How LP returns are feeling the exit squeeze

Read online | Don't want to receive these emails? Manage your subscription.

Log in

The Daily Pitch: VC

November 2, 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:

PE firms are contributing a record 51% equity stake to clear LBO deals in the syndicated loan market, LCD finds

Trends in the equity, debt and commodities markets show how LP returns are feeling the exit squeeze

Factory financing fuels carbon tech's record quarter for VC funding

US VC investors are shy about overseas deals in 2023, but they do favor the UK

Today's Top Stories

October wrap-up: One month in global markets

Our latest Global Markets Snapshot breaks down a month of trends in the equity, debt and commodities markets, tracking returns across a range of indexes and sectors. It also features private market activity, including major deals, fundraising, IPO performance, lending volume and unicorn creation. For October, we look at how the challenging exit environment has hit returns to LPs.

In this monthly digest, we provide the datasets that the PitchBook Institutional Research Group is keeping an eye on as we near the end of 2023.

read it now

Share:

LBO equity contributions top 50% amid debt costs, investor caution

(Mark Carrel/Shutterstock)

Just how conservative has the market for LBO financing become after six quarters of soaring borrowing costs and declining investor tolerance for risk?

Very, according to LCD's recent analysis, which details how PE firms are now stepping up for a whopping 51% equity stake to clear LBO deals in the syndicated loan market. That's the most ever—and up considerably from the 41% average seen during the more accommodating rate environment of the 10 years ending in 2021.

Get weekly leveraged finance and private credit market updates in the new PitchBook LCD newsletter, The Credit Pitch.

Recommended Reads

A PE slump hasn't slowed firm employees' raises this year, but the most lucrative parts of compensation packages keep evolving. [Institutional Investor]

The Carlyle Group's failed bid for Cotiviti shows how higher rates have started to pummel PE dealmakers. [Financial Times]

Spirit Halloween lives on, even when the holiday ends and stores close. [CNBC]

Since yesterday, the PitchBook Platform added:

47

VC valuations

2148

People

614

Companies

22

Funds

See what our data software can do

The Daily Benchmark:
2017 Vintage Global VC Funds

Median IRR

22.63%

Top Quartile IRR

34.03%

0.24x

Median DPI

Select top performers

YLV III

Flagship Pioneering Fund VI

Alta Partners NextGen Fund I

*IRR: net of fees

59 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

Tabby, a Saudi Arabia-based buy now, pay later startup, raised a $200 million Series D led by Wellington Management, valuing the company at $1.5 billion.

Infinitum, an industrial climate-tech specialist developing a sustainable motor, raised a $185 million Series E led by Just Climate.

Digital bank Atom raised £100 million from BBVA, Toscafund and Infinity Investment Partners, at a valuation of £362 million, down from its 2022 valuation of £435 million, the Financial Times reported.

Cybersecurity startup FusionAuth raised $65 million led by Updata Partners.

SaaS provider ORO Labs raised a $34 million Series B led by Felicis.

AI-powered dataset provider Vespa.ai raised $31 million led by Blossom Capital.

Genome Insight, a healthtech specialist focusing on cancer and rare diseases, raised $23 million.

Spotted Zebra, a London-based workforce management platform provider, raised an €8.8 million Series A led by Nauta Capital.

Houston-based Graylog raised a $9 million Series C extension and $30 million in debt led by Silver Lake Waterman, Piper Sandler Merchant Banking and Harbert Growth Partners.

London-based Sprout.ai, which offers an AI-powered insurance claims automation platform, secured £5.4 million in a round led by Amadeus Capital Partners and Praetura Ventures.

VC-backed freight-forwarding company Flexport agreed to buy Convoy's technology, The Information reported. The Seattle-based trucking company, whose investors include Baillie Gifford and Greylock Partners, shut down in mid-October.

Don't miss our upcoming webinar

Underwhelming stock performance thwarted the hope for a resurgence in IPOs this year, which was led by Instacart and Klaviyo's Q3 listings. An increasingly investor-friendly market is expected to further slow the pace of dealmaking, compress deal metrics and set an even higher bar for startups across the VC lifecycle. Our speakers will highlight findings from the Q3 2023 PitchBook-NVCA Venture Monitor, sponsored by Insperity, J.P. Morgan, Dentons, and Deloitte, and what investors should be aware of for 2024.

The liquidity crunch and shuttered IPO window have left startups across all VC stages with fewer options for receiving capital.

Dry powder figures appear strong, but without a consensus on whether the market has hit bottom, investors are more cautious than ever about deploying capital.

Portfolio markdowns, the denominator effect and interest rates have diminished LP interest in the VC asset class.

Register now to secure your spot.

Share:

PE Deals

Brookfield Infrastructure Partners agreed to purchase all of the assets of Cyxtera for $775 million as part of the Florida-based data center and IT infrastructure company's restructuring under Chapter 11 bankruptcy protection.

A Greenbelt Capital Management-led group acquired Saber Power Services, a Houston-based services provider for medium-to-high voltage electrical infrastructure, from Oaktree Capital Management. Other investors include Schroders Capital, StepStone Group and Wafra.

HB Capital acquired Florida-based Structural Building Components, a structural construction company specializing in single-family and multifamily homes.

Exits & IPOs

Formerly VC-backed WeWork, which provides coworking spaces, is planning to file for bankruptcy as soon as next week, The Wall Street Journal reported.

Health automation company Olive AI is winding down its operations and has sold itself off in pieces to Waystar and Humata Health.

Kentucky-based Waystar, a healthcare payments company backed by EQT and the Canada Pension Plan Investment Board, pushed back its IPO plans to December or into 2024, according to reports.

Blackstone sold a 35% stake in Hotel Investment Partners to Singapore's GIC. Blackstone retains a 65% stake in HIP, which owns resorts in southern Europe.

NYSE-listed HubSpot has agreed to acquire B2B data software provider Clearbit.

Fundraising

New York-based KPS Capital Partners raised $8 billion for special situations investments in manufacturing and industrial businesses and $1.7 billion for KPS Special Situations Mid-Cap Fund II, which targets smaller companies in the same industries, The Wall Street Journal reported.

Florida-based Trivest Partners has closed Trivest Recognition Fund on $1.3 billion. The PE fund targets investments in founder and family-owned lower-middle-market businesses with EBITDA over $15 million.

New York-based PE firm American Industrial Partners closed its eighth fund on its $5 billion hard cap.

Bee Partners, a pre-seed investor focused on the deep-tech sector, has raised $50 million for its fourth fund.

Investors

CVC Capital Partners is postponing its Amsterdam IPO, originally planned for late October, Bloomberg reported. The firm may revisit the public offering in 2024.

Chart of the Day

"Private-equity-backed borrowers raised $66.4 billion in the syndicated loan market in the year ending June 30, 2023, but more than half of this amount supported refinancings. In addition, investor appetite for the riskiest borrowers—those falling into the B-minus ratings bucket—remains limited. Only 34% of H1 2023 syndicated loan volume to PE-backed borrowers came from this ratings category, the lowest reading in seven years, down from 64% in 2022."

Source: PitchBook's H1 2023 Private Debt Report

About PitchBook | Terms of use | Advertise with us | Contact

This email was sent to you via the PitchBook Platform.

Do you want to change your email address, get a different edition or unsubscribe? Manage your subscription here.

How LP returns are feeling the exit squeeze

Older messages

Climate-tech startups buck trends

Sizing up the seed blip

Can AI jump-start information security?

What's holding back European IPOs?

What now for IPOs?

You Might Also Like

I'm back, and have some news

🦅 Skyrocket your audience growth

🔍 Bridge IRL to Digital Activations

📣 Stay on brand

CRITICAL - Read before MIDNIGHT… ⏳

Unlock our best offer of the year

Bitcoin Rally Hits Fresh Highs at $89,500 With Eyes on $100K+

Is your 2024 holiday marketing strategy ready? 🎁🎄

Social media strategies that drive results

ET: November 12th 2024