Random Ramblings
TPG Capital had its annual LP meeting earlier this week, and there were two surprises: (1) Attendees were entertained by The Who (rumor had been that it would be Eric Clapton), and (2) The firm’s new flagship private equity fund might actually reach its target.
Nearly two years ago, I wrote about why TPG was going to have fundraising challenges this time around. And the WSJ’s Mike Specter followed up with similar (albeit updated) thoughts this past summer.
But I’ve spoken with multiple LPs this week, and all believe that TPG is going to get this thing done.
One thing that helps is that the firm’s overall target is $10 billion, inclusive of nearly $2 billion in bridge funding led earlier this year by state pensions in Oregon and Washington (which has not yet been tapped, although it would be were TPG to do a new deal before an interim fund close). That is significantly smaller than the $19.8 billion it raised for its sixth fund in 2008 – partially explained away by TPG’s subsequent decision to raise separate funds for asset classes like real estate, which had a $2.5 billion allocation out of TPG VI. More importantly, the firm has been doing little things to endear themselves to limited partners.
For starters, it has not run away from responsibility for its two investment disasters: Washington Mutual and TXU. Instead, it’s essentially begged forgiveness, and fortunately has not had a third unlucky charm. Second, TPG’s annual LP meeting is usually followed by a CEO summit of sorts, which means that LPs share the room (and TPG partner facetime) with a cavalcade of execs and bankers. That was done away with this year. Finally, and perhaps most importantly, TPG covered most of the LP portion on its “collusion case” settlement for TPG V, a fund that is in the black but not in the carry. Relatively small money for David Bonderman and Jim Coulter, but a big relief for LPs (particularly those at state pensions).
To be sure, it’s not raised until it’s raised. But there has been widespread PE market speculation that TPG could join veteran firms like First Reserve and Providence Equity in taking a major fund target haircut, and I don’t believe that will be the case.
• More fundraising scoop: Golden Gate Capital is expected to raise another $3.5 billion fund next year, with the investment switch to flip at the beginning of 2016. This would be another opt-out subscription structure for Golden Gate, which is basically like an evergreen fund without reinvestment of returns (i.e., distributions go to LPs, rather than back into the fund).
• Even more fundraising scoop: Cowboy Ventures, the seed-stage venture firm founded by ex-Kleiner Perkins partner Aileen Lee, has effectively finished raising its second fund. Not certain of the final amount, but an SEC filing had suggested a $55 million target.
• So much fundraising scoop: Khosla Ventures is expected to wrap up its fifth fundraise by year-end, with well more than $750 million in commitments already banked. The total target is $1 billion.
• Okay, this is getting ridiculous: We recently reported that venture firm New Enterprise Associates would soon return to market with a follow-up to its $2.6 billion Fund 14. Word is that docs will come within the next two months, with two changes: (1) The target will be slightly higher (likely around 10%), and managing partner Peter Barris will now share the title with Scott Sandell.
• Recommended reading: Bloomberg has an important piece up about how Fed scrutiny over leveraged loan multiples (plus broader pullback in the high-yield bond markets, partially due to Gross/Pimco) has caused some banks to pull back from new deals.
This is something I've been hearing more and more from buyout pros, who say that the magic multiple seems to be 6x. In other words, things were okay in the first half of 2014 when S&P LCD reported average leveraged loan multiples of 5.89x EBITDA, but not in the third quarter when it rose to 6.23x. For context, it was 6.23x in 2007. It seems there are two possible consequences here: (1) For future deals, we see the return of clubs. (2) For recently-agreed upon deals, we could (possibly) see hung loans. After all, it isn't just banks balking at leading new deals, but it's also banks declining to participate in syndicates for existing ones. Read Bloomberg's entire piece by going here. Also interested in your recent experiences in this regard -- whether on the sponsor or lender side -- so please drop me a note if you have some insights (if you want it to be confidential, just say so in the email and I'll honor it).
• Secondary update: We've written a lot about how a lot of "unicorn" startups have been refusing to allow employees to sell vested stock to secondary buyers, going well beyond the traditional rights-of-first-refusal. Sometimes even insisting that these folks either hold or accept below-market tenders from the company. Yesterday, the WSJ reported that AirBNB is working on a deal whereby employees could sell around $50 million in stock at a $13 billion valuation to undisclosed outside investors (or perhaps just a single investor, given how small the overall outlay is). This seems fairly similar to how Twitter ultimately handled its insider share sales while still private...
• Have a great weekend. Go Pats!
THE BIG DEAL
• Koudai Gouwu, a China-based mobile shopping platform, has raised $350 million in Series C funding. Tencent led the round, and was joined by Tiger Global, DST, H Capital, Vy Capital and Falcon Edge. The company previously raised capital from Chengwei Capital, Matrix Partners China and Warburg Pincus. Read more
VENTURE CAPITAL DEALS
• Enjoy, the new e-commerce startup from Ron Johnson (ex-Apple, JC Penney and Target) , has raised $30 million in first-round funding. Oak Investment Partners and Kleiner Perkins Caufield & Byers co-led the round, and were joined by Andreessen Horowitz. Johnson describes the company as providing “high-touch personal service to help people make the most of their important purchases.” www.enjoytech.com
• D3 Banking, an Omaha, Neb.-based digital banking solutions for regional and community financial institutions, has raised $7 million in equity funding from Route 66 Ventures. www.d3banking.com
• Ello, an ad-free social network that promises to stay that way, has raised $5.5 million in Series A funding. Backers include Bullet Time Ventures, Foundry Group and return backer FreshTracks Capital. The company also announced that it has become a legal public benefit corporation, or PBC. Read more.
• Luxe, a San Francisco-based valet parking app, has raised $5.5 million in seed funding. Backers include Google Ventures, Foundation Capital, BoxGroup, Data Collective, Redoint Ventures, Sherpa Ventures, Lightspeed Venture Partners, Upfront Ventures, Slow Ventures, Eniac Ventures and Rothenberg Ventures. www.luxevalet.com
• Fountain, a mobile live-video app that connects home and gardening experts with customers in need of guidance, has raised $4 million in Series A funding from First Round Capital and Shasta Ventures. Fountain is led by Aaron Patzer, founder of Mint.com. www.fountain.com
• Vestorly, a New York-based content marketing platform for service providers, has raised over $2 million in seed funding. No investor information was disclosed. www.vestorly.com
PRIVATE EQUITY DEALS
• Abry Partners has agreed to sell Xand, a Hawthorne, N.Y.-based provider of data center infrastructure, collocation, private cloud and business continuity services, to TierPoint. No financial terms were disclosed. TierPoint was acquired earlier this year by an investor group that included Thompson Street Capital Partners, The Stephens Group, RedBird Capital Partners and Jordan/Zalaznick Advisers. www.xand.com
• Aldora Aluminum & Glass, a portfolio company of Superior Capital Partners, has acquired the assets of Peterson Industries Inc., a Fla.-based manufacturer of framed and frameless shower doors, mirror doors, closet doors and glass enclosures. No financial terms were disclosed. www.excelrvs.com
• Apollo Global Management has agreed to acquire Express Energy Services, a Houston, Texas–based oilfield services company. No financial terms were disclosed. www.eeslp.com
• AssuredPartners, a Lake Mary, Fla.-based insurance brokerage platform owned by GTCR, has acquired Turner & Hamrick LLC, a Troy, Ala.-based agency specialized in trucking industry insurance. No financial terms were disclosed. www.assuredptr.com
• The Blackstone Group is partnering with Safariland LLC, an Ontario, Calif.–based maker of bulletproof vests and gun holsters, to bid on British safety-equipment maker Survitec Group Ltd., according to Bloomberg. Survitec currently is owned by Warburg Pincus, and is believed to be valued at between £400 million and £500 million. Other bidders include Wendel, Onex Partners, AEA Investors and Clayton Dubilier & Rice. Read more.
• Farrow & Ball, a UK-based maker of luxury paints owned by European Capital, has received second-round takeover offers from Ares Management, Bain Capital, The Carlyle Group and Investcorp, according to Reuters. The deal could be valued at around £250 million. Read more.
• Kohlberg Kravis Roberts & Co. is kicking the tires on $6.8 billion retailer PetSmart (Nasdaq: PETM), according to the NY Post. Read more.
• Maroon Group LLC, an Avon, Ohio-based portfolio company of CI Capital Partners, has acquired Addipel LLC, an Avon Lake, Ohio-based custom blender and re-packager of specialty chemicals. No financial terms were disclosed. www.maroongroupllc.com
• MTS Health Investors has acquired a majority stake in MyNexus Inc., a Brentwood, Tenn.–based provider of hospital care management services. No financial terms were disclosed. www.mynexuscare.com
• Riverstone Holdings has agreed to acquire Proserv Group Inc., a Scotland-based provider of offshore and subsea solutions for the oil and gas industries, from Intervale Capital and Weatherford International. No financial terms were disclosed. www.proserv.com
• Rostra Precision Controls, a portfolio company of Superior Capital Partners, has acquired Vehicle Safety Manufacturing LLC, a Newark, N.J.-based manufacturer of turn-signal switches and lighting products for the heavy-duty truck and slow-moving vehicle market. No financial terms were disclosed. www.vehiclesafetymfg.com
• Siris Capital Group has agreed to acquire Digital River Inc. (Nasdaq: DRIV), an Eden Prairie, Minn.–based provider of commerce-as-a-service solutions. The deal is valued at approximately $840 million in cash, or $26 per share (50% premium over yesterday’s closing price). www.digitalriver.com
IPOs
• No IPO news this morning...
EXITS
• Proofpoint Inc. (Nasdaq: PFPT) has agreed to acquire Nexgate, a Burlingame, Calif.–based provider of security and compliance solutions for social media communication channels, for approximately $35 million in cash. Nexgate had raised VC funding from Sierra Ventures and Windforce Ventures. www.proofpoint.com
OTHER DEALS
• The Atlanta Hawks have hired Goldman Sachs and Inner Circle Sports to find a buyer for the NBA franchise, which currently is majority-owned by Bruce Levenson. Read more.
• Cutrale Group and Safra Group are raising their offer for Chiquita Brands International (Nasdaq: CQB) from $14 per share to $14.50 per share, now valuing the banana company at around $680 million. If Chiquita Brands today approve the company’s planned tax inversion acquisition of Ireland’s Fyffes, then the Curtale/Safra effort would end. Read more.
• MOKO Social Media Ltd. (Nasdaq: MOKO) has acquired an 80% stake in Australia-based news and entertainment website Tagroom.com for an undisclosed amount of cash and stock. www.tagroom.com
• Telecom Italia is in “advanced talks” to sell the mobile phone towers of its Brazilian unit, TIM Participações, according to Reuters. www.telecomitalia.com
FIRMS & FUNDS
• Bernhard Capital Partners is seeking $750 million for its debut fund, according to Dow Jones. The Baton Rouge, La.-based private equity firm is focused on U.S. energy services company, and was founded by Jim Bernhard, the founder and former CEO of Shaw Group. www.bernhardcapital.com
• Council Capital is raising upwards of $125 million for its third fund, according to a regulatory filing. The Nashville, Tenn.-based firm backs early- and growth-stage companies in the healthcare space. www.councilcapital.com
MOVING IN, UP, ON & OUT
• Nicolas Debock has joined London-based venture capital firm Balderton Capital as a principal focused on the French market. He previously was with Paris-based VC firm XAnge. www.balderton.com
• Sean Jacobsohn has joined Norwest Venture Partners as a principal. He will work out of the firm’s Palo Alto office, and also is newly-opened San Francisco office. Jacobsohn previously was a venture partner at Emergence Capital Partners and, before that, served in executive positions with Hightail and Cornerstone OnDemand. www.nvp.com
• New Enterprise Associates has promoted Jon Sakoda to general partner. He joined the firm’s Menlo Park office in 2006, and sits on the boards of Blue Jeans Network, DataVisor, Desire2Learn, Hearsay Social, Opower, ScienceLogic, Suniva, Swiftype and WibiData. www.nea.com
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