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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.
I keep a weekly list of all the deals that might be worth diving into in this newsletter. Today, that list was looking awfully long. It’s been a hectic stretch. So in the interest of covering as much ground as we can, let’s try something a little different: Instead of going deep on one deal and then jumping to two or three Deal Dives, we’re going to run through all the biggest developments from the past few days in one fell swoop. Then we’ll get into the rest of our normal rundown.
Here are seven things you should know from the past week, beginning with a rumored mega-deal that’s now come to fruition:
1. Broadcom nabs VMware
What was only a tantalizing possibility earlier this week is now official: Broadcom has agreed to buy VMware for about $61 billion, in a deal that would be the second-biggest acquisition announced so far this year and one of the largest software takeovers of all time.
In Tuesday’s newsletter, we covered how this deal fits into Broadcom’s track record of big-ticket M&A. After first establishing itself as a giant in the semiconductor industry by rolling up several smaller companies, Broadcom and CEO Hock Tan are now trying something similar in the enterprise software space. Although you could hardly call Tan’s recent targets small: In two previous software deals, Broadcom bought CA Technologies for $18.9 billion in 2018 and Symantec’s cybersecurity arm for $10.7 billion in 2019.
This deal will be a highly profitable one for Michael Dell, who along with Silver Lake acquired a majority stake in VMware as part of a $67 billion takeover of EMC in 2016. (That’s one of the few tech deals ever with a higher price tag than this week’s Broadcom deal.) Dell retained about 40% of VMware stock after spinning out the company last November; this transaction values that stake at more than $24 billion. Silver Lake owns another roughly 10% stake in VMware.
It seems very safe to say that Dell and Silver Lake’s series of bets on Dell Technologies, EMC and VMware is one of the more profitable strategies in recent dealmaking history.
In the big picture, this transaction is a signal that enormous M&A deals can still take place despite rising interest rates, inflation and an uncertain stock market. At least, they can for a target like VMware, whose hybrid cloud technology is crucial for many companies that operate across public and private cloud environments. This is part of the idea of investing in enterprise software in general: Many names in the space provide theoretically recession-proof tools that are critical to other companies, whether the market is thriving or not.
For a chronic acquirer like Tan, the desire to expand his footprint in the space—gaining new economies of scale and better pricing power in the process—outweighed any concerns that the economy might keep shifting under his feet.
2. Advent goes huge
Advent International wrapped up the second-biggest fund in private equity history on Tuesday, closing its tenth flagship effort with $25 billion in commitments. The industry’s only larger vehicle to date came from Blackstone, which raised $26 billion for a flagship fund in 2019.
Experts and insiders had predicted this could be a year filled with mega-funds, as major buyout firms sought to replenish the billions they spent on a record-setting deal spree in 2021. But slumping stocks, rising interest rates and other market factors have made LPs a little more reluctant than expected to reup. It’s not like massive funds have dried up, though: Advent’s fund comes a week after Clearlake Capital closed a $14 billion vehicle.
Advent closed its prior flagship fund on $17.5 billion back in 2019. The firm deployed that capital in several high-profile deals: It teamed up with Cinven to buy ThyssenKrupp’s elevator unit (now TK Elevator) for nearly $20 billion in 2020, and last year it joined with five other firms to acquire the McAfee cybersecurity business for $14 billion.
Now that it has $25 billion more burning a hole in its pocket, Advent might have some more mega-deals on the way.
3. Andreessen’s crypto conviction
There’s a lot more pessimism in the crypto market today than there was 12 months ago. But at Andreessen Horowitz, which has pushed more aggressively into crypto than any other premier venture firm, there’s still plenty of belief to go around.
Andreessen’s crypto unit closed its fourth fund this week with $4.5 billion in commitments, the biggest crypto fund raised to date by a VC. My colleague Alex Konrad spoke to Arianna Simpson, who will help lead the new fund, about some of the details, including how much cash will go toward Web3 investments and why Andreessen is still optimistic despite the crypto downturn.
4. Startup layoffs
The bad news keeps coming for Bolt. The one-click checkout startup laid off more than 25% of its employees this week, about 240 workers in total; my colleague Kenrick Cai reports that the number of people on Bolt’s Slack channel dropped from 900 to 660 after the moves.
Bolt had previously announced a hiring freeze last month. And just a few weeks ago, the New York Times reported that the company and cofounder Ryan Breslow had inflated some metrics to woo investors. Bolt was valued at $11 billion in January, but that figure would surely be much lower if it raised new funding today.
To be sure, Bolt isn’t the only tech startup running into serious turbulence. More than 100 startups have conducted layoffs since the start of 2022, per the crowdsourced site Layoffs.fyi. Earlier this week, German grocery delivery startup Gorillas laid off about 300 employees and shuttered its operations in Italy, Spain, Denmark and Belgium, the latest sign of trouble in a sector that expanded rapidly during the pandemic. Just seven months ago, Gorillas raised about $1 billion in new funding at a valuation north of $3 billion.
5. Ecarx bucks the trend
Didi Global went public last June to much fanfare, closing its first day trading with a market cap of nearly $68 billion. It was all downhill from there. The ride-hailing company promptly found itself at the center of a showdown between Chinese regulators and the country’s tech industry, with disastrous effects: Didi now has a market cap of $8.7 billion and plans to delist from the NYSE.
Regulators’ effort to make an example of Didi had its intended effect: Since then, few other Chinese tech companies have pursued listings in the U.S. But an exception to that new rule surfaced this week, when Ecarx, which develops infotainment systems and other hardware and software for cars, revealed plans to go public in the U.S. by merging with a SPAC at a $3.8 billion valuation. If the deal goes through, it would be the largest debut in the U.S. by a Chinese company since Didi.
Ecarx is backed by Chinese auto giant Zhejiang Geely Holding Group and sports-car maker Lotus, both of which are also clients of the company. Li Shufu, the billionaire founder of Geely, is also a cofounder of Ecarx, having formed the company alongside current chairman Ziyu Shen in 2017.
6. A data unicorn
Monte Carlo first raised venture capital less than two years ago. Now, it’s a unicorn. The San Francisco-based data monitoring startup is worth $1.6 billion after raising $135 million in Series D funding. The round was announced this week, but as my colleague Kenrick Cai reports, the company actually closed the deal in January, before the market for tech startups took a turn for the worse.
That propitious timing—plus four separate funding rounds in the span of 20 months—means Monte Carlo should be well capitalized to pursue its aim of improving the quality of data that other companies use to make decisions. GGV Capital managing partner Glenn Solomon and IVP general partner Cack Wilhelm both spoke to Cai about why they’re believers.
7. Inside Stripe
Every startup begins its journey with dreams of shaking up the establishment. It’s a very difficult thing to do; only a small percentage of companies succeed. Those that do then eventually face a very different challenge: What happens when you go from disruptor to disrupted?
That’s one of the questions facing Stripe and its cofounders, brothers John Collison and Patrick Collison. They’ve built the fintech company into the fourth most valuable startup in the world, with a latest valuation of $95 billion. And they’ve turned into a crucial cog in the economy, a key piece of infrastructure that, to some investors, functions as something of an index for the entire e-commerce space.
E-commerce thrived during the pandemic. But now, the economic environment for a major tech startup is very different—see the above news about Bolt. What will that mean for Stripe? How do the Collisons plan to navigate these choppy waters? My colleague Alex Konrad has the inside scoop on Stripe’s plan to stay on top.
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