PitchBook News - Zombie funds: the next wave

VC fuels a recovery in enterprise SaaS M&A; tracking public healthcare services valuations; a rebound in the consumer sector
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The Daily Pitch: VC
October 14, 2024
Presented by Fidelity Private SharesSM
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In today's Daily Pitch, you'll find:
 
Today's Top Stories  
Startup investor ranks fall another 25%—can they come back to life?
(Julia Midkiff/PitchBook News)
More VC firms than ever are becoming zombies.

In 2023, some 15,303 unique investors participated in at least one VC deal in the US. But this year, that figure has dropped to 11,425, according to the Q3 2024 PitchBook-NVCA Venture Monitor.

The decline signals that a significant consolidation of the venture market is underway.
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VC-backed sales fuel a recovery in enterprise SaaS M&A
Corporate M&A is unexpectedly up in the enterprise SaaS sector, especially for deals involving VC-backed companies. Some 62% of enterprise SaaS M&A dealmaking in the first half of 2024 focused on such companies, compared to a recent historical average of 38%, according to our latest Emerging Tech Research.

Across the SaaS industry, deals are recovering, despite a dip in buyouts by PE firms—AuditBoard and BioCatch being the two notable exceptions. And while valuation metrics are being left out of more deals announcements, the increasing investor confidence in the space is clear.
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Vertical integration is in question for healthcare services
The direction of healthcare services giant CVS is unclear as the company considers separating its assets. Other public companies such as Walgreens and Walmart have receded their retail primary care offerings, and CVS could do the same with its value-based care clinic Oak Street Health. The splitting of these acquisitions puts into question the appeal of vertical integration in the healthcare services market, which has also seen a renewed appetite for IPOs.

Our Q3 2024 Healthcare Services Public Comp Sheet and Valuation Guide tracks stock performance, valuations, revenue growth, and EBITDA margins for key publicly traded companies.
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PE still waiting for an infrastructure fundraising rebound
(Ezra Bailey/Getty Images)
Fundraising for global infrastructure vehicles has not recovered, with around $78 billion added so far this year.

However, a handful of mega-funds could close before the year is out. And growing LP demand for exposure to digital infrastructure and clean energy could drive more allocations.
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PE dealmaking in consumer sector is poised for a comeback
Buyout activity in the consumer retail and services industry is staging a rebound in the wake of the Federal Reserve's interest rate cut. Total PE deal count in the space reached 461 in Q2 2024, marking a 31% year-over-year increase, according to our debut Consumer Retail & Services Report.

But the sector is still grappling with challenges. Financial buyers are hesitant to make acquisitions, citing elevated borrowing costs and unfavorable valuations.
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Bain leads Japan's latest wave of foreign PE buyouts
(StockByM/Getty Images)
Bain Capital ranks as Japan's most active overseas investor when it comes to buyouts, notching 32 deals since 2019.

The total value of PE buyouts with foreign participation in Japan is on track to reach $10 billion this year, with deal count expected to reach a five-year high.
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The Daily Benchmark:
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VC Deals  
AI startup CoreWeave raised $650 million in a credit facility led by JP Morgan, Goldman Sachs and Morgan Stanley.

Abridge, a startup using AI to transcribe doctor's appointments, is raising $250 million in a round led by Elad Gil and IVP, The Information reported.

Electric vehicle battery-maker Northvolt, based in Sweden, is in talks to raise €200 million, Reuters reported.

Automated accounting software developer Numeric raised a $28 million Series A led by Menlo Ventures.

COVU, a San Francisco-based startup developing AI software for insurance providers, raised $12.5 million in debt and equity as part of its Series A from investors including Benhamou Global Ventures, ManchesterStory and Markd.
 
PE Deals  
The personal protective equipment unit of Honeywell is in talks to be acquired by Odyssey Investment Partners in a deal valuing the business at around $1.5 billion, Bloomberg reported.

Nasdaq-listed JFrog, which creates technology for software developers, is in talks to be taken private. Permira and Hellman & Friedman are among firms eyeing the company, Bloomberg reported.

CD&R beat a rival bid from a group led by Paris-based PAI Partners for French pharmaceutical company Sanofi's consumer health unit at a €15.5 billion valuation.
 
Exits & IPOs  
The PGA National Resort will likely be sold by owner Brookfield Asset Management to real estate firm Henderson Park Capital in a transaction valuing the private golf club at around $425 million, Bloomberg reported.

Trustly Group, a Sweden-based digital payments company, is in talks to be sold by Nordic Capital, which could also push for an IPO, Bloomberg reported.

Bain Capital scrubbed the IPO plans for Japanese memory chip manufacturer Kioxia after investors gave the company a market value of 800 billion yen ($5.4 billion) firm, matching only half of Bain's target, Reuters reported.
 
Fundraising  
New York-based Mill Point Capital closed its third PE lower-mid-market fund on $1.7 billion, The Wall Street Journal reported.

Siguler Guff raised over $580 million for its small-business credit opportunities fund.

Interlagos, a California-based VC firm founded by former SpaceX employees, is targeting $550 million for its first fund.

Montreal-based VC firm Diagram closed its ClimateTech Fund on a $80 million hard cap, beating its target of $60 million.
 
Investors  
London-based Mountside Ventures launched its inaugural accelerator program for emerging VCs. It is the first program of its kind in Europe.

InfraRed Capital Partners agreed to manage the wind-down of UK investor Digital 9 Infrastructure, replacing Triple Point.
 
Chart of the Day  
Source: PitchBook Analyst Note: Infrastructure Investors Capitalize on the Digital Revolution
 
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