Junior partner exodus, continued: We’ve been chronicling the proliferation of spin-off firms launched by junior partners, but that trend is not limited to venture capital. The same thing is coming to private equity. Nothing is concrete yet, but I’m hearing junior partners at a handful of buyout firms are initiating talks with LPs to open their own shops.
The trend coincides with buyout firms selling stakes in their management companies. In recent months, for example, TSG Consumer Partners sold a minority stake to funds backed by Kuwait and The Riverside Company sold a minority stake to Parkwood LLC. Last year Littlejohn & Co. sold a minority stake to Goldman Sachs. And last year Goldman raised a $1.5 billion fund for these kinds of deals. (Again, there’s nothing concrete to report yet, so these are just examples of the minority stake trend.)
Junior partners — my shorthand for anyone not named on the Form ADV — are not usually involved in these discussions. They may have decision-making power on deals, but they don’t have a say in what happens to the firm, or on who makes money on a minority stake sale. Most notably, the non-compete clauses are normally limited to the partners named on the ADV.
In some cases, I’m told, junior partners are frustrated that outside investors get access to the fee stream ahead of them. As one observer noted, “It is a struggle between single digit millionaires and the founders who may be worth, on paper, hundreds of millions.”
Meanwhile, limited partners are wary of any potential tension created by management stake sales – they’d rather a firm incentivize its junior partners to stay. The result is that some savvy LPs are targeting junior partners at firms that have sold minority stakes and offering to be an anchor investor in a new fund. “They see an opening when the junior partners who didn’t get any money and didn’t have to sign a non-compete in the minority stake sale are now tired of being left behind,” one source said. We’ll be watching to see how this develops…
Getting out: Harvard’s endowment is selling off $2.5 billion worth of stakes in private equity and venture capital funds, according to the Wall Street Journal. That includes some of its holdings in Kleiner Perkins Caufield & Byers funds. It’s part of a turnaround initiated by N.P. Narvekar, the fund’s new endowment chief. What is he backing instead of PE and VC? WSJ reports:
Under Mr. Narvekar, Harvard made a first-time investment in New York hedge fund Element Capital Management this April and recently invested with Cambridge Square Capital, a new Boston hedge fund launched by a former Harvard bond manager. Harvard also bought $1 billion worth of exposure to exchange-traded funds last quarter, according to a securities filing, in an attempt to track markets at a low cost.
Harvard is also in talks to sell 8,500 acres of New Zealand dairy farms and 5,500 cows to KKR for around $70 million. ¯\_(ツ)_/¯
Getting in: At least 20% of the proceeds from the enormous Saudi Aramco IPO (if it happens) will go toward private equity. Which explains why Steve Schwarzman, David Rubenstein, Robert Smith and Masayoshi Son are putting in quality time with Yasir al-Rumayyan, who runs Saudi Arabia’s Public Investment Fund (PIF), according to WSJ. One notable detail for those taking part in the windfall: The PIF is no passive investor. WSJ’s Maureen Farrell reports:
PIF is eager to secure more of a say in how funds it backs operate than a traditional limited partner would have, people familiar with its plans said. It could have input in what types of investments these buyout funds make or have veto power over new investments. The sovereign-wealth fund will also likely pay significantly lower fees than other investors do, according to industry experts, because of its size and because it often makes the first seed investment, giving it more leverage.
THE LATEST FROM FORTUNE…
• Mickey Drexler steps down from TPG and Leonard Green-backed J. Crew.
• Docker lost its head of product.
• Lyft partners with Nutonomy for self-driving tech; no word on what this means for its partnership with GM and Cruise.
• Is synthetic oil worth the money?
• Ray Dalio thinks Trump’s Paris decision will backfire.
• Uber hired a Harvard professor to help with leadership issues.
• Yesterday Apple hosted its WWDC conference. Check out Fortune’s coverage:
A big long Q&A with Steve Schwarzman. Why the car-sharing market hasn’t taken off the same way Airbnb has. (This link was missing in yesterday’s edition.) Blockchain job ads surge. Digital privacy is making antitrust concerns relevant again. The baroque phase of the scam economy. The walls keep closing in on John Paulson. Worker protections viewed with new skepticism under Trump. Why old-timey jobs are hot again.
• Netskope, a Los Altos, Calif.-based cloud security provider, raised $100 million in Series E funding. Lightspeed Venture Partners and Accel led the round, and were joined by Social Capital, Iconiq Capital, Sapphire Ventures and Geodesic Capital. Read more at Fortune.
• Coinbase, a San Francisco-based bitcoin wallet and platform, is in talks with potential investors to raise $100 million or more in a new round of funding at a valuation of more than $1 billion, according to The Wall Street Journal. Read more.
• Earlens Corporation, a Menlo Park, Calif.-based hearing aid maker, raised $73 million in Series C preferred stock funding. Vertex Healthcare led the round, and was joined by investors including Windham Venture Partners, Sightline Partners, New Enterprise Associates, Aisling Capital, Lightstone Ventures and Medtronic.
• Shipt, the Birmingham, Ala.-based online grocery delivery marketplace, raised $40 million funding, according to TechCrunch. Investors include Greycroft Partners, e.ventures, and Harbert Venture Partners. Read more.
• Riversand Technologies, a Houston, Texas-based provider of master data management solutions, raised $35 million in funding. Crestline Investors led the round.
• Trilogy Education Services, a New York-based skill-based training program developer, raised $30 million in Series A funding from Highland Capital Partners, and was joined by investors including Rethink Education and City Light Capital.
• Armis, a Palo Alto, Calif.-based enterprise IoT security company, raised $17 million in funding. Investors include Sequoia Capital and Tenaya Capital.
• Tulip, a Somerville, Mass.-based industrial IoT and advanced analytics platform, raised $13 million in Series A funding. New Enterprise Associates led the round, and was joined by investors including Pitango Venture Capital.
• Fishpeople Seafood, a Portland, Ore.-based seafood products company, raised $12 million in Series B funding. Advantage Capital Agribusiness Partners led the round, and was joined by 3×5 Partners, S2G Ventures, Encourage Capital, Blueberry Ventures and Collaborative Fund.
• Workey, an AI-based career development and recruitment platform with offices in Tel Aviv and New York, raised $8 million in Series A funding. PICO Partners and Magma VC led the round.
• Clustree, a Paris-based talent management solutions provider, raised $7.9 million in Series A funding. Investors include Creandum, Idinvest Partners, and Alven Capital.
• Freight Farms, a Boston-based provider of high-yield crop production, raised $7.3 million in Series B funding. Spark Capital led the round.
• Audioburst, a Palo Alto, Calif.-based AI-powered audio content platform, raised $6.7 million in Series A funding. Advanced Media Inc led the round, and was joined by investors including Flint Capital, 2B-Angels, and Mobileye’s investors consortium.
• Wahed, a New York-based Shari’ah compliant investment platform, raised $5 million in seed funding. Investors include Khalid Al Jassim, Laurent Nordin, Nasr-Eddine and John Elkhair.
• Wiretap, a Columbus, Ohio-based enterprise security and collaboration solutions provider, raised $4.85 million in funding. Draper Triangle Ventures and Ohio Innovation Fund led the round, and were joined by JumpStart and Rev1 Ventures.
• Quantifi, an Indianapolis-based digital advertising R&D platform, raised more than $2 million in seed funding. Investors include High Alpha Capital and Router Ventures.
• Court Innovations, an Ann Arbor, Mich.-based online court case resolution platform, raised more than $1.8 million. BELLE Michigan Fund led the round, and was joined by investors including Northern Michigan Angels, Michigan Angel Fund, the student-led Social Venture Fund at the University of Michigan.
• BookNook, an Oakland-based reading instruction technology that promotes small group learning with kids, raised $1.2 million in seed funding. Reach Capital led the round, and was joined by Urban Innovation Fund, Better Ventures, and Impact Engine.
• STRIVR Labs, a Palo Alto, Calif.-based virtual reality training software company, raised funding of an undisclosed amount from the National Football League, according to The Wall Street Journal. Read more.
• The Relish, a San Francisco-based sports media company providing content geared to female fans, raised funding of an undisclosed amount from investors including Precursor Ventures, Halogen Ventures and Slow Ventures.
HEALTH AND LIFE SCIENCES DEALS
• DOC+, a Moscow, Russia-based digital health company, raised $5 million in Series B funding. Investors include Yandex and Baring Vostok.
PRIVATE EQUITY DEALS
• Clayton, Dubilier & Rice agreed to acquire the Waterworks business unit, a St. Louis-based distributor of industrial and construction products, of HD Supply Holding for $2.5 billion.
• GTCR and Carlyle Group are in talks to jointly acquire U.S. contract drug manufacturer and researcher Albany Molecular Research (Nasdaq:AMRI) for $922 million in cash, according to Reuters. The $21.75 per share offer represents a premium of about 10% to Albany Molecular’s closing price on June 5. Read more.
• Warburg Pincus has committed up to $300 million to Princeton Growth Ventures, a U.S.-based telecom, media and technology buyout platform. [This item has been corrected with the right link.]
• Baird Capital acquired a majority stake in CAV, a U.K.-based fluid based ice protection systems provider. Financial terms weren’t disclosed.
• Unison Capital acquired Dinamix, a Japan-based operator of bars and restaurants. Financial terms weren’t disclosed.
• Royal Adhesives & Sealants, which is backed by American Securities, acquired the assets of Ball Ground’s aircraft sealant repackaging business from Graco Supply. Financial terms weren’t disclosed.
• Solera Holdings acquired Colimbra Holding B.V., a Netherlands-based provider of intelligent data management software for the automotive insurance industry. Financial terms weren’t disclosed.
• Emergency Communications Network, a portfolio company of Veritas Capital, acquired Send Word Now, a New York-based provider of enterprise notification solutions. Financial terms weren’t disclosed. Send Word Now has been rebranded as OnSolve.
• Fisher Container Holdings, which is backed by Morgan Stanley Capital Partners, acquired Packaging Products Corporation, a Mission, Kansas-based flexographic printing and converting of flexible films, bags and pouches manufacturer. No financial terms were disclosed.
• Blackstone has made an investment of an undisclosed amount in Ascenty, a Brazil-based telecommunication services company, which is backed by Great Hill Partners.
• Kidd & Company formed Logistyx Technologies, a Chesterfield, Mo.-based logistics software platform, through the merger of a coalition of software solution providers, including Advanced Distribution Solutions, Agile Network, and Pantechnik International. Financial terms weren’t disclosed.
• Shawbrook Group Plc (LSE:SHAW) rejected a raised and final offer of 868 million pounds ($1.12 billion) from private equity groups trying to take control of the lender, according to Reuters. Read more.
• Investors led by Grupo BTG Pactual SA’s Timberland Investment Group will pay about $403 million for Weyerhaeuser’s (NYSE:WY) Uruguay timberlands and a manufacturing business, according to Reuters. Read more.
• GroupBy Inc., a Toronto-based provider of relevancy-focused eCommerce solutions, acquired Edgecase, an Austin, Texas-based product data enrichment software provider. Financial terms weren’t disclosed.
• Delivery Hero, a Berlin-based food delivery service, said Tuesday that it is preparing for an IPO on the Frankfurt Stock Exchange. The offering should be expected in coming months, with the company targeting proceeds of about EUR 450 million ($507 million). The company, backed by German company Rocket Internet, posed revenue of EUR 349 million($393 million) in 2016. Citigroup, Goldman Sachs, Morgan Stanley have been named joint global coordinators. UniCredit Bank, Berenberg, Jefferies, and UBS have been named as additional joint bookrunners.
• Boston Omaha Corp., a real estate and billboard company based out of Boston, Mass., announced the terms of its IPO Monday. The company plans to offer 5.5 million shares between $12 to $14 a piece, raising about $71.5 million. Company insiders plan to buy about $47 million worth in shares. Boston Omaha says it will trade on the Nasdaq under “BOMN,” with Cowen and Company as underwriter. In 2016, the company reported $3.8 million in revenue on $3.2 million net loss. Magnolia Capital Fund(pre-offering 55.6%) and Boulderado Partners(37.4%) back the company.
• Domino’s Pizza meanwhile is expected to list its Russia and Turkey business in London. DP Eurasia owns the pizza’s chain’s franchises in Turkey, Azerbaijan, and Georgia, according to the Financial Times. Domino’s is the biggest pizza delivery company in Turkey, and third-largest in Russia. The size of the offering has not yet been revealed.
• Snap Inc acquired Placed, a location-based analytics and ad measurement startup, for more than $200 million, according to media reports. Placed had raised more than $13 million in venture funding from investors including Madrona Venture Group and Two Sigma Ventures. Read more.
• LDC sold its investment in A-Gas, a subsidiary of U.K.-based refrigerant recovery company A-Gas International, to KKR. Financial terms weren’t disclosed. LDC said it will make 3.3x money multiple on its original investment and an IRR of 24%.
• Aurora Capital Partners acquired Randall-Reilly, a Tuscaloosa, Ala.-based provider of B2B data and data-driven marketing services for the trucking, construction and agriculture industries. The seller was Investcorp. Financial terms weren’t disclosed.
• Empire Petroleum Partners acquired Superior Transport’s consignment and wholesale motor fuels supply businesses and the related fuels transportation assets. The seller was Matrix Capital Markets Group. Financial terms weren’t disclosed.
FIRMS + FUNDS
• Alpha Private Equity, a Paris-based private equity firm, raised 903 million euros ($1.01 billion) for its seventh mid-market Pan-European private equity fund.
• ACE & Company, a Switzerland-based private equity group specializing in co-investment, raised more than $120 million for its flagship buyout co-investment fund ACE Buyout III SPC.
• Steve Egli joined Raymond James as a managing director for its financial services investment banking practice. Previously, Egli was at Sandler O’Neill.
• Evan Earley joined LightBay Capital as a senior associate. Previously, Earley was at Pritzker Group Private Capital.
• David Melina joined Simon Group Holdings as a chief investment officer. Previously, Melina was at Sentry Investment Partners and Costa Kondylis & Partners.
• Ryan McDonough joined Marcus Partners as a principal with a focus on the New England market. Previously, McDonough was at Bentall Kennedy.
• Asif Giga joined Experian as a director. Previously, Giga was at Singtel Innov8 Ventures.