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COVID-19’s Effect on Valuations

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Gen II Fund Services, a provider of private equity fund administration services, has just released the results of a survey on how COVID-19 is affecting the valuations of private equity portfolio companies.

Results of the survey show that approximately 80% of private equity firms believe there could be up to a 25% reduction in the value of portfolio investments in their first quarter valuations. As expected, the survey also shows that there is a high degree of uncertainty regarding the long-term effects of COVID-19 on investments and as a result, traditional methodologies for valuing portfolio investments are less reliable.

To address this, private equity firms are considering using a combination of valuation approaches, including public company comparables, third party valuation services, and adjustments to previously applied valuation methodology. “The survey gives our clients important insights into how private equity sponsors are thinking about valuations under these unprecedented circumstances,” said Steven Millner, the co-founder and managing principal of Gen II.

Gen II surveyed over 150 of its clients from April 8, 2020 through April 24, 2020. The survey respondents are principally invested in buyout, real estate, energy and infrastructure, credit, and fund-of-funds strategies.

“Our clients view us as their trusted advisors, in line with this role it is important for us to understand and share industry trends and perceptions as they are occurring,” said Norman Leben, a co-founder and managing principal of Gen II.

Other interesting findings from the survey:

  • For recently acquired portfolio investments, close to 70% of respondents will be holding investments made within the last 12 months at cost;
  • Respondents expect to provide additional capital of up to 25% of their portfolio investments;
  • 80% of respondents will primarily be relying on public market comparables in conjunction with other metrics in conducting their portfolio company valuations;
  • Approximately 70% of respondents believe that the effects of COVID-19 will not impact their fund economics; and
  • Private equity firms generally intend to report the effects of COVID-19 on a quarterly basis to their investors

Gen II Fund Services is a provider of private equity fund administration services including operational infrastructure, financial reporting, and investor communications. The firm has offices in New York City, San Francisco, Boston, Stamford, Dallas, and Luxembourg.

Private Equity Professional | May 7, 2020

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Source: https://peprofessional.com/2020/05/covid-19s-effect-valuations/

Private Equity

Kentik raises $23.5M for its network intelligence platform

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Kentik, the company once known as CloudHelix, today announced that it has raised a $23.5 million growth funding round led by Vistara Capital Partners, with existing investors August Capital, Third Point Ventures, DCVC, and Tahoma Ventures also participating. With this round, Kentik has now raised a total of $61.7 million.

The company’s platform allows enterprises to monitor their networks, no matter whether that’s over the Internet, inside their own data centers or in public clouds.

“The world has become even more internet-centric, and we are seeing growth in traffic levels, product engagement, and revenue across both our enterprise and service provider customers,” said Avi Freedman, the co-founder and CEO of Kentik when I asked him why he was raising a round now. “We’ve seen an increased pace of adoption of the kind of hybrid and internet-centric architectures that Kentik is built for and thought it was a great time to increase investment, especially in product, as well as go-to-market and partner expansion to support market demand.”

Freedman says the company has been growing 100% compounded year-over-year since it launched in 2015 and now has customers in 25 countries. These include leading enterprises, SaaS companies, content providers, gaming companies, content providers, and cloud and communication service providers, he tells me. Current customers include the likes of IBM, Zoom, Dropbox, eBay, Cisco and GoDaddy.

The company says it will use the new funding to invest in its product and for go-to-market investments.

One notable fact about this new round is that it is a combination of equity and growth debt. Why growth debt? “Growth debt is an attractive option for startups with the right scale and strong unit economics, especially with the changes to capital markets in response to current economic conditions,” said Freedman. “Another element that makes long-term debt attractive is that unlike equity financing, long-term debt limits dilution for everyone, but especially benefits our employees who hold common stock.” That, it’s worth noting, is also something that lead investor Vistara Capital has made one of the core tenants of its investment philosophy. “Since Kentik is now at a scale where we have enough data on the business fundamentals to be able to make growth investments using debt while still being able to repay it over time, it made sense to us and our investors,” noted Freedman.

Source: https://techcrunch.com/2020/05/27/kentik-raises-23-5m-for-its-network-intelligence-platform/

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Private Equity

Revealed: how the US solar market is creating huge opportunity for returns

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The rising gap between the cost of US solar power development and the price of delivered electricity ahead of the coro

Source: https://www.altassets.net/private-equity-news/by-pe-sector/specialist-pe-sectors/100158592.html

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Private Equity

Riverside Company ends 14-year ActivStyle ownership trade sale to AdaptHealth

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The Riverside Company has ended its 14-year ownership of incontinence products business ActivStyle to trade buyer Adapt

Source: https://www.altassets.net/private-equity-news/by-news-type/deal-news/riverside-company-ends-14-year-activstyle-ownership-trade-sale-to-adapthealth.html

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