PE pressured to fund add-ons with equity

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The Daily Pitch: VC

July 26, 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:

More PE managers are financing add-ons with equity to avoid upping the cost of existing debt

Private capital is helping the healthcare industry transition to value-based care

These five trends encapsulate European PE's Q2

Today's Top Stories

Private capital holds a key to enabling value-based healthcare

As parts of the US healthcare industry transition to value-based care, patients should expect better medicine and, hopefully, lower costs. But executing that transition well requires a massive up-front investment.

One solution: Value-based care enablement, a business model that groups independent practices or health systems together and takes on the downside risk of the new billing framework. Our recent industry research delves into the public and VC- and PE-backed companies driving the shift toward better-value healthcare.

read it now

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PE turns to equity to fund add-ons amid tough debt market

(filadendron/Getty Images)

PE firms are changing their add-on playbook by relying more on equity to avoid paying higher interest rates.

Investors are increasingly worried that taking on further leverage to fund add-ons will trigger debt clauses that raise their overall borrowing costs.

Insights for broadband industry deals

Macroeconomic challenges, including geopolitical tensions, global supply chain disruptions, and interest rates raised to combat inflation, shifted dealmaking trends in the communications space.

However, pockets of opportunity remain with continued growth of digital and mobile technologies, including 5G and cloud-based communication tools, driving significant private market investment. Quarterly private investment deal value grew 41.6% in the first quarter of 2023 and already represents more than half of the annual total closed in 2022.

Explore recent dealmaking data and current trends in this industry report.

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VC Deals

Solink, a Canadian enterprise security startup, has raised a $60 million Series C led by Goldman Sachs Asset Management.

Nuqleous has raised a $26 million growth round led by Blue Ladder Capital. Nuqleous' software provides retail space planning and performance analytics.

K4Connect, which develops software for senior living communities, has secured an $8.9 million investment co-led by Bryce Catalyst and AXA Venture Partners.

Eflow Global, a London-based provider of financial compliance software, has secured a £7 million Series A led by Finch Capital.

Portuguese maintenance management specialist Infraspeak has raised an additional €7.5 million led by Bright Pixel for its Series A, bringing the round's total to €17.5 million.

Fintech startup Sk3w Technologies has raised a $7 million Series A led by Tower Research Ventures, IMC and Citadel Securities.

London-based Quench.ai has secured $5 million from investors including Firstminute Capital and Notion Capital for its AI personal learning coach.

PE Deals

HIG Capital has agreed to acquire audiobook publisher RBmedia from KKR for more than $1 billion, more than double the $500 million KKR paid for the company in 2018, The Wall Street Journal reported.

Silversmith Capital Partners-backed AppHub, an ecommerce enablement platform, has received a $95 million growth investment from PSG. AppHub has made nine software acquisitions since its founding in 2021.

The Carlyle Group has agreed to acquire Evolution Funding, a UK-based car finance software platform, from LDC. LDC will retain a stake in the business.

BC Partners has agreed to sell a minority stake in PetSmart, one of North America's largest pet retailers, to Apollo Global Management.

Middle market-focused RF Investment Partners has made a growth capital investment in Nextpoint, a legal-tech software provider.

Pearl Energy Investments has invested in newly formed Voyager Midstream Holdings, which will acquire and develop midstream oil and gas infrastructure in North America.

Exit & IPOs

Thoma Bravo has agreed to sell Imperva to French aerospace and defense giant Thales for $3.6 billion. Imperva specializes in enterprise cybersecurity.

Fundraising

Proterra Investment Partners has closed Proterra Credit Fund 2 above its $500 million initial hard cap. It will target middle-market food and beverage companies based in North America.

PE firm Valesco Industries has closed its third fund on $434 million. The fund is focused on investments, as well as subordinated debt, in small businesses and lower-middle-market businesses.

Valhalla Ventures has launched its debut fund with $66 million to invest in seed-stage gaming and deep-tech startups.

Corporate M&A

Banc of California is in talks to acquire PacWest Bancorp with the help of equity contributions from Centerbridge Partners and Warburg Pincus.

Chart of the Day

Source: PitchBook's Q1 2023 Global Real Assets Report

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PE pressured to fund add-ons with equity

Insights for broadband industry deals

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