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The Daily Pitch: VC

May 3, 2023

The Daily Pitch is powered by PitchBook’s industry-defining research and best-in-class data

In today's Daily Pitch, you'll find:

US PE exits had a sluggish start to the year, and GPs will need to get creative to spawn liquidity.

Dig into M&A dealmaking trends with our latest report on the industry.

The Carlyle Group's new CEO says the rescue of First Republic Bank shows resilience in the banking system.

Today's Top Stories

Discount prices keep global M&A activity afloat

A persistently gloomy macroeconomic backdrop and near banking crisis drove a decline in M&A activity in Q1 2023, pushing global deal value down 32% from the peak just over a year prior.

But total M&A deal value still topped $1 trillion for the quarter. While certain sellers—think private equity—stepped back in recent months, lower valuation multiples in some cases helped encourage deal flow.

Our Q1 2023 Global M&A Report, sponsored by Liberty GTS, explains which deals are happening and why, diving into dealmaking trends within industries and between regions:

Multiples on PE-led buyouts collapsed by 29% in Q1 after holding firm for two years, reflecting a shift to smaller and cheaper deals.

Smaller companies—those worth $100 million or less—have seen their median enterprise value drop to a revenue multiple of 1.1x, trailing behind the overall M&A market's median of 1.6x.

Founder-owned companies made up 85% of all businesses sold in Q1, their highest share of the market ever.

read the report

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Startup radar: European VCs on space tech startups to watch

(Vadim Sadovski/Shutterstock)

Technological advances have made space tech increasingly accessible, leading to more VCs exploring opportunities in the sector.

We spoke to four European VCs active in space tech for their opinions on which startups, both in and outside of their portfolios, are worth watching.

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A message from Pillsbury Winthrop Shaw Pittman

In Focus: Climatetech and VC

In 2022, climatetech companies were not immune to the challenges facing VC, but the long-term bets placed on climate innovation are driving the space forward. Pillsbury's Climatetech: 2022 Year in Review provides in-depth analysis of climatetech VC activity.

Key takeaways include:

Climatetech VC activity totaled $24.5 billion, down from $32.9 billion in 2021 but representing its second-biggest year.
Despite the downward trends in broader VC activity, 2022 set a record with $2.1 billion in total first-time financing deal value in climatetech.
Earlier VC rounds held a larger share of total deal value in 2022. PE, corporate venture capital (CVC), and nontraditional VC investment activity all reached their second-highest annual levels of deal value in 2022.
CVC activity deal activity set a record for the number of deals completed, despite moderately lower aggregate deal value.

Read the report

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Carlyle CEO: First Republic rescue shows banking resilience

The Carlyle Group CEO Harvey Schwartz
(Patrick T. Fallon/Getty Images)

The Carlyle Group's new chief executive sees resilience in the banking system amid collapses.

At the Milken Institute Global Conference this week, Carlyle CEO Harvey Schwartz said the announcement of JP Morgan's rescue of First Republic Bank demonstrates that the industry can handle institutional problems: "(Monday) was a good day for the system and for the country."

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PE exits slow to a trickle in Q1

(Tim Roberts Photography/Shutterstock)

Buyout firms are holding off on selling their portfolio companies at lower valuations, resulting in a lackluster start to the year for exits. In the first quarter, PE firms closed only an estimated 279 exits for a total of $55.9 billion.

While sales to corporate buyers became PE firms' preferred exit route, these deals still declined in both deal value and count quarter-over-quarter.

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Leverage in syndicated US loan market sinks to seven-year low

(QtraxDzn/Shutterstock)

The big question in the $1.4 trillion US leveraged loan market these days: Where's the leverage?

With M&A financings either being snapped up by an aggressive private credit segment or shelved due to market volatility, the old-school syndicated loan world has been left largely with less-risky refinancings so far in 2023.

Overall leverage in the sector recently dipped below 5x debt/EBITDA, the first time that's happened in seven years, according to PitchBook LCD. While less leverage can mean less risk, it also means less return for investors.

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Recommended Reads

China has dominated the global IPO market as the US reels from the recent banking crisis. [Financial Times]

Quantitative asset manager AQR is experimenting with ChatGPT to improve returns. [Institutional Investor]

How JP Morgan became banking's regular rescuer. [The New York Times]

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VC Deals

Generative AI startup Cohere is in talks to raise $250 million, which would give it a valuation of about $2 billion, the Financial Times reported. The upcoming round is being led by Inovia Capital with participation from Index Ventures.

Employee intranet startup Simpplr has raised a $70 million Series D led by Sapphire Ventures and joined by investors including Salesforce Ventures.

Foretellix, an automated driving safety and validation startup, has raised a $43 million Series C led by 83North. Nvidia and Woven Capital also joined, among others.

Uwill, a mental health and wellness startup focused on university students, has raised a $30 million Series A led by Education Growth Partners.

Nomba, a Nigerian banking and payment services startup targeting small businesses, has raised $30 million in a round led by Base 10 Partners.

Morgan Health, the health-focused investment arm of JP Morgan, has invested $25 million in Kindbody, a fertility clinic network.

Biotech startup Hygieia has raised a $22 million Series B led by Firstime Ventures.

Supplement brand Thesis has raised $13.5 million between an $8.4 million Series A and a $5.1 million seed round. Unilever Ventures participated in both.

Autonomize AI, an AI healthcare startup, has raised a $4 million seed round led by Asset Management Ventures.

Job platform startup Gigs has raised a $2.7 million pre-seed round led by Slauson & Co.

Sniffer, a robotics startup focused on emissions monitoring, has raised $2 million in seed funding led by the Michigan Angel Fund.

PE Deals

I Squared Capital has agreed to buy Australian transport equipment leasing company Rentco. The firm will invest an extra A$300 million (roughly $200 million) to support the company's expansion.

The Carlyle Group and Premji Invest are in separate talks to buy a 20% stake in TVS Credit Services, the auto finance unit of motorcycle maker TVS Motor, for around $150 million, Reuters reported.

Siris Capital has led a $100 million round for Mavenir, building on the PE firm's existing stake in the network software provider.

Everlane Equity Partners has invested in South Watch, a third-party fund administrator and middle-office services provider.

Sterling Investment Partners has invested in produce, dairy and specialty foods distributor Mr. Greens.

Portfolio Companies

Turkish grocery delivery company Getir is in talks to buy VC-backed peer Flink, the Financial Times reported. Flink is also said to be looking to raise $100 million from existing investors at a $1 billion valuation.

Exit & IPOs

DuPont has agreed to acquire Spectrum Plastics Group from AEA Investors for $1.75 billion in cash. AEA purchased the medical device manufacturer for $950 million in 2018.

E-scooter company Tier Mobility has hired Qatalyst Partners to help explore a sale or merger, Sky News reported. The Berlin-based company, which was valued at $2 billion in 2021, is backed by investors including SoftBank, Northzone and Speedinvest.

Fundraising

Neos Partners has raised roughly $800 million for its debut fund, which will invest in clean energy, The Wall Street Journal reported.

Pacific Avenue Capital Partners, which focuses on corporate divestitures in the middle market, has closed its first fund on more than $500 million.

Red Arts Capital has closed its latest fund on $270 million, with commitments from Prudential Financial, The University of Chicago's Office of Investments and Neuberger Berman, among others.

Energy Impact Partners has raised $111.9 million for Elevate Future Fund I, which will back clean energy startups with founders from underrepresented groups. Investments so far include ChargerHelp!, Robust.ai and Rheaply.

Growth investor Claret Capital Partners has launched a €72 million fund for follow-on investments in its portfolio companies.

Chart of the Day

Source: The State of CVCs in Japan

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PitchBook News - M&A shops the discount rack

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