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The Daily Pitch: VC

November 30, 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:

The top public PE firms shore up dry powder for private credit as commitments flood in

A new investor is betting big on mining rare-earth metals to fuel the energy transition

Firms like KKR gravitate to the stable source of capital that insurance assets can offer

PE activity in consumer transport is rolling steady, defying the overall trend in Europe

The leveraged loans market's wins are diminished by low cash flow coverage of interest expense

Today's Top Stories

KKR ramps up insurance bets in fundraising dry spell

(Richard Drury/Getty Images)

PE powerhouse KKR increased its stake in Global Atlantic, a life insurer it acquired in 2021. Alternative asset managers are investing more in insurance assets as they try to boost asset growth and revenue in a challenging fundraising market.

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Mapping generative AI's dealmaking trends

Our latest Emerging Tech Research dives into the dealmaking trends within the generative AI emerging space, which—when excluding Big Tech's mega-deals—is only on pace to match 2021's VC funding total this year.

While generative AI isn't immune to the broader VC and tech slowdown, promising exit opportunities remain on the horizon in spaces including coding and healthcare. Our analyst note lays out all the trends, who's behind the investments, and what the future may hold.

read it now

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A message from Affinity

In conversation with Speedinvest: Investor Relations

Investor relations dynamics are evolving. Limited Partners (LPs) want more involvement as well as financial and high-impact returns, and General Partners (GPs) are rapidly adapting in line with these new expectations.

Learn best practices for investor relations in 2024 from Katharina Porenta, Fundraising Manager at Speedinvest on December 14. She's speaking to Affinity about how to develop and execute strategies that resonate with LPs, ways to use data to maintain LP trust, and why you should be using technology to drive value creation and report on performance.

Whether you plan to fundraise in 2024 or want to drive effective investor relations more broadly, don't miss this opportunity to get expert guidance. Register now for December 14.

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Public GPs raise more money for private credit than they can deploy

The top alternative asset managers are awash in capital committed to private credit strategies. Recently, private credit's share of overall fundraising surged at the biggest public PE firms, but lending volumes are tracking down 33% this year during a slump in dealmaking.

PitchBook's Q3 2023 US Public PE and GP Deal Roundup checks the vital signs that many Wall Street analysts miss on the seven largest US-listed alt managers: Blackstone, KKR, Apollo Global Management, Blue Owl, The Carlyle Group, Ares Management and TPG. 

For these bellwether firms, shoring up dry powder for private credit is just one of many strategies—including blockbuster deals with insurers—to sustain long-term growth.

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Eyeing battery boom, new PE firm joins race to boost US rare metals industry

(Simonkr/Getty Images)

Electric vehicle batteries and other crucial pieces of the energy transition puzzle require minerals on a scale far beyond the needs of an energy economy rooted in oil and gas.

To meet that demand, a new Toronto-based private equity firm raised over $500 million to invest in the production, processing and infrastructure of battery metals. Kinterra Capital's founders spoke to PitchBook about the challenges of investing in mining.

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PE activity in European consumer transport stays right on track

(NurPhoto/Getty Images)

Private equity has invested about $10.5 billion in Europe's consumer transport sector across 81 deals in 2023—just shy of last year's €10.3 billion total from the same number of transactions.

This year's largest deals have happened in just the past two months: I Squared Capital's $1.6 billion acquisition of Arriva Group, the operator of London's iconic red buses, and the $1.2 billion restructuring of Scandinavian Airlines SAS.

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For loan issuers, coverage metrics spiral even as earnings growth persists

(Martin Barraud/Getty Images)

Leveraged loan issuers, which have been enjoying continued earnings growth, face a dose of reality as cash flow coverage of interest expense declined again in Q3. It's at the lowest level since the early days of the pandemic in 2020, yet the underlying reasons are different now.

The most notable cause is the Federal Reserve bringing interest rates to new long-term heights. This limits borrowing and increases refinancing and default risks moving forward.

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

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A message from Orrick

Life sciences VC deals continue at a slower pace, but exits picked up in Q3

Venture activity in life sciences remains subdued, meaning 2023 will more than likely be the second year in a row with a decline in total deal value. However, there are some positive signals emerging, including two consecutive increases in quarterly deal value and record-high median valuations. The exit environment showed promise in Q3 2023 as well, with the $9.0 billion generated marking the biggest quarter for exit value since Q4 2021. Orrick's Life Sciences Snapshot explores these dynamics further alongside an in-depth roundtable discussion on the topic of leveraging alternative financing, including debt.

Read it now

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VC Deals

Cayman Islands-based blockchain infrastructure startup Wormhole raised $225 million at a $2.5 billion valuation from investors including Brevan Howard, Coinbase Ventures and Multicoin Capital.

Castore, a premium sportswear brand, secured £145 million led by The Raine Group. The funding values the company at £950 million, the Financial Times reported.

Together AI, which offers a platform for developing AI applications, raised a $102.5 million Series A led by Kleiner Perkins.

Arrivo BioVentures raised a $45 million Series B led by Orlando Health Ventures to develop clinical drugs for neuropsychiatric disorders and pancreatitis.

Cloud-based SaaS startup DuploCloud raised a $32 million Series B led by WestBridge Capital and StepStone Group.

Adionics raised a $27 million Series B from investors including SQM, Bpifrance and Supernova Invest. The Paris-based company is developing an eco-friendly lithium extraction process for the mining industry.

Modo Energy raised $15 million in a Series A led by MMC Ventures for its data platform for energy storage systems.

Australia's Picklebet, the operator of an esports and sports betting platform, secured A$15 million (about $10 million) in a Series A led by Discerning Capital.

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PE Deals

Blackstone agreed to acquire Seattle-based Rover, which operates a pet-sitting marketplace, for $11 per share, or roughly $2.3 billion. Formerly VC-backed Rover went public through a deSPAC deal in mid-2021.

Bain Capital-backed Rocket Software agreed to buy OpenText's AMC business for $2.28 billion in cash.

Ardian and Saudi Arabia's Public Investment Fund agreed to buy 15% and 10% stakes, respectively, in London's Heathrow Airport from its largest shareholder, Spanish multinational Ferrovial.

Fort Point Capital invested in Visu-Sewer. The Wisconsin-based company provides rehabilitation and maintenance for wastewater infrastructure.

Portfolio Companies

Stability AI has held early-stage conversations with several potential acquirers, Bloomberg reported. One of the lead investors of the generative AI company's 2022 Series A, Coatue, has called for CEO Emad Mostaque to resign, according to the report.

Exits & IPOs

Lineage Logistics, a warehousing and logistics provider based in New Mexico, is targeting a 2024 IPO at a more than $30 billion valuation, Bloomberg reported. Bay Grove Capital and Equable Capital launched the platform in 2012.

Permira plans to list Italian luxury shoe brand Golden Goose during the first half of 2024 in a Milan IPO that could value the company at roughly €3 billion, the Financial Times reported. The Carlyle Group has a minority stake in the company.

Gabon's state-owned oil firm, Gabon Oil Company, is seeking to use its right of first refusal to buy Assala Energy—the Africa-based oil refinery owned by The Carlyle Group—blocking its potential sale to French oil company Maurel & Prom, Reuters reported.

TSG Consumer- and AlpInvest Partners-backed outdoors retailer Backcountry agreed to sell its European subsidiary Bergfreunde to French retailer Decathlon.

Fundraising

Power Sustainable closed Vintage II of its Power Sustainable Energy Infrastructure Partnership on C$800 million (about $589 million).

Tola Capital, a VC investing in AI-enabled enterprise software, raised $230 million for its third fund.

London- and Stockholm-based Oxx raised $190 million for its second fund targeting European B2B SaaS scale-ups.

London's Bethnal Green Ventures reached a £33 million first close of its latest fund. The capital will be used to back companies through the firm's Tech for Good program. Investors in the fund include British Business Bank, M&G Catalyst and Big Society Capital.

Corporate M&A

NYSE-listed health insurers Cigna and Humana are in talks to merge into one company valued at around $140 billion, The Wall Street Journal reported. The deal could be finalized before the year's end.

Chart of the Day

Source: The Role Banks Play in the Japanese Venture Market

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PitchBook News - Top GPs' private credit surplus

Life sciences VC deals continue at a slower pace, but exits picked up in Q3

Older messages

Medtech primed for strong finish to 2023

Retail fintech holds its ground

Biotech, AI stand out in emerging tech

Fintech's holiday markdowns

Tech giants take hold in AI

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