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The Wire

Dec. 6, 2021

Accel-KKR runs multi-asset secondaries on older fund, JMI Equity leads $85m funding in ServiceTrade

Happy Monday!

 

Private equity’s NSO Group saga continues — the New York Times reported this weekend that NSO’s spyware software called Pegasus was used to hack the iPhones of 11 U.S. Embassy employees in Uganda. It’s the first-known case of the spyware being used against U.S. officials, the article said.

 

There is no evidence of NSO itself directly hacking the embassy employees, but one of its clients using its software, the article said. NSO, which said it carefully vets clients and its software is used in law enforcement and prevention of terrorism, said it will conduct an investigation into the hack.

 

NSO is owned by private equity firm Novalpina, a partnership that broke up earlier this year over allegations of investment incompetence and conflicts over the future structure of the firm. LPs in Novalpina’s first and only fund made the rare move of booting the three founding partners in what’s called a no-fault divorce. LPs appointed Berkeley Research Group to replace the GP and manage the portfolio.

 

It now falls to BRG and LPs to manage out Novalpina’s three portfolio companies, including NSO Group. The situation highlights the risk of private equity investing to institutional investors in the case of a partnership failure — when large pensions, endowments and sovereign funds, not necessarily equipped to oversee company operations, must deal with the reputational risks of overseeing a spyware company. PE breakups are extremely rare, but when they do occur, LPs can end up picking up the pieces, or at the very least, cashing out at fire sale prices. Read more here on Buyouts.

 

Growthy: JMI Equity led an $85 million growth investment in ServiceTrade, a SaaS provider for commercial service providers. Other investors in the funding include Frontier Growth and Bull City Venture Partners. Read more here on PE Hub.

 

Multi: One of the big multi-asset continuation fund processes on the market is Accel-KKR, which is working on a process to move six companies out of its third fund into a continuation vehicle. The deal could total more than $1 billion, though one of the assets may get excluded from the process, sources told me. I’m not exactly sure why, but the likelihood is the asset is a traditional M&A target and could get picked off in a regular exit. Read more here on Buyouts.

 

That’s it for me! Have a great Monday. Reach me with your thoughts, tips, gossip, people moves, new firm formation, big deals, funds, Drama — anything and everything(!!) at cwitkowsky@buyoutsinsider.com or over on LinkedIn.

 

Read the full wire commentary on PE Hub... 

 

Also of note (may require subscriptions)

"Is private equity overrated?" ask the New York Times. "[P]rivate equity's returns increasingly may not provide the stellar performance that investors have been sold — and the returns can be misleadingly calculated in a way that overstates success."

"Several of Toshiba's biggest shareholders are accusing the Japanese conglomerate of failing to fully pursue talks with private equity buyers, and say they will ratchet up pressure on the board to revive discussions on a full buyout of the company." (Financial Times)