Spring 2018
Akash Pulluru
THE IMPACT OF TAX REFORM ON THE PE INDUSTRY

On December 19th, a Republican-controlled Congress narrowly passed a tax reform bill. This bill represents the most significant tax overhaul since 1986 and has profound implications for the private equity industry. Although this administration is often chastised for being overly friendly to private equity barons, the reality of this bill is far more complicated.

GOTHAM THROWS MEDMEN A LINE (OF CREDIT)

Despite many cannabis stocks trading in the red Friday, MedMen was able to eke out a 6% gain due to cannabis-focused private equity firm Gotham Green Partners extending the marijuana retailer a line of credit valued at $250 million. The investment is composed of convertible senior secured notes divided into three tranches, with the 1st worth $100 million and 2nd and 3rd worth $75 million. Once the deal is closed, the $100 million will become available to MedMen, while the remaining two installments will be paid out every 6 months.

THE CLEAR CHOICE TO AUTO INSURANCE COVERAGE: CLEARCOVER

The FinTech industry is booming because of the attractive market for millennials. Younger generations are more flexible and less likely to choose firms based on tradition. Millennials tend to switch between preferred companies based on convenience and simplicity. FinTech has been largely steered towards millennials because mobile platforms such as Robinhood, Petal, and Acorn are able to have seamless apps with virtually no learning curve and limited costs. Beyond financial services, startups have been increasingly targeting opportunities for growth in the insurance industry.

MUSIC SERVICES STARTUP EXPECTED TO RECEIVE A LARGE CHECK

Kobalt is a music technology and services company that grants artists royalties and serves a platform for music production. This startup is viewed extremely positively in the eyes of investors due to its software management system for digital content, which enables artists who purchase Kobalt’s services to effectively view user data and song performance across music streaming apps. The company champions the right of the artist--a right that is often forgotten in pursuit of additional income by other businesses in the music industry.

ROKU’S GROWTH: CREATING HUGE BUYOUT OPPORTUNITIES FOR TMT

The rapid rise of TV streaming platform company Roku has been difficult to ignore in the last year. Since going public, Roku has demonstrated market expansion and execution excellence, while lowering competitive risk and capital intensity through its strategic positioning as an “over-the-top” (OTT) takeover target and disruptive business model. With its continued growth, it is likely that larger companies such as Amazon or Google may be circling for a potential buyout.

TRANSDIGM ACQUIRES ESTERLINE

The aerospace-focused PE firm Transdigm acquired its rival Esterline last October for 4B$, its largest-ever deal. Evercore and Goldman Sachs advised Esterline, while Morgan Stanley advised Transdigm. This deal is expected to close this spring and will put Transdigm among the leaders of its industry. As of March, the company’s shares have increased by roughly 30% since the deal was announced and the market is optimistic about the company’s future.

EXPERTISE IS KEY WHEN IT COMES TO ENTERPRISE SOFTWARE

Software investments are currently surging in private markets. Technology pervades many PE deals because PE firms are in pursuit of deals that will drive sustainable value. Developments increasingly appealing to PE investors include artificial intelligence, data management, healthcare IT, industrial automation, and Software-as-a-Service.