HUNGRY FOR SMALL DEALS
The M&A boom is slowing, and big banks are eyeing smaller deals. Although mega-mergers account for the majority of U.S. deals by dollar value, there’s a larger amount of small deals being closed. And Wall Street is perking up.
The Wall Street Journal reports that investment bankers are “tripping over themselves, and sometimes each other,” to win business advising much smaller companies that they would’ve never even considered a few years ago. The article notes: “A Goldman Sachs Group partner cold-called his way onto a $162 million stock-offering deal for a Texas-based chemicals company. Citigroup Inc. sent a chairman to pitch for a $140 million tech deal. And JPMorgan beat out four other banks to represent Cianna, which sold for $200 million to Merit Medical Systems Inc.”
So why now?
Well, because there are only so many mega-deals. There were approximately 135 deals in the U.S. last year valued at over $2 billion, versus 2,200 under. Plus, there are advantages to pursuing smaller deals. Yes, the fees are smaller, but they are also split among fewer players. The deals also tend to move faster and require less manpower than some of the more complex, international takeovers.
But it’s worth asking — will this last or are investment bankers committed for real this time? “Every 10 years or so, the big banks get the idea to move in,” Mark Brady, head of M&A at William Blair & Co., a Chicago-based firm where the average deal is $400 million, told the WSJ. “As soon as there’s a down-cycle, they disappear.”
THE YEAR OF ANDREESSEN HOROWITZ: Venture firm Andreessen Horowitz is emerging as the big winner of the 2019 tech IPO wave. The firm was an early investor in several companies slated to go public in the near future. It led the Series B round of Slack, Pinterest, PagerDuty, and Airbnb. Andreessen Horowitz also turned an estimated $100 million investment in Lyft into a holding worth more than $1 billion, even after the drop following the first day of trading.
“People are always going to bark at us because we’re always beating them,” Ben Horowitz told The Financial Times. “When you get beaten by the same people over and over again, you talk smack. But that’s OK, that’s just the name of the game.”
SLACK IS GOING FOR IT: It looks like Slack will pursue a direct listing in favor of a traditional IPO, and the workplace messaging startup has chosen the New York Stock Exchange to host its offering. Slack is expected to go public in June or July, according to the Wall Street Journal.
Slack would become the second big technology company after Spotify to bypass a traditional IPO. A direct listing is an unusual move in which a company circumvents the traditional underwriting process and allows the market to play a greater role in determining the price. The company’s IPO will be closely watched by other Silicon Valley entrepreneurs who are considering following suit. Let's see whether the risk will be worth the reward.
BITCOIN SOARS: Bitcoin burst to its highest level in almost five months this morning thanks to a major order by an anonymous buyer. The cryptocurrency is up 15% in its biggest one-day gain since April last year. Meanwhile, The New York Times published a feature outlining the challenges in bringing Bitcoin from the fringes of the internet into the mainstream financial world. “The smart money knows that crypto is not ready,” a cryptocurrency trader told the NYT.
We’ll see. Meanwhile, Fortune is holding its first annual Brainstorm Finance conference in Montauk in less than three months. Come join us on June 19-20.
• Bill.com, a business payments and software platform, raised $88 million in funding at a valuation of more than $1 billion. Franklin Templeton led the round, and was joined by investors including Mastercard and Fidelity Investments Canada ULC.
• Fast Radius, a Chicago-based manufacturing technology company, raised $48 million in Series B funding. UPS led the round, and was joined by investors including Drive Capital.
• Elvie, a London-based health and lifestyle brand developing technology for women, raised $42 million in Series B funding. IPGL CEO Michael Spencer led the round, and was joined by investors including Octopus Ventures and Impact Ventures UK.
• ProteanTecs, an Israel-based software platform developer, raised $35 million in Series B funding. Investors include Avigdor Willenz, Intel Capital, ITI Venture Capital Partners, Mitsubishi UFJ Capital, Redline Capital Management S.A., Viola Ventures, WRVI Capital and Zeev Ventures.
• CollegeVine, a Cambridge, Mass.-based provider of high school guidance and college admissions advising, raised $24 million in Series B funding. Investors include Maywood Street Investments, Fidelity Investments, Morningside Technology Ventures and University Ventures.
• Pixeom Inc, a Mountain View, Calif.-based software-defined edge computing company, raised $15 million in funding. Investors include Intel Capital and National Grid Partners.
• BillionToOne, a Menlo Park, Calif.-based precision diagnostics company, raised $15 million in Series A funding. Hummingbird Ventures and NeoTribe Ventures led the round, and were joined by investors including Y Combinator, Civilization Ventures, Fifty Years, 500 Startups Istanbul and HOF Capital.
• Sqreen, a provider of application security management, raised $14 million Series A funding. Greylock Partners led the round, and was joined by investors including Y Combinator, Alven Capital and Point Nine.
• Fifth Eye, an Ann Arbor, Mich.-based medical device software company, raised $11.5 million in Series A funding. Arboretum Ventures and Cultivation Capital led the round.
• Fliit, a Germany-based food logistics startup, raised 10 million euros ($11.2 million) in Series A funding. Investors include Maersk Growth and Berlin Technologie Holding.
• HammerTech, a mobile provider of health, safety and quality software for the construction industry, raised $10 million in Series A funding. Arrowroot Capital led the round.
• NextGen Jane, a women’s health tech startup, raised $9 million in Series A funding. Material Impact led the round, and was joined by investors including Access Industries, Viking Global Investors and Liminal Ventures.
• Productiv, a Palo Alto, Calif.-based company that provides real-time SaaS engagement insights, raised $8 million in Series A funding. Accel Partners led the round.
• Good Dog, a New York City-based marketplace to allow people to get a dog from a breeder, shelter or rescue, raised $6.7 million in funding. Investors include BoxGroup, Felicis, Slow Ventures, Fuel Capital, BarkBox, and SV Angel.
• Movellus, a San Jose, Calif.-based digital infrastructure startup, raised $6 million in Series A funding. Stata Venture Partners led the round.
• Seedo, a cannabis tech startup, raised $4 million in funding. SodaStream CEO Daniel Birnbaum led the round.
HEALTH AND LIFE SCIENCES DEALS
• Karuna Therapeutics, a Boston-based developer of drugs for the treatment of schizophrenia, raised $12 million in Series B funding, from Sofinnova Investments.
PRIVATE EQUITY DEALS
• 3i Group plc agreed to invest in Regional Rail LLC, a provider of freight transportation, car storage, and transloading services. Financial terms weren't disclosed.
• Mill Point Capital acquired Kemp Technologies, a Kemp, N.Y.-based provider of load balancer and application delivery controller solutions. Financial terms weren't disclosed.
• SNH Capital Partners acquired Universal Background Screening, a Phoenix, Ariz.-based provider of background screening products and services. Financial terms weren't disclosed.
• Evolution Research Group, which is backed by Linden Capital Partners, acquired Finger Lakes Clinical, a Rochester, N.Y.-based clinical research facility specializing in pediatric and adult central nervous system trials for major national and international pharmaceutical firms.Financial terms weren't disclosed.
• HGGC invested in American Megatrends International, a developer of key hardware and software solutions for the computer marketplace. Financial terms weren't disclosed.
• Tradeweb Markets, a New York-based electronic trading platform, plans to raise $657.5 million IPO of 27.3 million shares priced between $24 to $26. Thomson Reuters and Blackstone back the firm. J.P. Morgan, Citi, Goldman Sachs and Morgan Stanley are underwriters. It plans to list on the Nasdaq as “TW.” Read more.
• Rustrancom, a Russian rail firm, plans to list in London raising about $300 million, Reuters reports.
• Boqii Co., a Chinese online pet shop, is planning a $100 million IPO in either Hong Kong or the U.S., Bloomberg reports citing sources. Goldman Sachs backs the firm. Read more.
• Endeavor, the international entertainment management firm, has filed confidentially for an IPO, WSJ reports. Firms including Silver Lake and Softbank back the firm. Read more.
• Willis Towers Watson acquired Tranzact, a direct-to-consumer healthcare organization that links individuals to U.S. insurance carriers. Clayton, Dubilier & Rice was the seller. Financial terms weren’t announced.
• Dunes Point Capital LP sold Miller Chemical & Fertilizer LLC, a Hanover, Penn.-based provider of crop protection and nutritional agrichemical products, to Huber Engineered Materials, which is owned by the J.M. Huber Corporation. Financial terms weren't disclosed.
• Thoma Bravo acquired a majority stake in Mailgun Technologies, a San Antonio, Texas-based provider of email infrastructure software. The seller was Turn/River Capital. Financial terms weren't disclosed.
• Anthony Cassano joined Ridgemont Equity Partners as a partner. Additionally, Ridgemont promoted Charles Anderson, Tim Dillon and Cay Freihofer to partner; Seth Peck to principal; Tyler Houin to vice president; and Dan Norton to senior associate.
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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.