2018 sees VC investment record set

BY Richard Summerfield

Venture capital (VC) funding has continued to pour into jurisdictions the world over, with 2018 seeing a record high of $255bn invested globally, according to KPMG’s Enterprise Venture Pulse Report. The fourth quarter of 2018 alone saw almost $64bn.

Activity was not limited to just one jurisdiction. The US, the wider Americas, Asia and Europe all recorded a record high level of annual VC investment during 2018.

“The record levels of funding we are seeing around the world highlight the intense focus VC investors are placing on late-stage deals. One billion+ mega-deals alone in Q4 2018 accounted for $22 billion in investment – approximately a third of the total funding raised this quarter,” said Brian Hughes, national co-lead partner at KPMG Venture Capital Practice, and a partner with KPMG in the US.

He continued: “While the extended decline in the number of deals, particularly at the earliest deal stages, is somewhat concerning, the highest quality companies are still attracting investment and we expect to see a strong IPO market in 2019.”

Across the Americas, VC investment rose to $41.8bn in Q4 2018, up from $32.5bn in Q3. For the third year running, Europe set new records for VC investment (despite ongoing uncertainty around Brexit) with a total of $24.4bn for 2018, although deal volume fell markedly year-on-year.

In Asia, VC investment reached an annual high of $93.5bn during 2018 – a significant increase on the $65.2bn recorded in 2017.

Looking forward, activity seems likely to drop this year, however there should still be significant investment, particularly in the tech space where autonomous vehicles, alternative energy vehicles and ride hailing continue to garner interest.

Despite the increase in investment value, the total number of VC deals globally declined to a six year low of 15,299 deals during 2018, compared to 17,314 in 2017 and a peak high of 20,172 in 2015. The drop in quarterly deal volume was also notable, with the 3048 deals seen in Q4 2018 the lowest number since Q3 2012.

Report: Venture Pulse Q4 2018

Californian wildfires liabilities push PG&E toward Chapter 11

BY Fraser Tennant

The devastation wrought by wildfires in California is pushing energy company Pacific Gas and Electric (PG&E) Corporation to file for Chapter 11 bankruptcy as it faces liabilities estimated at $30bn.

In 2017 and 2018, fires destroyed vast areas of Northern California and claimed the lives of 44 and 86 people respectively.

During the Chapter 11 process, PG&E expects to resolve its liabilities resulting from the 2017 and 2018 wildfires and will assure access to the capital and resources needed to continue to provide a safe service to its customers.

Furthermore, the company has stated that it does not expect any impact to its customers’ electric or natural gas service and remains committed to assisting the communities affected by the wildfires.

Earlier this week, Geisha Williams, PG&E's chief executive since March 2017, resigned.  

"The people affected by the devastating wildfires are our customers, our neighbours and our friends, and we understand the profound impact the fires have had on our communities and the need for PG&E to continue enhancing our wildfire mitigation efforts,” said John R. Simon, interim chief executive at PG&E Corporation. “We remain committed to helping them through the recovery and rebuilding process. We believe a court-supervised process under Chapter 11 will best enable PG&E to resolve its potential liabilities in an orderly, fair and expeditious fashion.”  

PG&E has engaged in discussions with potential lenders with respect to debtor-in-possession (DIP) financing and expects to have approximately $5.5bn of committed DIP financing by the time it files for relief under Chapter 11 on or about 29 January 2019. The DIP financing will provide PG&E with sufficient liquidity to fund its ongoing operations, including its ability to provide a safe service to its customers.

Richard C. Kelly, chair of the board of directors of PG&E Corporation, concluded: “Our goal will be to work collaboratively to fairly balance the interests of our many constituents – including wildfire victims, customers, employees, creditors, shareholders, the financial community and business partners – while creating a sustainable foundation for the delivery of safe service to our customers in the years ahead.”

News: PG&E talking to banks on multibillion dollar bankruptcy financing

US-based VC-backed companies raised close to $100bn in 2018, says new report

BY Fraser Tennant

US-based venture capital (VC)-backed companies raised close to $100bn across 5536 transactions in 2018 – the highest annual funding level since 2000 – according to PwC’s and CB Insight’s MoneyTree report  published this week.

While deal activity in 2018 was at its lowest level since 2013, the report reveals that US companies still raised a record number of mega-rounds in 2018, with 184 $100m-plus funding rounds. In addition, there was a record number of new unicorns in 2018, as 53 US VC-backed companies saw their valuation rise to over $1bn.

“2018 was a phenomenal year for US venture capital, with $99.5bn invested, a record-breaking 55 unicorn births, 184 mega-rounds and funding levels at $119.6bn, their highest level since 2000,” said Tom Ciccolella, PwC’s US venture capital leader. “There certainly continues to be a healthy availability of funds and appetite for investment, while the trend of fewer, bigger deals persists.”

Key highlights in the Q4 MoneyTree report include: (i) US deals and funding slipped in Q4, dropping from a record funding level of $28bn across 1325 deals in Q3 2018 to $25bn across 1211 deals in Q4 2018; (ii) seed-stage activity rose slightly to 23 percent of all deals, although this was still well below levels from a year prior; (iii) expansion-stage deal activity was up slightly, at 24 percent of all deals, compared to 20 percent a year prior; and (iv) median deal sizes were up across the board, with later-stage median deal size rising to $37.5m in Q4 2018, up from $32.4m from the previous quarter.

Regionally, San Francisco, Silicon Valley, New York, New England and Los Angeles all saw increases in funding levels in 2018. In San Francisco, funding jumped 55 percent, rising to $28bn. In New England, funding activity increased for the second straight year, to $11bn. Silicon Valley and New York saw an uptick in funding in 2018, increasing to $18bn and $13bn, respectively. Funding for Los Angeles-area companies increased slightly to $6bn.

“While this year saw the lowest level of deals since 2013, median deal sizes are up and $100m plus mega-deals are becoming standard," said Anand Sanwal, chief executive co-founder of CB Insights. "US companies raised a record 184 mega-rounds, a 53 percent increase compared to last year's record. While mid- and late-stage start-ups are winners in the current environment, the early stage is getting pinched with seed activity.  There does not appear to be a near-term catalyst to get seed activity growing again."

In terms of global VC funding, last year saw $207bn of VC funding raised globally across 14,247 transactions – a 10 percent increase in deal activity. Furthermore, 2018 came close to the funding record of 2000, a 21 percent jump compared to 2017. 

Report: Q4 2018 MoneyTree Report

Bristol-Myers and Celgene agree record deal

BY Richard Summerfield

Bristol-Myer Squibb is to acquire Celgene Corp for $74bn in a cash and stock deal which combines two of the biggest pharmaceutical companies in the world.

The deal will see Celgene shareholders receive one Bristol-Myers Squibb share and $50 in cash for each share held, or $102.43 per share, a premium of 53.7 percent to Celgene’s closing price on the day before the deal was announced. The boards of directors of both companies have approved the deal, which is expected to close in the third quarter of 2019.

“Together with Celgene, we are creating an innovative biopharma leader, with leading franchises and a deep and broad pipeline that will drive sustainable growth and deliver new options for patients across a range of serious diseases,” said Giovanni Caforio, chairman and chief executive of Bristol-Myers Squibb. “As a combined entity, we will enhance our leadership positions across our portfolio, including in cancer and immunology and inflammation. We will also benefit from an expanded early- and late-stage pipeline that includes six expected near-term product launches. Our new company will continue the strong patient focus that is core to both companies’ missions, creating a shared organisation with a goal of discovering, developing and delivering innovative medicines for patients with serious diseases. We are confident we will drive value for shareholders and create opportunities for employees.”

“For more than 30 years, Celgene’s commitment to leading innovation has allowed us to deliver life-changing treatments to patients in areas of high unmet need,” said Mark J. Alles, chairman and chief executive of Celgene. “Combining with Bristol-Myers Squibb, we are delivering immediate and substantial value to Celgene shareholders and providing them meaningful participation in the long-term growth opportunities created by the combined company. Our employees should be incredibly proud of what we have accomplished together and excited for the opportunities ahead of us as we join with Bristol-Myers Squibb, where we can further advance our mission for patients. We look forward to working with the Bristol-Myers Squibb team as we bring our two companies together.”

The Celgene/Bristol-Meyer deal is the second notable merger to be announced in the pharmaceutical sector recently, following news of the $8bn merger between Eli Lilly & Co and Loxo Oncology announced on Monday.

News: Bristol-Myers to buy Celgene for $74 billion in largest biopharma deal

Vinci gets Gatwick

BY Richard Summerfield

Vinci Airports has agreed to acquire a majority stake in Gatwick Airport Limited, the UK’s second-busiest airport, for $3.7bn.

By acquiring a 50.01 percent stake in Gatwick, Vinci now operates 46 airports across 12 countries. Gatwick will be the largest airport in the French company’s portfolio, having handled nearly 46 million passengers in 2018, up from 32 million at the time of its previous sale a decade ago. The airport expects passenger numbers to grow to 60 million in the coming years.

The remaining 49.99 percent share in the company will be held by private equity firm Global Infrastructure Partners (GIP). The deal is expected to complete in the first half of 2019.

“Creating synergies and sharing best practices being at the core of our values, the whole Vinci Airports network will benefit from Gatwick Airport’s world-class management and operational excellence, which has allowed it to deliver strong and steady growth in a very constrained environment,” said Nicolas Notebaert, president of Vinci Airports, in a statement. “As Gatwick’s new industrial partner, Vinci Airports will support and encourage growth of traffic, operational efficiency and leverage its international expertise in the development of commercial activities to further improve passenger satisfaction and experience.”

Adebayo Ogunlesi, GIP chairman and managing partner, said: “We welcome Vinci Airports, one of the world’s most respected airport operators, as a partner in Gatwick airport. We look forward to building on the Gatwick success story together.”

“This partnership is focused on continuing the transformation at the airport over the last decade,” said Michael McGhee, a partner at GIP. “We are pleased Vinci Airports shares our vision of Gatwick’s future. We expect the transaction to be completed by the middle of next year, with the senior leadership team remaining in place. Their focus, along with everyone at Gatwick, obviously remains on doing their very best for customers over the busy holiday period after the challenges of recent days.”

Announcement of the deal was delayed by the chaos caused by three days of drone sightings at Gatwick in the run-up to Christmas. The drone sightings closed the airport’s runway, disrupting flights for 140,000 passengers. In response to the disruption, Gatwick has invested £5m in anti-drone technology.

News: France's Vinci in $3.7 billion swoop on UK's Gatwick airport