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The Daily Pitch: VC |
December 29, 2020 
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Like our newsletter? The data comes from the PitchBook Platform — our data software for VC, PE and M&A |
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2020 Private Equity Awards
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| (Eskay Lim/Getty Images) |
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Private equity firms have long touted their ability to make savvy investments when the economy is disrupted. But the industry has never experienced anything quite like 2020.
Whether it was conducting fundraising roadshows over Zoom or embracing less-common investment strategies (hello SPACs!), the industry had to adapt. And adapt it did, with firms using their own considerable cash piles to keep struggling portfolio companies afloat while simultaneously making new investments.
The year has—thankfully—almost come to an end. And now is the time to honor some of the top investors who still managed to spend big, reap huge gains and raise billions. So, without further ado, here are financial writer Adam Lewis' picks for the winners of the PitchBook Private Equity Awards.
Dealmaker of the Year: Thoma Bravo
While some are waiting for the pandemic to subside before spending billions, Thoma Bravo has continued to be a force in the tech world, striking four deals worth $2 billion or more in 2020. Overall, Thoma Bravo completed more than 40 deals this year, according to PitchBook data, topping a firm record from 2019.
In March alone, the Chicago-based investor acquired UK-based cybersecurity company Sophos for around $3.9 billion and edtech software specialist Instructure for around $2 billion. In December, Orlando Bravo's firm also agreed to acquire Flexera Software, a provider of IT management software, for a reported $2.85 billion. They then capped the year by striking an all-cash deal with RealPage that values the provider of property management software at roughly $10.2 billion.
Spending billions is one thing. But reaping billions is better. In September, Thoma Bravo sold Ellie Mae, a provider of mortgage origination software, to New York Stock Exchange parent company Intercontinental Exchange for around $11 billion. That led to a whopping $9 billion profit for Thoma Bravo, Forbes reported, with the sale coming less than two years after the firm used just $2.2 billion in equity to acquire the company for $3.7 billion.
A return that quick and lucrative is rare in PE. And for that, Thoma Bravo should be recognized.
(Delicious) Deal of the Year: Dunkin' Brands
Earlier this month, Roark Capital-backed restaurant franchisor Inspire Brands completed an $11.3 billion deal to acquire Dunkin' Brands, parent of the Dunkin' breakfast chain and ice cream brand Baskin-Robbins. The transaction brought the iconic brands into a growing group of Inspire-backed companies that includes Buffalo Wild Wings, Jimmy John's, Sonic and Arby's. The deal also made Inspire the second-largest restaurant company in the US and gives it a foothold into a breakfast restaurant segment that's expected to boom in a post-pandemic economy.
The whopping purchase price marked the latest milestone for Roark, an Atlanta-based private equity firm whose name pays homage to the protagonist in Ayn Rand's "The Fountainhead." It's easily their most expensive deal to date, surpassing the $2.9 billion paid for Buffalo Wild Wings, including debt.
But if history repeats itself, the premium may well be worth it. In 2006, Bain Capital, The Carlyle Group and Thomas H. Lee Partners acquired Dunkin' Brands for roughly $2.4 billion. Five years later, when the company went public and its shares soared 47% in their trading debut, the trio made some $600 million apiece in profit, according to The Washington Post.
Fund of the Year: Platinum Equity Capital Partners V
In a year when private equity fundraising totals tumbled, Platinum Equity, a Beverly Hills buyout shop led by Detroit Pistons owner Tom Gores, took a step in the opposite direction. And it was due at least in part to perfect timing.
In January, before COVID-19 began to sweep across the US, Platinum announced it had closed its fifth flagship fund on $10 billion, topping an $8 billion target and a predecessor that brought in $6.5 billion. The firm managed to avoid the challenges of remote meetings and worried LPs that cropped up after the pandemic hit in earnest. In an interview with PitchBook later in the year, Platinum Equity partner Mark Barnhill could barely contain his excitement at the way it all worked out.
"Sometimes it's better to be lucky than good," he said.
Earlier this month, Platinum put part of its cash pile to use by agreeing to acquire Ingram Micro, a retailer of iPhones and other electronic products, from Chinese conglomerate HNA Group in a deal worth around $7.2 billion.
Executive of the Year: Postponed
It may have been a great year financially for many buyout titans. But it didn't feel right to hand out this award when the efforts of many were so overshadowed by a pair of headline-grabbing controversies involving two of the industry's most famous executives.
To recap: Apollo Global Management co-founder Leon Black apologized on an October conference call after a New York Times report revealed he paid convicted sex offender Jeffrey Epstein at least $50 million for various consulting services related to Black's estate planning, philanthropic advice and more. Black said there was no business connection between Apollo and Epstein, whose death in a New York jail was ruled a suicide in 2019. But the whole episode has brought unwanted attention to a firm that's typically shied away from the spotlight.
That same month, Vista Equity Partners founder Robert Smith admitted to tax fraud related to a complex offshore scheme used to avoid paying taxes on the firm's debut flagship fund, which he started with disgraced software executive Robert Brockman in 2000. Smith agreed to pay the IRS roughly $140 million as part of the settlement.
Smith has emerged as a prominent philanthropist in recent years, earning acclaim in 2019 for pledging to pay off the student debt of Morehouse College's graduating seniors in a rousing graduation speech. But now, his firm faces something of an uncertain future. Co-founder Brian Sheth left Vista in the wake of Smith's IRS settlement, denying media reports that his departure was due in part to Smith's admission of fraud. |
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Cleantech startups poised to benefit from climate incentives under Biden
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| (acilo/Getty Images) |
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Cleantech investors are hopeful that President-elect Joe Biden can use the power of the markets to drive down carbon emissions.
The road ahead won't be easy—especially if Congress remains divided—but there are bipartisan avenues. Venture capitalists think carbon trading markets and similar programs could foster a wellspring of entrepreneurial activity: |
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Private debt rides out crisis despite fears of loose deal terms
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| (Oscar Wong/Getty Images) |
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Amid the unprecedented economic emergency caused by the coronavirus, many private debt managers are facing their first real test since the global financial crisis. The frothy market and loose lending habits that preceded 2020 have fueled fears that some aren't prepared for a downturn—and a wave of defaults could be imminent.
Yet while there have been casualties, the industry has shown resilience, and many direct lenders have fared better than anticipated. This is especially true for those who targeted specific sectors and strategies: |
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From mealworms to mushrooms: 10 VC deals you might have missed in 2020
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| (Megan Woodard/PitchBook News) |
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Though it had its ups and downs, 2020 wasn't as rough on the venture capital dealmaking scene as some might have expected. The year sparked a series of deals involving early-stage entrepreneurs crafting unique—and sometimes strange—technologies.
From farming insects for animal feed to treating depression with a hallucinogenic compound, the startups are distinct in their own ways. But they have one thing in common: They made significant strides in 2020, and those strides deserve a second look. |
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Assessing the pandemic-driven rise in insider-led VC deals
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| (Malte Mueller/Getty Images) |
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When the pandemic hit, VCs pursuing new deals were often forced to do so without meeting startup founders in person.
One impact of that reality: a shift in focus to existing portfolio companies. Indeed, through the end of Q3, the proportion of insider-led rounds had reached a decade high of 8.3%, according to a recent PitchBook research note.
But how did that impact valuations? And what does it mean for future returns? |
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Since yesterday, the PitchBook Platform added:
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