Term Sheet — Wednesday, June 1

Updated: Jun 01, 2016 2:20 PM UTC

Random Ramblings

Partners Group this morning announced an agreement to acquire PCI Pharma Services, a Philadelphia-based provider of outsourced services to the global pharma market, from Frazier Healthcare Partners. No financial terms were disclosed, but we've learned that the deal values PCI at just over $1 billion (including debt), and that Frazier will roll over some of its proceeds so that it can retain a minority equity position.
PCI was originally formed in 2012, via Frazier’s purchase of the U.S. commercial pharma packaging operations of Catalent Pharma Solutions Inc. from a group of investors led by The Blackstone Group. One year later it would acquire the AndersonBrecon, the consumer packaging business of AmerisourceBergen Corp. and, one year after that, would add on Penn Pharmaceutical Services, a British provider of provider of drug development and manufacturing services.
Reuters had reported back in March that Frazier was looking to sell for around $1 billion, with Royal Bank of Scotland managing the process.
“We had a lot of inbound interest and there were some things we wanted to do in terms of additional M&A, and this deal with Partners gives us a stronger capital base,” says Nathan Every, a Frazier Healthcare partner and PCI board member. “We’d like to get bigger in clinical packaging and more global in commercial packaging, and on the manufacturing side we’d really like to do more in areas like high potency, where Penn is already a leader.”
If more M&A is what PCI and its new majority owner are looking for, it shouldn’t be hard to find targets. A number of companies ― including InVentiv Health, Envision Pharma, eResearch Technology and Pharma Product Development LLC ― are known to be in market, as pharma companies continue to outsource more and more of their packaging and manufacturing processes (kind of like where the contract research organization business was a decade ago).
“Big pharma companies are under a lot of pressure to control costs, which means they’re looking to optimize their supply chains,” explains Joel Schwartz, a managing director and head of Americas private equity at Partners Group. “Outsourcing is becoming an increasing part of that optimization, which is why private equity has so much interest right now.”
Partners Group is a limited partner in several Frazier Healthcare funds, including the one that houses PCI. “It’s how we first got to know about the company,” Schwartz says.
•  The best things come to those who wait: Today's big deal is that Vista Equity has agreed to acquire Marketo Inc. for around $1.79 billion, or $35.25 per share. That's below the company's January 2014 peak price of $42.79 per share, but well above where it has been trading for the past year and a half. Moreover, it represents a huge reward for Storm Ventures, which originally invested in Marketo's Series B round in 2008 (at a price of just $0.69 per share). Storm held onto 2.5 million of the 5.1 million shares it held when Marketo went public in May 2013 at $13 per share. Also worth noting that Battery Ventures held onto around 20% of its 2.6 million post-IPO shares (it purchased 500k new shares via the offering).
•  Today in TheranosForbes today "revised" the estimated net worth of Theranos founder and CEO Elizabeth Holmes from $4.5 billion to zero. It has posted a detailed explanation, but perhaps a future rule of thumb could be to avoid assigning net worth to entrepreneurs based on illiquid securities. Yes, that also would include Travis Kalanick, et al.
•  Update: Last fall we reported that  Clear Ventures had launched as a new VC firm focused on early-stage software infrastructure companies, led by Chris Rust (ex-USVP) and Rajeev Madhavan (founder of Magma Design Automation). It was seeking $80 million for its debut fund, but this morning announced that it finished up at $120 million.
Madhavan says that the pair believes the amount of money any particularly early-stage GP can manage is between $40 and $60 million, based on making between two to three new investments each year (excluding follow-ons). Thus the $120 million. "This is not a very high velocity game," he says.
•  Where in the World? Tonight I'll be speaking at the annual meeting of the Boston chapter of the Private Equity CFO Association. Looking forward to seeing some of you there...
•  Getting there: I've received a lot of reader emails asking my opinion of the Peter Thiel v. Gawker situation, but the truth is that I'm still working through it.
My gut reaction is that Thiel should have been transparent from the get-go, rather than sniffed out years after the initial fact. At the same time, there is a long history of funding third-party lawsuits (albeit not usually for the sake of revenge ― and that's what it was, not "philanthropy"), and I can't figure any satisfactory way to split that particular baby. Moreover, we do not yet know if Thiel has funded any frivolous lawsuits (Hogan, given the verdict, does not qualify), so this is not the case of a vengeful billionaire using his wealth to drown a critical media outlet in legal bills for the sake of legal bills.
To be honest, I've been a bit stunned by how many black-and-white reactions have come from both Thiel's peers and mine. From this seat, there seems to be a whole lot of gray

THE BIG DEAL

•  Vista Equity Partners has agreed to acquire Marketo Inc. (Nasdaq: MKTO), a San Mateo, Calif.-based provider of cloud-based engagement marketing software, for around $1.79 billion. The $35.25 per share deal represents a 64% premium to Marketo’s stock price on May 9, which was the day before reports that Marketo had hired Morgan Stanley to explore strategic options.
Current Marketo shareholders include Storm Ventures (5.63% stake) and Battery Ventures (1.14%). Vista Equity also is an existing Marketo holder, with a 1.88% position. Read more.

VENTURE CAPITAL DEALS

•  Spredfast, an Austin, Texas-based provider of software for managing social media activities, has raised $50 million in growth equity funding. Riverwood Capital led the deal, and was joined by return backers Austin Ventures, Interwest Partners, OpenView Venture Partners and Lead Edge Capital. Read more.
•  Ionic Security, an Atlanta-based data protection company, has raised $45 million in new VC funding. Amazon, Goldman Sachs and Hayman Capital were joined by return backers Google Ventures, Icon Ventures, Kleiner Perkins Caufield & Byers, Meritech Capital Partners and Tech Operators. Read more.
•  uSens Inc., a San Jose, Calif.-based developer of “natural hand-and-head tracking technologies for augmented and virtual reality,” has raised $20 million in Series A funding led by Fosun Kinzon Capital. www.usens.com
•  Vendini, a San Francisco-based provider of live event business management software, has raised $20 million in Series A funding from Level Equity. www.vendini.com
•  Docupace Technologies LLC, a Los Angeles-based provider of  document management and workflow solutions, has raised $16.5 million in funding from Palisades Growth Capital and TVC Capital. Part of the proceeds will be used to buy back a majority stake in the company from bankrupt RCS Capital, which had acquired Docupace in 2014 at an enterprise value north of $70 million. www.docupace.com
•  LinkBee, a New York-based stealthy IoT hardware startup, has raised $6 million in seed funding co-led by Pegasus Capital Advisors and Loeb Enterprises. www.linkbee.com
•  Lost My Name, a London-based publisher of personalized kid’s books, has raised €4 million in new VC funding from Germany’s Project A Ventures. Existing shareholders include Google Ventures, Greycroft, The Chernin Group and Forward Partners. Read more.
•  Luxury Garage Sale, a Chicago-based designer brand consignment retailer, has raised $5 million in Series A funding. Data Point Capital led the round, and was joined by Chicago Ventures, Hyde Park Angels, Pallasite Ventures and individual angels. www.luxurygaragesale.com
•  RubiconMD, a New York-based online medical consulting platform for primary care providers, has raised $4 million in Series A funding from Waterline Ventures. Dioko Health Ventures and Alma Mundi Fund. www.rubiconmd.com
•  Bridgei2i, a Fremont, Calif.-based enterprise analytics startup, has raised an undisclosed amount of Series A funding from Edelweiss Private Equity. www.BRIDGEi2i.com

PRIVATE EQUITY DEALS

•  3i Group has acquired Schlemmer, a German auto parts maker, from Hannover Finanz. Reuters reports that the deal values Schlemmer at more than €400 million, while 3i said that its equity investment was €181 million. Read more.
•  Advent International and Bain Capital reportedly are working on a joint takeover bid for Australian chemicals company ALS Ltd. (ASX: ALQ), which has a current market cap of A$2.04 billion. Read more.
•  Aerostar Aerospace, a Phoenix-based portfolio company of Nautic Partners, has acquired Warmelin Precision Products, a Hawthorne, Calif.-based manufacturer of precision components for the global aerospace industry. No financial terms were disclosed. www.nautic.com
•  The Carlyle Group has invested around $400 million for a minority equity stake in ION Investment Group Ltd., a Dublin, Ireland-based provider of l software to financial institutions and corporations. Existing ION shareholders include TA Associates. www.carlyle.com
•  Envysion, a Louisville, Colo.-based portfolio company of Parthenon Capital Partners, has acquired Next Wave, a Millersville, Md.based provider of loss prevention auditing solutions for the quick-serve restaurant industry. No financial terms were disclosed. www.envysion.com
•  Patterson Medical, a Warrenville, Ill.-based distributor of rehabilitation and sports medicine products, has acquired Performance Health, an Akron, Ohio-based maker of consumer branded health, wellness and self-care products, from Gridiron Capital. No financial terms were disclosed. Patterson Medical is a portfolio company of Madison Dearborn Capital Partners. www.performancehealth.com
•  Searchlight Capital Partners has acquired Harbortouch Payments LLC, an Allentown, Penn.-based provider of payment processing and point-of-sale systems to small and mid-sized merchants, from Prospect Capital Corp. for $328 million. www.harbortouch.com
•  Thoma Bravo is preparing to make a binding takeover offer for Qlik Technologies Inc. (Nasdaq: QLIK), a Radnor, Penn.-based provider of business intelligence software, according to Reuters. The bid could value Qlik at upwards of $2.8 billion, or between $28 and $30 per share. Other initial suitors, including Bain Capital and Permira, opted against continuing in the auction process. Read more.
•  Wincove Private Holdings has sponsored a recapitalization of Hygrade Components, a Bethlehem, Penn.-based provider of components used in the manufacture of residential and commercial windows and doors. No financial terms were disclosed. www.hygrademetal.com

IPOs

•  AC Immune SA, a Swiss biopharma company focused on developing treatments for neurodegenerative diseases associated with protein misfolding, has filed for a $50 million IPO. It plans to trade on the Nasdaq under ticker symbol ACIU, with Credit Suisse, Jefferies and Leerink Partners serving as underwriters. Shareholders include Dievini Hopp BioTech (37.7% pre-IPO stake). www.acimmune.com
•  PapayaMobile, a Chinese provider of programmatic ad software, raised $40 million in an IPO on China’s National Equities Exchange and Quotations Index (NEEQ: 837493). Shareholders include DCM. www.en.papayamobile.com
•  Valvoline Inc., a Lexington, Ky.-based branded automotive lubricant company being spun out by Ashland Inc. (NYSE: ASH), has filed for a $100 million IPO. Renaissance Capital estimates that the offering could ultimately raise $800 million. It plans to trade on the NYSE under ticker symbol VVV, with BofA Merrill Lynch, Citigroup and Morgan Stanley serving as underwriters. Valvoline reports $133 million of net income on $936 million in revenue for the six months ending March 31, 2016, compared to $90.5 million of net income on $973 million in revenue for the year-earlier period. www.valvoline.com

EXITS

•  ServiceNow (NYSE: NOW) has agreed to acquire BrightPoint Security, a San Mateo, Calif.-based cyberthreat intelligence platform, for an undisclosed amount of cash. BrightPoint had raised over $7 million in VC funding from firms like Aligned Partners, EMC, TechOperators and Lucas Venture Group. www.servicenow.co

OTHER DEALS

•  Apple Inc. (Nasdaq: AAPL) reportedly is planning to raise around $1 billion via its first-ever bond issuance in Taiwan. Read more.
•  DAS Health, a Tampa, Fla.-based provider of medical management software, has acquired Falcon Healthcare Systems, a Las Vegas-based provider of medical billing services to the healthcare organizations. No financial terms were disclosed. www.dr-solutions.com
•  MGM Resorts International (NYSE: MGM) has agreed to acquire the 50% stake it does not already own in Atlantic City's Borgata Hotel Casino & Spa from joint venture partner Boyd Gaming (NYSE: BYD) for $900 million. MGM Resorts will then turn around and sell the entire asset to MGM Growth Properties (NYSE: MGP) for $1.18 billion. Read more.
•  Salesforce (NYSE: CRM) has agreed to acquire Demandware (NYSE: DWRE), a Burlington, Mass.-based provider of cloud software for e-commerce, for around $2.8 billion. The $75 per share deal represents a 56.28% premium over yesterday’s closing price for Demandware stock, and will represent the largest acquisition ever by Salesforce. Read more.
•  SoftBank Group said that it plans to sell at least $7.9 billion of its stake in Alibaba Group (NYSE: BABA), including a $5 billion private placement sale and $2 billion in sales back to Alibaba. The moves could cut SoftBank’s stake in the Chinese ecommerce giant from over 32% to around 28%. Read more.
•  Toyota Motor Corp. is in talks to buy robotics groups Boston Dynamics and Schaft from Google parent Alphabet Inc., according to the Nikkei. Read more.

FIRMS & FUNDS

•  Abac Capital, a mid-market private equity firm focused on Spain, has closed its debut fund with €320 million in capital commitments. MVision Private Equity Advisers served as placement agent.  www.abaccapital.com/en
•  Inflexion Private Equity has closed its fourth lower middle-market private equity fund with £250 million in capital commitments It also has raised £250 million for a “supplemental” fund that will co-invest alongside the UK-based firm’s £650 million flagship buyout fund. www.inflexion.com
•  The Maryland State Retirement and Pension System board has increased its private equity target allocation from 10% to 11%has approved a reorganization of its asset allocations and has increased it private equity target from 10% (its current allocation is 9.4% of its $44.7 billion system). www.sra.maryland.gov
•  MidOcean Partners is raising up to $300 million for a “tactical credit” fund, according to a regulatory filing. www.midoceanpartners.com
•  Navis Capital Partners is raising up to $182 million for a new private equity fund focused exclusively on mid-market investment opportunities in Malaysia, according to Private Equity International. Read more.
•  Parthenon Capital Partners, a middle-market private equity firm with offices in Boston and San Francisco, has closed its fifth fund with $1 billion in capital commitments. www.parthenoncapitalpartners.com
•  Romulus Capital has closed its third seed-stage tech fund with over $75 million in capital commitments. www.romuluscap.com

MOVING IN, ON & UP

•  Nareg DerManuelian has joined BBVA as head of digital M&A activities, according to his LinkedIn account. He previously was a senior VP with Citi Ventures. www.bbva.com
•  Joakim Karlsson is stepping down as co-managing partner of Nordic Capital, and will lead the firm’s Swedish and industrial sector deals going forward. The move leaves Kristoffer Melinder as the European private equity firm’s sole managing partner. Read more.
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