| | | | | | | Presented By RBC Capital Markets | | | | Pro Rata | | By Dan Primack ·Jun 07, 2021 | | 🎧 Axios Re:Cap digs into the May jobs report and what it means for Biden's big spending plans. Take a listen. 🚨 Breaking: Sam Ro, the longtime managing editor at Yahoo Finance, is joining Axios to write our daily Markets newsletter, beginning next Monday. Sign up here. | | | | | | Top of the Morning |  | | | Illustration: Aïda Amer/Axios | | | | When news broke last month that groups of buyout firms were bidding around $30 billion to buy medical supplies firm Medline Industries, we speculated that it could kick off a new "Golden Age" of private equity, an era that directly preceded (but didn't cause) the financial crisis. Fast forward: Medline has picked its patrons, a consortium led by The Blackstone Group, The Carlyle Group and Hellman & Friedman. But the details make this feel more like a growth equity deal on steroids than a mega-LBO of yesteryear. Backgrounder: The Illinois-based company is massive, with around $17.5 billion in annual sales. Its products include everything from wheelchairs to PPE to those blue and pink baby blankets that are ubiquitous in hospital nurseries. - Some private equity firms have been gently kicking its tires for years — going back to when Medtronic put its own medical supplies business on the block in 2017 — but the actual process got underway earlier this year when Medline hired Goldman Sachs to find it a buyer.
- Several big-name firms expressed interest, but the second and final round of bidding only included the winning group and Canadian investor Brookfield Asset Management.
- Every suitor needed to spend extra time assessing what parts of Medline's 2020 financials were pandemic-specific, and which parts were sustainable. For example, it sold tons of PPE last year, but many fewer surgical supplies.
What's the same: Despite some protestations from sources close to this transaction, it is most certainly a "club deal." It might not have six or seven firms participating, but three counts (particularly once you add in LP co-investors). There's a bunch of leverage, even though not nearly as lopsided as some pre-crisis deals. What different: No changes to management, this isn't a take-private and Medline's founding family will remain the company's single largest shareholder. - Everyone I spoke with said the investment thesis is entirely about growth.
- Some of that is product line expansion via acquisition, but more is geographic. The vast majority of Medline's business is currently in the U.S., but the PE firms want it to go hard at hospital customers in Europe and Japan.
In context: This seems to be the largest buyout since the financial crisis, and the largest-ever healthcare LBO. But put giant asterisks next to both of those, given the massive inflation of capital markets dollars. - Hospital operator HCA, for example, was taken private for $21 billion and is now valued at north of $70 billion.
- There doesn't seem to be a pipeline of other Medline-sized deals, per conversations with several mega-buyout investors, which means this is unlikely to kickstart a gold rush. Instead, expect big PE deals going forward to be more in the $10 billion to $15 billion range.
Look ahead: Medline's family owners likely could have gotten a higher price in the public markets, but wanted to remain private. In the end, though, they may just be delaying the inevitable, as the PE buyers will want an exit and there isn't a strategic with enough scale to buy Medline. |     | | | | | | The BFD | | Source: Giphy Dave, a Los Angeles-based overdraft protection and money management app, agreed to go public at an implied $4 billion valuation via VPC Impact Acquisition Holdings III (NYSE: VPCC), a fintech SPAC formed by Victory Park Capital. - Why it's the BFD: This is part of an accelerating trend whereby SPAC sponsors have existing financial relationships with their targets, thus raising at least the specter of conflicts of interest. Victory Park isn't an equity holder in Dave, but has worked with it on two debt deals — including an active line worth around $100 million.
- Context: TechCrunch on Friday reported that self-driving company Aurora is in advanced talks to be acquired by a SPAC affiliated with Reid Hoffman, who's already an investor in Aurora via VC firm Greylock.
- ROI: Dave raised around $186 million in VC funding, most recently in 2019 at a $1 billion valuation, from firms like Norwest Venture Partners, Capital One Ventures, The Chernin Group and Section 32.
- The bottom line: "All a SPAC sponsor need do right now is write a lengthy disclosure when raising a SPAC that ultimately says, 'Hey, I might use the capital I'm raising for this blank-check company to buy another company where I already have a financial interest, and here's how that's going to work.' The question is whether such rules around potential conflicts — or lack of rules — will continue to exist indefinitely." — Connie Loizos, TechCrunch
| | | | | | | | Venture Capital Deals | | • Trulioo, a Vancouver-based online identity verification platform, raised US$394 million at a $1.75 billion valuation. TCV led, and was joined by insiders like Citi Ventures and Blumberg Capital. http://axios.link/4EaD • Oda, a Norwegian online grocer, raised around $271 million at a $1.2 billion valuation from firms like SoftBank Vision Fund 2. http://axios.link/5fM2 🚑 Helix, a San Mateo, Calif.-based maker of DNA sequencing tests, raised $50 million in Series C funding from insiders Warburg Pincus, DFJ Growth, Kleiner Perkins Caufield Byers, Mayo Clinic and Temasek. http://axios.link/BvIp 🚑 Iksuda Therapeutics, a British developer of antibody drug conjugates, raised $47 million led by Mirae Asset Capital. www.iksuda.com • Hungryroot, a New York-based grocery delivery startup, raised $40 million in Series C funding led by L Catterton. http://axios.link/vTWP • Grabango, a Berkeley, Calif.-based checkout-free tech provider, raised $39 million in Series B funding. Commerce Ventures led, and was joined by Founders Fund, Unilever Ventures, Honeywell Ventures and WIND Ventures. www.grabango.com • Poka, a Quebec City-based connected worker platform for manufacturers, raised US$25 million in Series B funding. North Ventures led, and was joined by McRock Capital and insiders SE Ventures, CDPQ, Robert Bosch Venture Capital and Leclerc. www.poka.io • OpenSooq.com, a Jordanian classifieds marketplace, raised $24 million. Saudi Jordanian Investment Fund led, and was joined by FJ Labs and iMENA Group. www.opensooq.com • Trellis, a San Francisco-based car and home insure-tech startup, raised $10 million in Series A funding. QED Investors led, and was joined by NYCA Partners and General Catalyst. www.trellisconnect.com 🚑 Rae Wellness, a Minneapolis-based developer of women's health supplements, raised $9.5 million in Series A funding. PowerPlant Ventures led, and was joined by M13, Able Partners and Victress Capital. http://axios.link/Ips3 • Vault Platform, a London-based misconduct reporting SaaS, raised $8.2 million in Series A funding. Gradient Ventures led, and was joined by Illuminate Financial, Kindred Capital and Angular Ventures. http://axios.link/8AiB • Ziina, an Egyptian P2P payments startup, raised $7.5 million in seed funding. Avenir Growth and Class 5 Global co-led, and were joined by Wamda Capital, FJ Labs, Graph Ventures, Goodwater Capital and Jabbar Internet. http://axios.link/v33b | | | | | | | | A message from RBC Capital Markets | | Communications infrastructure will underpin the future | | |  | | | | Valuations in the communications sector remain very robust as the demand for opportunities remains high. Why it's important: The comms infrastructure sector will transform the way we communicate in the future, whether it's 5G, AI, automated cars or the data that needs to be stored consequently. | | | | | | Private Equity Deals | | • BGH Capital offered to buy Hansen Technologies (ASX: HSN), an Australian billing software company, for A$1.3 billion. http://axios.link/Jgk7 • The Blackstone Group agreed to buy Overland Park, Kan.-based data center operator QTS Reality Trust (NYSE: QTS) for around $6.7 billion, of $78 per share (21% premium to Friday's closing price), per the WSJ. http://axios.link/gtAu • KKR is in talks to buy Atlantic Aviation, a Plano, Texas-based fixed base operator, for around $4.5 billion from Macquarie Infrastructure, per Reuters. http://axios.link/9x4j • Munch's Supply, a New Lenox, Ill.-based wholesale HVAC distributor owned by Ridgemont Equity Partners, acquired Windsor, Ontario-based Marks Supply. www.munchsupply.com • Platinum Equity agreed to buy Urbaser, a Madrid-based provider of environmental services, from China Tianying for around $4.2 billion. http://axios.link/ZNlU • Primavera Capital Group agreed to buy the infant formula and child nutrition business of Reckitt Benckiser Group (LSE: RKT) for $2.2 billion, with RKT retaining an 8% stake. http://axios.link/wa9i • SoundPoint Capital Management agreed to buy the U.S. direct lending arm of CVC Capital Partners, per the WSJ. http://axios.link/2vEp | | | | | | | | Public Offerings | | • Eight companies plan to price IPOs this week on U.S. exchanges: 1stDubs, Kanzhun, LifeStance, Marqeta, Monday.com, TaskUs, Zeta Global and Zhangmen Education. http://axios.link/cbsl • China Youran Dairy Group, a Chinese dairy products maker owned by PAG, is seeking to raise up to US$800 million in a Hong Kong IPO. http://axios.link/r2Td 🚑 Alpha Teknova, a Hollister, Calif.-based provider of reagents for biopharma, filed for a $75 million IPO. It plans to list on the Nasdaq (TKNO) and reports $3.6 million in profit on $31 million in revenue for 2020. Telegraph Hill Partners holds an 83% pre-IPO stake. http://axios.link/06t2 🚑 CVRx, a Minneapolis-based developer of neuromodulation therapies for cardiovascular diseases, filed for a $75 million IPO. It plans to list on the Nasdaq (CVRX) and raised over $430 million from firms like J&J (31.8% pre-IPO stake), NEA (17%), Gilde Healthcare (12.7%), Vensana Capital (11.9%), GSK (6%) and Treo Ventures (5.8%). http://axios.link/T3Lw 🚑 GH Research, an Irish biotech focused on depression, filed for an IPO. The pre-revenue company plans to list on the Nasdaq (GHRS) and raised over $125 million from firms like BVF Partners, RA Capital Management, RTW Investments, Boxer Capital, Deerfield and Cormorant. http://axios.link/jGQR 🚑 Graphite Bio, a South SF-based gene editing startup, filed for an IPO. The pre-revenue company plans to list on the Nasdaq (GRPH) and raised nearly $200 million from firms like Versant Ventures, Samsara BioCapital, RA Capital Management, Rock Springs Capital, Cormorant, Deerfield, Federated Hermes Kaufmann Funds, Fidelity, Janus Henderson, Logos Capital, OrbiMed, Perceptive Advisors, Surveyor Capital and Venrock. http://axios.link/XHJi • Intapp, a Palo Alto-based provider of business management software for professional services firms, filed for an IPO. It plans to list on the Nasdaq (INTA) and reports a $31 million net loss on $153 million in revenue for the nine months ending March 31, 2021. Backers include Temasek and Great Hill Partners. http://axios.link/L2jD • LegalZoom.com, a Glendale, Calif.-based provider of online legal solutions, refiled for an IPO (it first filed in 2012 but withdrew in 2014). It plans to list on the Nasdaq (LZ) and reports $10 million of profit on $471 million in revenue for 2020. Shareholders include Francisco Partners, IVP, Kleiner Perkins, TCV and Bryant Stibel. http://axios.link/sxH0 | | | | | | | | SPAC Stuff | | • L Catterton Latin America Acquisition, a consumer SPAC, filed for a $200 million IPO. http://axios.link/0GK3 • Mount Rainier Acquisition, a tech SPAC led by Matthew Kearney (LeadingResponse), filed for a $150 million IPO. http://axios.link/f39K • UKwisdom, an Asia-focused SPAC formed by Ucommune International, filed for a $50 million IPO. http://axios.link/m50M | | | | | | | | Liquidity Events | | • Facebook (Nasdaq: FB) acquired Unit 2 Games, a British maker of a Roblox-like game creation platform that had raised around $5 million from firms like Makers Fund. http://axios.link/n7Y7 | | | | | | | | More M&A | | • Altium (ASX ALU), an Australian provider of CAD software, rejected a US$3.9 billion takeover bid from U.S. peer Autodesk (Nasdaq: ADSK), saying the price was too low. http://axios.link/NTlV • Domain Building Materials (TSX: DBM) acquired U.S. lumber manufacturer Hixson Lumber Sales for US$375 million. http://axios.link/9Hpr • eBay (Nasdaq: EBAY) received binding bids for its South Korean business from listed retailers Lotte Shopping and Shinsegae Group, in a deal that could fetch $4.5 billion. http://axios.link/agYP • Microsoft (Nasdaq: MSFT) won U.S. antitrust approval for its $16 billion takeover of speech tech company Nuance Communications (Nasdaq: NUAN). http://axios.link/qmgO • SoftBank is investing up to $150 million for a minority stake in Grupo Bursátil Mexicano, a 35 year-old Mexican stock brokerage. http://axios.link/iCMd | | | | | | | | Fundraising | | • Abry Partners is raising $1.25 billion for its sixth structured equity fund, per an SEC filing. http://axios.link/Y5Sd • Alpine Investors, a San Francisco-based tech PE firm, is targeting $1.7 billion for its eighth fund, per the WSJ. http://axios.link/X0fR • Foundation Capital, a Palo Alto-based VC firm, is raising $500 million for its tenth fund, per an SEC filing. www.foundationcapital.com • Susa Ventures is targeting $125 million for its fourth seed-stage fund and $250 million for its second opportunities fund, per SEC filings. www.susaventures.com • Trucks VC, a transportation-focused venture firm, raised $52 million for its second early-stage fund and an undisclosed amount for its first growth fund. www.trucks.vc | | | | | | | | Final Numbers: SPAC performance | Source: IPOx SPAC Index, tracking aftermarket performance of U.S. SPACs. | | | | | | | | A message from RBC Capital Markets | | What influences consolidation in the comms infrastructure sector? | | | | | | | | 70-80% of the growth in the communications infrastructure sector has been driven by a handful of high-scale companies. What this means: There's a push towards consolidation — as the industry evolves eventually it will get down to a smaller number of players. Find out more. | | | | 🙏 Thanks for reading Axios Pro Rata! Please ask your friends, colleagues and the Daves you know to sign up by going here. |  | | The tool and templates you need for more engaging team updates. | | | | | | Axios thanks our partners for supporting our newsletters. If you're interested in advertising, learn more here.
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