PE'S TECH LOVE AFFAIR
Good morning, Term Sheet readers.
Private equity firm Thoma Bravo will acquire Veracode, a Burlington, Mass.-based software security firm, from chipmaker Broadcom. The deal is valued at an eye-popping $950 million.
This is the latest security-related acquisition for Thoma Bravo, which has completed more than 30 enterprise security deals since inception. The deal indicates private equity’s ever-growing appetite for cybersecurity (and more broadly, software). According to Pitchbook, firms have already completed more cybersecurity deals in the U.S. and Europe in 2018 than in any other recent full year.
Since adding software and technology to its investment focus, Thoma Bravo has done 54 software and technology acquisitions (23 platform companies and 31 add-ons) with an aggregate value in excess of $7.5 billion.
Private equity deal activity in the tech sector has tripled since 2010. So what are some of the factors at play that make tech companies attractive targets? In February, I spoke with Hugh MacArthur, Bain’s head of private equity, who shed some light around private equity’s increasing interest in tech. He said that tech in the U.S. has been the largest sector for PE investment for the last three years, and approximately half of the deals are in software.
“A lot of the tech sector businesses have some attractive growth characteristics,” he told Term Sheet at the time. “They are new economy businesses able to drive technological change and are on growth curves that support the very high multiples that we’re seeing in the marketplace right now.”
Of course, private equity is interested in tech companies while everyone is willing to pay high multiples for these companies. We’ll see what happens if the music ever stops.
Even Thoma Bravo managing partner Orlando Bravo told The Financial Times last year the boom could still blow up. “The thing I don’t like about the whole asset class is I haven’t seen other groups sell that much,” he said. “Where is the money on the table, guys? I’d like to see how much is stuck.”
TUNE IN TOMORROW: Tomorrow, I'll publish a Q&A with Aperture Investors founder Peter Kraus for Term Sheet’s ‘5 Qs’ with a Dealmaker’ series. Aperture is a new asset management firm that is betting on a performance-based fee structure where fund managers are paid based on how they perform against the market. I enjoyed this conversation, and I think you will too.
THE LATEST FROM FORTUNE...
• This Startup Wants to Bring 'Common Sense' to Self-Driving Cars (by Renae Reints)
• The Biggest Challenge for Hudson's Bay's New CEO? Deciding What Not to Do (by Lisa Marie Segarra)
• Canada's Advantage Over the United States? Immigration, Says Justin Trudeau (by Emma Hinchliffe)
• Why the Role of the CFO Is Bigger—and Broader—Than Ever Before (by Lisa Marie Segarra)
...AND ELSEWHERE:
Amazon plans to split HQ2 evenly between two cities. Verizon will reorganize business segments. The path to online voting. How right-wing social media site Gab got back online. Under Armour: No more strip clubs on company dime. Icelandair to buy discount rival Wow Air.
VENTURE DEALS
• Luckin Coffee, a China-based coffee chain, plans to raise between $200 million and $300 million in funding at a valuation of $1.5 billion to $2 billion, according to Reuters. Read more.
• Tink Labs, a Hong Kong startup that develops smartphones that hotels provide to their guests for free, is raising up to $300 million in funding, according to TechCrunch. Tink Labs will be valued of at least a $1.5 billion post-money valuation. Read more.
• VIP Peilian, a China-based online music education platform, raised $150 million in Series C funding. Tiger Global led the round, and was joined by investors including Tencent Holdings, Orchid Asia, GSR Ventures and Bluerun Ventures.
• Meesho, an India-based social commerce startup, raised $50 million in Series C funding. Investors include Shunwei Capital from China, DST Partners, RPS Ventures, Sequoia India, SAIF Partners, Venture Highway and Y Combinator.
• ScienceLogic, a Reston, Va.-based provider of artificial intelligence software for IT operations management, raised $25 million in funding. Investors include Square 1 Bank, a division of Pacific Western Bank.
• Syntiant Corp., an Irvine, Calif.-based semiconductor startup, raised $25 million in Series B funding. Investors include Sunstone Venture Capital, Seraph Group, Microsoft, Intel, Amazon, Robert Bosch, Applied Materials and Motorola.
• Oncology Analytics, an Atlanta and Plantation, Fla.-based company that helps health plans manage the costs of cancer treatment care, raised $21 million in Series B funding. Oak HC/FT led the round, and was joined by investors including McKesson Ventures, Blue Cross Blue Shield Venture Partners and Sandbox Advantage Fund.
• Templafy, a Denmark-based enterprise template management and document creation company, raised $15 million in Series B funding. Investors include Insight Venture Partners, Dawn Capital, SEED Capital, and Preben Damgaard.
• ShipMonk, a Deerfield Beach, Fla.-based provider of order fulfillment services and inventory management software to small and midsized e-commerce companies, raised $10 million in Series A funding. SJF Ventures led the round, and was joined by investors including Grotech Ventures and Supply Chain Ventures.
• Partnerize, a U.K.-based provider of partner marketing software for global brands, raised $9 million in funding, at a valuation of $127 million. GP Bullhound led the round.
• Zeguro, a San Francisco-based developer in cyber risk management for small and medium-sized enterprises, raised $5 million in funding. Mosaik Partners led the round, and was joined by investors including Healthy Ventures, Munich Re / HSB Ventures, QBE Ventures, Social Capital, Plug and Play, and Sparkland Capital.
• Aiden.ai, a London-based AI analytics startup raised $1.6 million in seed funding. Partech led the round.
• Kinvolved, a Brooklyn-based provider of software and services to reduce chronic absenteeism and boost daily attendance, raised $1.54 million in funding. The Draper Richards Kaplan Foundation led the round, and was joined by investors including Twilio.org Impact Fund.
• Transit, a Canada-based transportation mobile app company, raised funding of an undisclosed amount. Investors include Alliance Ventures.
PRIVATE EQUITY DEALS
• ConvergeOne Holdings Inc (Nasdaq:CVON) agreed to be acquired by CVC in an all-cash deal valued at $1.8 billion.
• Bojangles' Inc. (Nasdaq:BOJA) agreed to be acquired by Durational Capital Management LP and The Jordan Company L.P., in an all-cash deal for $16.10 per share.
• Detector Technology, a portfolio of Ampersand Capital Partners, acquired ETP Ion Detect Pty Ltd, a Sydney, Australia-based electron multiplier manufacturer. Financial terms weren't disclosed.
• Millpond Equity Partners acquired Innovative Learning Concepts Inc (TouchMath), a Colorado Springs, Colo.-based provider of supplemental, multi-sensory mathematics curriculum and products designed to teach foundational mathematics concepts.
EXITS
• OMERS Private Equity agreed to sell MatrixCare Holdings Inc, a Minneapolis, Minn.-based provider of long-term post-acute care software, to ResMed Operations Inc, for $750 million.
• Stone Point Capital acquired Eliassen Group, a Reading, Mass.-based consulting and talent solutions firm. The seller was Riverside Partners. Financial terms weren't disclosed.
• Battery Ventures acquired Audio Precision Inc, a Portland, Ore.-based provider of high-performance instrumentation and software for audio testing and analysis. Financial terms weren't disclosed.
• Ardian acquired a majority stake in Trustteam, a Belgium-based integrated one-stop-shop ICT provider for SMEs, from Naxicap. Financial terms weren't disclosed.
FIRMS + FUNDS
• Global Blockchain Ventures formed a $100 million blockchain tech-focused venture fund. Stonegate Digital Capital Group is committing a “seven-figure” investment to seed Global Blockhain Ventures Fund LP.
PEOPLE
• Matt Heiman joined CRV as a partner, and Erica Van as a venture investor. Previously, Heiman was at Greylock Partners, and Van was at Presidio Partners.
• New Enterprise Associates promoted Julia Schottenstein to principal.
• AlixPartners named David Podolsky as a managing director in its private equity and investors practice. Previously, he was at Bain & Company.
• Di-Ann Eisnor joined Obvious Ventures as a venture partner. Previously, she was at Waze.
• KPS Capital Partners promoted Raquel Palmer to co-managing partner, and Ryan Baker and Kyle Mumford have been promoted to partner.
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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.
