This is an excerpt from Deal Flow, Forbes’ twice-weekly newsletter about the latest billion-dollar deals from venture capital, private equity, M&A and beyond. Want a new edition in your inbox as soon as it comes out? Subscribe here.
Investment banks like Goldman Sachs and JPMorgan Chase have historically been the middlemen of the dealmaking ecosystem. They work with the investors that are taking stakes in companies. They work with those companies themselves. And in return, they’re paid fees. Lots and lots of fees.
In more recent years, though, lots of investors that usually shy away from the startup space have begun getting more aggressive in venture capital—Goldman and JPM among them. Goldman’s asset management arm made 28 late-stage venture investments in 2021, per PitchBook—its most ever in a year. JPM logged nine late-stage deals, also an all-time annual high.
That rate of activity has continued in 2022. In particular, it continued this week.
We tried a new week-in-review format for the Friday newsletter a couple weeks ago. At least some of you seemed to like it—many thanks to those who dropped me a note. So let’s do it again. Here are eight dealmaking developments you need to know:
1. Wall Street’s ventures
JPM announced an investment on Wednesday that very much squares with the bank’s larger mission: It led a $100 million Series C investment in Codat, a London-based startup that makes APIs used by fintech companies such as Brex, Pipe and Clover to create new offerings for small-business clients. Budding fintech powers Shopify and Plaid are both also investors in Codat, as are Tiger Global, American Express and PayPal Ventures.
While JPM’s recent venture activity has been largely focused on the fintech sector—other recent investments include banking tech startup Thought Machine and cash-management startup Trovata—Goldman’s asset-management arm behaves more like a traditional venture investor than a corporate VC, doing deals across a range of sectors.
This week, it led a $100 million investment in Recover Textile Systems, valuing the seller of sustainable fashion at about $1.1 billion, according to the Wall Street Journal. Story3 Capital Partners, which has backed Recover since 2020, will retain a minority stake. Elsewhere, Goldman led a $20 million funding round for CareAcademy, which provides training for in-home healthcare providers. It’s the latest example of investors pouring capital into an industry that seems poised to grow significantly.
2. Elon Musk gets the firehose
Elon Musk wants to see the tweets. The world’s wealthiest man raised a regulatory stink early this week when he submitted a securities filing arguing that Twitter is breaching the terms of their deal by not providing him more information about bots and fake accounts. And on Wednesday, Twitter acquiesced, although not quite in the way Musk might have hoped: Rather than any select data or analysis, it will open up its so-called firehose to the billionaire, giving him access to data on every one of the roughly 500 million tweets that are posted each day.
As we’ve covered before, this whole Musk-Twitter saga often feels like some combination of kabuki and farce. Before he signed a very formal and official contract to buy Twitter for $44 billion, Elon Musk waived his right to conduct due diligence on the deal. This is the exact sort of information one might acquire by doing due diligence. So it’s hard to read Musk’s latest play as genuine, and much easier to see it as a ploy to walk away from a transaction that doesn’t look as appealing as it did two months ago.
Experts seem to think that Musk’s chances of skipping out on the sale are slim, if Twitter decides to enforce the signed agreement through the courts. The question remains: Is there a point at which the company will grow tired of Musk’s machinations and let him walk away?
3. A Dutch unicorn
The fintech investors at Motive Partners have identified their next high-profile target. The New York-based firm agreed this week to invest €120 million ($127 million) in Backbase, which makes software used by big banks to pull together and use data from many disparate sources. The round values the Amsterdam-based company at €2.5 billion.
Backbase was founded way back in 2003, but this is its first institutional funding. Until now, it’s been quite a successful bootstrapper, growing revenue to some €200 million and achieving profitability, according to TechCrunch.
Motive Partners pursues both minority and majority deals, but it invests exclusively in the fintech sector. Other notable portfolio companies include Forge Global, which went public through a SPAC deal in March, and Trumid, which landed a spot on Forbes’ recently released Fintech 50.
4. The Big 4’s big plans
Late last month, news emerged that Ernst & Young was considering a restructuring that would shake up the accounting industry. Now, it sounds like Deloitte might follow suit.
The Wall Street Journal reported this week that Deloitte is exploring the possibility of dividing its audit and consulting practices into separate standalone companies, a move that would ostensibly remove some of the inherent conflicts of interest that exist when one firm is supposed to be both an advisor to a company and an independent arbiter of its finances. The WSJ had previously reported that EY was considering the same move.
Along with PricewaterhouseCoopers and KPMG, Deloitte and EY comprise the Big Four firms that dominate the broader professional services sphere and serve as some of the most frequent advisors on acquisitions, IPOs and other transactions. If EY and Deloitte decide that dividing is the best way to conquer, it could lead to significant changes in the dealmaking landscape.
5. Boots on the ground
The bidding for the Boots drugstore chain has pulled in some major players. Apollo Global Management and India’s Reliance Industries have teamed up to launch a joint bid for Boots, valuing the British business at more than £5 billion ($6.3 billion), according to Bloomberg.
Boots has been part of Walgreens Boots Alliance since the end of 2015, when the U.S.-based Walgreens acquired the rest of Boots that it didn’t already own in a bid to branch into the European market. But this January, CEO Roz Brewer said the pharmacy conglomerate was launching a strategic review of Boots, with a sale and an IPO both potential options. Various reports have pegged Sycamore Partners, Bain Capital and CVC Capital Partners as other possible bidders.
6. TDR’s next step
Another name that’s been mentioned in connection to Boots is TDR Capital, a London-based private equity firm that frequently invests alongside gas-station moguls Mohin Issa and Zuber Issa. Their highest-profile collaboration was the 2021 takeover of British grocery chain Asda in a deal worth £6.8 billion ($8.5 billion at today’s conversion rate).
This week, though, TDR and the Issa brothers were in the news for a much smaller deal—one that could be a sign of things to come. The group led an $80 million round this week for Bud, the creator of an open-banking platform that allows large banks and other clients to build new apps and offerings. And as my colleague Iain Martin writes, TDR and the Issas have ambitions of backing more fintech startups.
7. Extra credit
Cred, a fintech startup from India that aims to help customers improve their credit scores, is in the midst of a fundraising bender to remember. In early $2021, it brought in $81 million in a Series C. Three months after that, it raised another $215 million. In October, it tacked on $251 million more. And this week, it unveiled a $140 million Series F at a $6.4 billion valuation—up from about $800 million when this fundraising binge began.
Singapore’s GIC led the new funding, while existing backers such as Tiger Global and Dragoneer also took part. Cred was founded in 2018 by Kunal Shah, a veteran fintech executive who was previously a part-time partner at Y Combinator and an advisor at Sequoia.
The investment comes at a fraught time for India’s startup market, which is experiencing an arguably more intense version of the same issues plaguing the broader venture landscape. The Indian publication Moneycontrol published a great rundown of how times are changing amid layoffs, disastrous IPOs and delayed fundraises.
8. Kohl’s hard cash
Activist investors have been calling for Kohl’s to pursue a sale for several months now. It appears the Wisconsin-based retail chain was listening.
Kohl’s declared this week that it is in exclusive talks to sell itself for around $8 billion to Franchise Group, an upstart retail conglomerate that might be best known for owning The Vitamin Shoppe and Sylvan Learning. Franchise Group founder Brian Kahn has thus far largely built up the business through M&A, but this would be by far his biggest transaction yet. If you’re a Forbes member, you should check out my full story on the looming mega-deal. (And if you’re not one, you can become one here.)
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