German provider of IT automation solutions, has secured an undisclosed amount of growth equity funding from KKR. The WSJ reports the commitment was for around $55 million. www.arago.co
• AssuredPartners, a Lake Mary, Fla.-based insurance brokerage platform owned by GTCR, has acquired Casualty Assurance of Chaska LLC, a Chaska, Minn.-based commercial, employee benefit and personal insurance agency. No financial terms were disclosed. www.assuredptr.com
• Bain Capital has invested around $164 million for an 80% stake in Chinese equipment leasing company Lionbridge Financial Leasing (China) Co., according to Reuters. Read more.
• Breg Inc., a portfolio company of Water Street Healthcare Partners, has merged with United Orthopedic Group Inc. to form a Carlsbad, Calif.-based provider of sports medicine, rehabilitative orthopedic products and services. Breg president Brad Lee will lead the combined company. UOG had raised VC funding from Essex Woodlands Health Ventures. www.breg.com
• CVC Capital Partners is in exclusive talks to acquire Paroc, a Finnish maker of insulation materials that is being sold by Arcapita, according to Reuters. The deal could be valued at between €700 million and €750 million, with CVC initially in competition with several other private equity firms. Lazard is managing the process. Read more.
• GEMS Education, a Dubai-based operator of more than 100 schools in 14 countries, has sold a “significant minority stake” to an investment group led by Fajr Capital. Other participants included Blackstone’s Tactical Opportunities funds and Bahrain Mumtalakat Holding Co. An earlier Bloomberg report suggested that the deal could involve a $350 million investment for a 20% stake. www.gemseducation.com
• Mountaineer Keystone Energy, a Pittsburgh-based portfolio company of First Reserve, has acquired PDC Mountaineer LLC, a Marcellus Shale joint venture between PDC Energy Inc. (Nasdaq: PDCE) and Lime Rock Partners. The deal was valued at $500 million, and involves over 131,000 net acres. www.firstreserve.com
• Pacon Corp., an Appleton, Wis.–based supplier of education, art and craft products, has acquired the assets of Roselle Paper Co. for an undisclosed amount. Pacon is a portfolio company of Mason Wells. www.pacon.com
• PlayMaker CRM, a Franklin, Tenn.-based provider of cloud-based customer relationship management software for the post-acute care industry, has secured an undisclosed amount of growth equity funding from Mainsail Partners. www.playmakercrm.com
• Saugatuck Capital has acquired a majority stake in Pharmaceutic Litho & Label Co., a Simi Valley, Calif.-based specialty printer for the healthcare market. No financial terms were disclosed, except that Ironwood Capital participated with mezzanine debt and an equity co-investment. www.pharmaceuticlitho.com
• VIP Cinema Seating, a New Albany, Miss.-based provider of seating solutions for the movie theater industry, has raised an undisclosed amount of funding from MML Capital Partners. www.vipcinemaseating.com
• DBV Technology, a French provider of allergy diagnostics and therapeutics, has set its U.S. IPO terms to 4.3 million shares beoing offered at $23 per share (based on the company’s most recent trading price in Paris). It plans to trade on the Nasdaq under ticker symbol DBVT, with Citigroup and Leerink Partners serving as lead underwriters. Shareholders include Sofinnova Capital (18.6% stake) and Bpifrance (18.2%). www.dbv-technologies.com
• Forward Pharma AS, a Denmark-based drug company focused on a multiple sclerosis treatment, raised $221 million in its IPO. The company priced 10.5 million shares at $21 per share (middle of range), but closed its first day of trading down at $17.50 per share. The company listed on the Nasdaq under ticker symbol FWP, while Leerink Partners servd as lead underwriter. Shareholders in the pre-revenue company include Nordic Biotech and BML Healthcare. www.forward-pharma.com
• The Habit Restaurants Inc., an Irvine, Calif.-based fast casual burger and sandwich restaurant chain, has filed for an $86.25 million IPO. It plans to trade under ticker symbol HABT, with Piper Jaffray listed as left-lead underwriter. The company reported nearly $6 million in net income for 2013 on $120 million in revenue. Shareholders include KarpReilly LLC. www.habitburger.com
• Argus Capital Partners and Qatar First Bank have hired BofA Merrill Lynch to find a buyer for their combined 40% stake in Turkish hospital chain Memorial Health Group, according to Bloomberg. The company reportedly generated $242 million in 2013 revenue. Read more.
• Digital Guardian (f.k.a. Verdasys), a Waltham, Mass.–based provider of data protection for endpoints for Global 2000 companies, has acquired Armor5, a Santa Clara, Calif.-based provider of cloud control solutions for securing mobile access to enterprise data. No financial terms were disclosed. Digital Guardian has raised nearly $70 million in VC funding from such firms as GE Pension Trust, Fairhaven Capital and Brookline Venture Partners. Armor5 was seeded by Trinity Ventures, Nexus Startup Ventures and Citrix. www.digitalguardian.com
• Ensighten, a Cupertino, Calif.-based provider of enterprise data and tag management, has acquired Anametrix, a San Diego–based multichannel marketing analytics platform. No financial terms were disclosed. Ensighten recently raised $40 million in Series B funding from Insight Venture Partners and return backers like Volition Capital. Anametrix backers include TVC Capital. www.ensighten.com
• Weir Group PLC has agreed to acquire Chinese mining equipment maker Trio Engineered Products from Navis Capital for approximately $220 million. www.trioproducts.com
• Tata Steel Ltd. is in talks to sell its European operations to Switzerland’s Klesch Group, according to Reuters. The deal could include mills in northern England and Scotand. Read more.
FIRMS & FUNDS
• Goldman Sachs (NYSE: GWS) reported $2.1 billion in profits for Q3 2014, up nearly 50% from a year ago. Read more.
MOVING IN, UP, ON & OUT
• John Bartling has stepped down as a senior partner with Ares Management, in order to become president and CEO of Invitation Homes LP, a giant U.S. single-family housing landlord owned by The Blackstone Group. www.blackstone.com
• Zoltan Berty has joined Gladstone Capital Corp. (Nasdaq: GLAD) as a Los Angeles-based managing director and head of West Coast debt origination efforts for privately-held companies. He previously was a principal with Caltius Mezzanine. www.gladstonecapital.com
• Christian Hess has joined Investec as head of a newly-created financial sponsors group. The move comes around 18 months after Hess left UBS, where he had co-founded the bank’s EMEA financial sponsors group. www.investec.com
• Russell Fleischer, a serial tech industry CEO who most recently led HighJump Software, has joined Battery Ventures as a Boston-based partner. www.battery.com
• Martina Suess has stepped down as head of communications at Quotidian Ventures, in order to take a position with Brand Innovators. www.quotidian.co
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