SOFTWARE AND BREAD
Today’s column is third in a series of interviews with the heads of M&A at the most acquisitive companies in the tech industry. Previously we’ve spoken with dealmakers at Salesforce and Google.
Now: Microsoft. Peggy Johnson has been EVP of business development at Microsoft since 2014, when she joined the company after a 24 year-run at Qualcomm.
Fortune: You’re doing a lot of venture investing – 26 deals in the first year.
Peggy Johnson: When I got here we didn’t have an early stage fund and I felt that, without one, we were missing early signal that might give us a view into a developing trend or interesting technology, and that puts us back in that conversation. We are at the table with the VC and startups and we have that ability to bring in these signals, and makes sure that senior leadership knows and sees what we see out there.
That can also create some uncomfortable situations. What happens when one of those investments becomes a competitor, or if you acquire a company that competes with a portfolio company?
I would rather be able to have my nose under the tent early on, so I can be more prepared if they turn into a competitor or prepared to partner with them. Sometimes these things turn into acquisitions, as Maluuba [a Montreal-based machine learning startup Microsoft acquired in January] did. I’d rather know about them when they are a $5 million or $50 million valuation, not a $500 million or $5 billion valuation. Sometimes it behooves me in this role to have that vision earlier rather than later.
Now that so many enterprise companies are preparing to go public, are you monitoring the IPO pipeline for deal opportunities?
I’d rather know about them much earlier. That’s the gap that Microsoft Ventures builds for us. We can look at things much earlier and have that ability to be flexible. I don’t want the market to drive when I’m making an acquisition.
I get the sense that your industry is poised for some major consolidation. There’s the expected tax repatriation, and many of the biggest players are looking to M&A for growth. Do foresee consolidation?
I’m very disciplined about what problems does a company solve for me, whether I choose to partner or invest or acquire. I try not to get drawn into something if there’s a hub of activity and not have outside forces involved. That just brings emotion and drama into the picture. I’d rather just keep a very consistent and non-volatile view.
How would Microsoft react to its competitors merging?
We’re doing our homework. We’re in the mix and making sure we don’t miss things. But we generally aren’t surprised. We like to take a long term view and not be reactionary.
Are you seeking transformative deals?
We’re looking at broadly across the spectrum of things. If it solves something for me, it could be a little tiny company and it could be something like LinkedIn, that brought us this fantastic enterprise network. But we don’t think of it as transformative or not.
Does the possibility of looser antitrust rules and repatriation under President Trump affect strategy and repatriation?
[Comment provided by Microsoft’s communications team]: We are supportive, as we have been for years, of structural US tax reform. We will continue to watch the various proposals with interest.
Read the entire interview, which discusses Microsoft’s investments in AI, autonomous vehicles, and social good initiatives, here.
Bread: Following the news that German investment conglomerate JAB would pay $7.8 billion to buy Panera Bread, my colleague John Kell spoke with Panera CEO and founder Ron Shaich about his decision to go private.
If Panera is so forward-looking—and has been so successful in terms of generating consistent sales and stock market growth—why sell? Shaich seems to have lost patience with all the headaches that come with running a public company. "I spend about 20% of my time explaining what I do and what I'm about to do," he said. "I think being private, for Panera, doesn't give us anything other than it frees us up." The deal is also personally lucrative to Shaich, as he owns a little over 5% of the company's Class A shares.
Shaich seems particularly excited to no longer have to deal with activist investors, which have been known to invade the restaurant industry to clamor for change. Panera found itself in the crosshairs twice: in 2007 with Shamrock Activist Value Fund LP and in 2015 with Luxor Capital. The latter battle led Panera to issue $500 million in new debt to buyback shares to appease Luxor.
THE LATEST FROM FORTUNE...
• The bright side of job-killing automation, via one billionaire’s mind
• Saying no to Trump job cost Jaime Dimon $70 million
• Amazon now more valuable than Walmart, Costco, Target combined
Tax reform and sandwiches. Credit Suisse and “excessive bonuses.” Trump’s budget cuts leave bridge and rail projects hanging. The great overseas cash grab. Why Uber won’t fire its CEO. The LaCroix bears.
• Armor, a Dallas-based cybersecurity company, raised $89 million in funding. ST Telemedia led the round.
• Peloton Technology, a Menlo Park, Calif.-based automated vehicle technology company focused on trucking, is on the verge of closing a $60 million Series B round led by Omnitracs. Additional investors include Intel, Capital, DENSO International America, Castrol innoVentures, Lockheed Martin, Nokia Growth Partners, UPS, Strategic Enterprise Fund, Volvo Group Capital, • Sandhill Angels, Band of Angels, Birchmere Ventures, Grupo Bimbo, Mitsui, Okaya, Schlumberger, and US Ventures. Read more at Fortune.
• Valens, an Israeli semiconductor company, raised $60 million in funding. Israel Growth Partners led the round, and was joined by Delphi, Samsung Catalyst Fund, Goldman Sachs, and MediaTek.
• Trov, a San Francisco on-demand insurance platform, raised $45 million in Series D funding. Munich Re / HSB Ventures led the round, and was joined by Oak HC/FT, Suncorp Group (ASX:SUN), Guidewire (NYSE: GWRE), Anthemis, and Sompo Holdings.
• Dapulse, an Israeli team management and productivity platform, raised $25 million in its Series B funding. Insight Venture Partners led the round, and was joined by Genesis and Entree Capital.
• Medwell Ventures, a Bengaluru, India-based provider of specialty home health care services, raised $21 million in Series B funding, according to the Economic Times. Mahindra Partners led the round, and was joined by Eight Roads Ventures, F-Prime Capital Partners, and angel investors. Read more.
• Portworx, a Los Altos, Calif. provider of container data services for DevOps, raised $20 million in Series B funding. Sapphire Ventures led the round, and was joined by investors including GE Ventures and Mayfield.
• ColorChip, an Israeli maker of optical components, raised $17 million in a funding round led by the CIRTech fund.
• Flow, a Hoboken, N.J. provider of cross-border commerce services, raised $16 million in Series A funding. Bain Capital Ventures led the round.
• AdAsia Holdings, a Singapore-based advertising technology company, raised $12 million in Series A funding from JAFCO Asia.
• Triptease, a London online service for making direct hotel bookings, raised $9 million in Series B funding. BGF Ventures led the round, and was joined by Notion Capital and Episode 1 Ventures.
• The Wing, a New York City all-women social, co-working and networking club, raised $8 million in Series A funding, according to Forbes. NEA led the round, and was joined by Kleiner Perkins, Built By Girls Ventures, and SoulCycle cofounders Julie Rice and Elizabeth Cutler. Read more.
• Dojo Madness, a Berlin-based developer of analytics and coaching tools for online gamers, raised $6 million in funding, according to TechCrunch. Raine Ventures and K Cube Ventures led the round. Read more.
• Bus.com, a bus travel startup formerly known as Sharethebus, raised $5 million in Series A funding. Jackson Square Ventures led the round, and was joined by BMW, Real Ventures, and Y Combinator. Read more at Fortune.
• PhenixP2P, a Chicago provider of real-time video streaming services, raised $3.5 million in Series A funding. KB Partners led the round.
• Whatfix, an Indian provider of SaaS customer engagement services, raised $3.5 million in Series A funding. Stellaris Venture Partners led the round.
• Critical Informatics, a Seattle cybersecurity company, raised $3.25 million in Series A funding. East Seattle Partners led the round.
HEALTH + LIFE SCIENCES DEALS
• OM1, a Boston healthcare technology company, raised $15 million in Series A funding. General Catalyst led the round, and was joined by Glikvest, 7wire Ventures, and Wanxiang Healthcare Investments.
PRIVATE EQUITY DEALS
• GTCR is in talks to buy CareerBuilder, a Chicago-based SaaS for job seekers and employers, from owners Tegna (NYSE:TGNA) , Tribune Media (NYSE:TRCO), and The McClatchy Company (NYSE:MNI) for more than $1 billion, according to Reuters. Read more.
• Monroe Truck Equipment, a truck equipment manufacturer backed by Industrial Opportunity Partners, acquired the assets of Towmaster, a Litchfield, Minn. equipment trailers and truck bodies manufacturer.
• Sphera Solutions, which is backed by Genstar Capital, acquired Rivo Software, a U.K.-based provider of environmental, health, safety and risk management software. Financial terms weren’t disclosed.
• Renovo Capital acquired Global HR Research, a Fort Myers, Fla.-based provider of pre-hire services, including background checks, from Patriot National (NYSE: PN).
• Beech Tree Private Equity invested in Learnlight, a provider of corporate language training services. Financial terms weren’t disclosed.
• Hypred, a France-based maker of cleaning solutions owned by Ardian, agreed to acquire Anti-Germ, a German developer of disinfecting products. Financial terms weren’t disclosed.
• Seven & i Holdings (TSE:3382), which operates 7-Eleven, agreed to buy Sunoco LP’s (NYSE:SUN) convenience stores and gas stations for about $3.3 billion. Read more at Fortune.
• PacWest Bancorp (NasdaqGS:PACW) agreed to acquire CU Bancorp (Nasdaq:CUNB) for around $705 million in cash and stock, according to Reuters. Read more.
• Cardinal Health (NYSE:CAH) is close to reaching a deal to acquire Medtronic’s (NYSE:MDT) medical supplies unit for around $6 billion, according to Reuters. Read more.
• Airbnb, a San Francisco-based home-sharing company, denied a report that it is in talks to partner with Chinese rival Xiaozhu. Read more at Fortune.
• MGM Holdings (OTCPK:MGMB) agreed to acquire the 81% of New York City cable channel Epix it does not already own from Viacom (Nasdaq:VIAB) and Lionsgate (NYSE:LGF.A).
• Unilever (LSE:ULVR) said it will explore the sale of its"spreads" business. Read more.
• Elevate Credit, a Fort Worth, Texas-based provider of online credit to non-prime consumers, expects to issue 12.4 million shares at $6.50 a share. The price represents a dramatic reduction from its previous plan to sell 7.7 million shares at between $12 to $14 a share. The company plans to trade on the NYSE under ticker symbol ELVT. Backers include Sequoia Capital (27.2% pre-IPO stake) and Technology Crossover Ventures (22.2% stake). [This item has been updated to reflect Elevate Credit's revised issue price]
• Pfingsten sold ILP, a Sanford, Fla. LED lighting fixtures manufacturer, to Harbour Group.
• Eyeo, a Germany adblocker, acquired Flattr, a Swedish online micropayments and donations service that’s raised $2.5 million in venture funding. Terms weren’t disclosed.
FIRMS + FUNDS
• Cendana Capital, a San Francisco fund-of-funds investment firm, raised $260 million for its network of five funds. Read more.
• Committed Advisors, a Paris-based investment firm, raised €1 billion ($1.1 billion) for its third fund, Committed Advisors Secondary Fund III.
• Forward Partners, a London-based early-stage venture capital firm, raised £60 million ($75 million) for its latest fund.
• Fred Destin is leaving Accel to focus on seed and earlier-stage investing. Read more.
• Russ Wilcox has joined Pillar as a partner. Previously Wilcox was the CEO of E Ink.
• Réal Desrochers is stepping down from his position as managing investment director of private equity at CalPERS.
• Steven Shekane and Jonathan Williams have joined Constitution Capital’s credit team. Shekane was previously a senior investor at Morgan Stanley Credit Partners, and Williams was most recently a senior associate at Silicon Valley Bank.
SHARE TODAY'S TERM SHEET
View this email in your browser.
Term Sheet is produced by Laura Entis. Submit deal items here.