Monday, August 14, 2023

Healthcare services' unexpected slump

VC's looming deficit; PE's healthcare fundraising boost sticks around; corporate buyers jump on infosec discounts; startups steer clear of bankruptcy
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The Daily Pitch: VC, PE and M&A
August 14, 2023
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Today's Top Stories  
Debt costs drag on healthcare services dealmaking
PE dealmaking for healthcare services companies slowed further in Q2 as some heavily leveraged platforms strain under the growing cost of debt and impending maturity walls.

But as healthcare specialist firms continue successfully fundraising and the broadly syndicated loan market cracks open, PitchBook analysts expect deal activity to gradually recover in coming quarters.

Our latest industry research breaks down PE trends and investment strategies in healthcare services, with spotlights on mental health services and medical spas, two of the sector's hottest investment categories.
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LPs seek recession hedge with PE healthcare funds
(picture alliance/Getty Images
"We moved from a recession to a pandemic to another potential recession," and those forces have boosted interest in specialty PE healthcare investors, says PitchBook analyst Rebecca Springer.

That's evident in the fundraising data, as healthcare specialists avoid the slump that faces other PE firms in 2023.
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A message from PitchBook  
PitchBook's 2023 Media Kit released
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By partnering with PitchBook Media, you will have daily opportunities to reach 1.5M+ industry professionals in our newsletter, and you can broaden exposure of your brand through our core industry reports. We also help clients create custom research to share data-driven insights on the market.

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The looming venture capital deficit
PitchBook's capital-demand-to-supply model illustrates how the immense amount of capital that entered the market in 2020 and 2021 impacted the dynamics of VC. Startups had previously come back to market on a regular schedule to raise new rounds, even as deal sizes increased.

As the market shifts to efficiency, startups have stretched themselves further between rounds. Our latest analyst note lays out how to account for these mechanics in this new investment environment and how the era of market overcapitalization is over—for now.
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Corporate buyers lured by infosec discounts are on the scent for more
(Joey Schaffer/PitchBook News)
M&A, like all exit activity, had frozen over—but within information security, a thaw might be starting. Customers are hungry for cybersecurity protection and favor consolidation within the industry. All told, M&A activity is predicted to tick up this year, though for startups it comes at the expense of accepting lowering valuations.
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European startup bankruptcies lie low while new company creation stalls
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European VC-backed bankruptcies are on pace to fall below last year's total, but new startup formation could see its lowest annual figure in nearly a decade.

Amid worsening funding conditions, managers are prioritizing existing portfolio companies over new investments, one explanation for the low failure and creation rates.
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Recommended Reads
An "iconic" Andreessen Horowitz investor is turning heads in the defense tech sector. [The Information]

Before a bot steals your job, it will steal your name. [The Atlantic]

When researchers claimed to discover a room-temperature superconductor, it set off a brief but intense hype cycle among investors and entrepreneurs. [The Washington Post]
 
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VC Deals  
Climate-tech startup Persefoni has raised a $50 million Series C1 round led by TPG Rise.

Tracer, a data intelligence specialist, has raised an $18.1 million Series A co-led by NewRoad Capital Partners, Progress Ventures and BDMI.

Atmosfy has raised a $12 million seed round led by Redpoint Ventures for its restaurant review video platform.

Germany's Neotaste, which makes a restaurant-finding app, has closed a €5.9 million Series A led by Burda Principal Investments.

Olis Robotics has secured $4.1 million led by PSL Ventures to design industrial-grade robots.

Saeki Robotics, a Swiss developer of robotic digital manufacturing units, has raised $2.3 million led by Wingman Ventures.
 
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In this webinar, PitchBook lead healthcare analyst Rebecca Springer will speak with representatives from Aurora Mental Health & Recovery, Colorado Access, and Owl Health about the transformation of treatment and business models in the behavioral health industry.

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PE Deals  
The Italian government has signed a preliminary agreement with KKR to take up to a 20% stake in Telecom Italia's landline network as the firm prepares to make a €23 billion binding offer for the business.

General Atlantic and Dragoneer Investment Group have agreed to buy Arco Platform in a deal that values the Brazilian-listed education software company at $1.5 billion.

Oakley Capital will purchase Flemming Dental, Excent, and Artinorway Group from European Dental Group.
 
Exit & IPOs  
Forward Air will acquire Omni Logistics, a freight forwarding company backed by Ridgemont Equity Partners and EVE Partners, for Forward Air stock and $150 million in cash. Omni's sellers plan to retain some ownership.
 
Fundraising  
CVC Capital Partners has raised more than $4.45 billion of a $6 billion target for its sixth Asia-focused fund, Reuters reported.
 
Corporate M&A  
FC Barcelona has agreed to sell its content creation platform Barca Media to Nasdaq-listed Mountain & Co. I Acquisition Corp. in a SPAC deal that gives the business an enterprise value of $1 billion.
 
Chart of the Day  
"Smaller venture funds have outperformed their larger counterparts during recent periods. A reason for this outperformance is that those funds have focused on the earlier stages of the venture lifecycle, where valuations have held up relatively well throughout the slowdown."

Source: 2023 Global Fund Performance Report (as of Q4 2022 with preliminary Q1 2023 data)
 
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