PitchBook News - Infosec VCs hold on for M&A uptick

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The Daily Pitch: VC

August 4, 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:

LCD data shows that leveraged loans lacking a "debt cushion" recover less in cases of default

Infosec VC funding has stayed flat and low since Q3 2022, but there are reasons for optimism

Silicon Valley Bank's owner, First Citizens Bank, is clawing back the lender's client base

The middle market gets crowded as larger GPs hunt downstream

Over a third of the clubs in Europe's five biggest soccer leagues are backed by private capital

Today's Top Stories

Infosec waits for the M&A flood

Information security remains a top spending priority for businesses, despite VC funding remaining flat in Q2 2023 with 157 deals totaling $2.2 billion—nearly identical to the three previous quarters.

According to PitchBook's Q2 2023 Information Security Report, however, M&A is likely to pick up in the second half of the year. Discover opportunities within the space in the latest Emerging Tech Research report.

read the preview

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As interest rates soar, leveraged loans' loss-absorbing debt cushion thins

(Number1411/Shutterstock)

Companies with debt taken on during an LBO might present another problem for their private equity owners, aside from what suddenly are steeper costs of servicing that debt.

Many of those buyout loans were structured with little or no subordinated debt beneath the loans. This lack of a "debt cushion" is important. LCD data shows that leveraged loans lacking a debt cushion recover less, in cases of default.

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1,500 SVB clients make fresh deposits under First Citizens

(AaronP/Getty Images)

"SVB is not going anywhere."

That's according to Peter Bristow, president of First Citizens Bank, which is the new owner of Silicon Valley Bank. First Citizens' effort to hold onto the lender's equity-rich client base seems to be paying off.

Around 1,500 companies that withdrew their deposits from SVB during the March bank run have returned at least a portion of their funds, even as rival banks race to capture clients.

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M&A dealmakers rely on structured deals to close transactions

Panelists speak at the ACG Seattle conference
(Madeline Shi/PitchBook News)

As lending remains tight, middle-market buyers are relying on private debt funds and structured deals to fund transactions.

Meanwhile, fierce competition for high-quality assets has put heightened pressure on middle-market PE firms, as larger funds hunt down market for smaller deals.

Those were two of the main takeaways from a group of panelists discussing M&A financing for middle-market deals at an event yesterday held by the Association for Corporate Growth.

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US private capital scores big in European soccer

Raheem Sterling of Chelsea FC
(Justin Casterline/Getty Images)

US private capital is flooding into European soccer clubs. More than a third of the continent's big league clubs are now backed by private equity, venture capital or other forms of private capital.

With the sport gaining popularity in the US and the growth of sports-focused investment strategies, it's a trend that seems set to continue.

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Recommended Reads

Private equity's deal rut is spurring firms to raise cash creatively. [Bloomberg]

Is a £20 billion subsea cable the answer to Britain's renewable future? [Sifted]

"There is no cloud. There is just someone else's computer.": Why some developers are embracing local-first software. [Wired]

Since yesterday, the PitchBook Platform added:

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VC valuations

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People

603

Companies

25

Funds

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The Daily Benchmark:
2016 Vintage Global Secondaries Funds

Median IRR

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Top Quartile

24.63%

0.79x

Median DPI

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Industry Ventures Special Opportunities Fund III

Greenspring Secondaries Fund II

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VC Deals

Toss Bank, a South Korean neobank, is close to raising another $154 million round, catapulting its valuation to $2.1 billion, according to TechCrunch.

Tenstorrent, which builds computers for AI, has raised $100 million in strategic financing led by Hyundai Motor Group and Samsung Catalyst Fund.

Cell therapy biotech company Kyverna Therapeutics has raised $60 million to extend its Series B to $145 million. Participating investors include Bain Capital Life Sciences, PE firm GordonMD Global Investments and drugmaker Gilead Sciences.

TytoCare, a virtual care startup, has raised a $49 million growth round led by Insight Partners.

SaaS startup Transcend has raised a $20 million Series B to automate infrastructure design in a round backed by investors including Autodesk and HG Ventures.

Knot, a fintech payment platform, has raised a $10 million Series A led by Nava Ventures, with Amex Ventures among participating investors.

Munich-based immersive media startup Hologate has closed an €8.3 million Series A led by Bolero Holdings and Vester Partners, Tech.eu reported.

Rolla, a social fitness platform based in Bosnia and Herzegovina, has raised €6.3 million in a round led by Hellen's Rock and entrepreneur Mate Rimac.

Orbital, a London-based finance and crypto platform, has secured £5 million in a round led by Golden Record Ventures.

BP Ventures has invested £4 million in Dynamon, a UK-based startup providing data analytics and simulation tools for commercial transport and logistics companies.

PE Deals

KKR is in advanced talks to acquire publisher Simon & Schuster in a $1.65 billion deal, The Wall Street Journal reported.

STG and Francisco Partners are among the PE firms competing to acquire Avid Technology, a Nasdaq-listed company that makes software for media creators, Reuters reported.

EQT plans to invest several billion dollars into its portfolio company First Student to electrify its fleet of school buses, The Wall Street Journal reported.

Baillie Gifford, Cox Enterprises and NB Renaissance have invested in Bending Spoons, an Italian digital technology company and owner of notetaking software provider Evernote.

Warburg Pincus and Centerbridge are among PE investors that have made nonbinding offers to acquire Barclaycard Germany, the German consumer finance unit of UK bank Barclays, Reuters reported.

Northleaf Capital Partners has acquired a majority stake in Provident Energy Management, a Canadian energy services provider specializing in condominiums.

Fundraising

Whitehorse Liquidity Partners has closed its fifth flagship fund on $5.3 billion.

Frontenac has closed a continuation fund for portfolio company Motion & Control Enterprises, a specialist industrial manufacturer.

Investors

Apollo Global Management reported a record $1 billion profit in its Q2 earnings call, a 75% jump year-over-year powered by high interest rates and gains in its annuities business.

The Carlyle Group recorded a 26% year-over-year decline in distributable earnings in its Q2 earnings call. Its net profit from asset sales fell by over 35% in the second quarter.

Chart of the Day

"The true test for this vintage, and those that followed, will be the next five years now that exits have slowed to a crawl."

Source: PE Exit Timelines and the Impending Maturity Wall

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PitchBook News - Infosec VCs hold on for M&A uptick

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