Dear Clients and Friends,
Our m&a report found here contains an update on m&a deals, values, and trends in the dozen+ segments of the information technology industry that we follow, and sometimes lead. Please see our May General Market Update here.
Byron Wien wrote a great piece last week on the perils of debt to the US economy. I encourage you to read it. Find it here.
Wien noted that US national debt – at $20tn – is 3x what it was in 2000 – but the interest on that debt is up only 25% – due in part to rates that have been held down by bond purchases by the Federal Reserve, China, and Japan – all of which are reducing their appetites. Meanwhile Congress has passed a tax-reform package predicted by many to add another $1tn of debt – each year. Wien writes that the combination may drive the 10-year Treasury bond yield to 3.25%–3.5% this year – up from about 2.9% now.
We look at this world through the prism of m&a. We’re nine years into a bull market and a rise of 600 basis points won’t kill it. It’s a 20% increase from a low base. We know that interest rates – as well as the willingness to invest or acquire – are affected by more than the appetites of bond buyers. They are also impacted by perceptions of risk. And as Mr. Wien points out, there are risks: the US is fighting wars in four countries and armed conflicts are threatening in the Korean peninsula, Eastern Europe, Syria, Asia, Iran and Israel, a trade war may be brewing with our largest partners – including many traditional allies, and Congress may be on the verge of leadership changes that, combined with multiple investigation into affairs surrounding the President of the United States, could have an impact that goes well beyond politics.
The good news is that investors have largely shrugged this all off – assuming (so far correctly) that even if one or more of these issues blow up, the risk to the macro-economy is low. Many of the world’s stock markets are near all-time highs; unemployment rates in the US and elsewhere are at lows not seen in 20 years. The IMF has twice revised global growth forecasts upwards for 2018 and 2019 – showing strength in the US, Europe and Asia. Read more here.
Investors are just powering through. We can only hope that it continues.
- Some of the more interesting transactions this month include:
Francisco Partners (San Francisco, CA) agreed to acquire VeriFone (NYSE:PAY) for $2.6bn, implying an enterprise value of $3.3bn and valuing the company at an implied 1.8x LTM revenue and 14.6x LTM EBITDA,
- Revolut (London, United Kingdom) raised $250mm in a Series C round of funding led by new investor DST Global, and including existing investors Index Ventures and Ribbit Capital,
- Oscar Insurance (New York, NY) raised $165mm in a growth funding round, valuing the company at $3.2bn,
- NICE (TASE:NICE) agreed to acquire Mattersight for $117mm, valuing the company at an implied 2.5x LTM revenue,
- OnDeck (New York, NY) raised $100mm in a debt funding round from undisclosed investors,
- IronNet (Fulton, MD) raised $78mm in a Series B round led by C5 Capital,
- empow (Boston, MA) raised $10mm in a Series B round led by Ascent Ventures. Marlin & Associates has helped empow secure the investment.