The War on Deals: Why the Biden Administration is battling Big Business—and putting all sorts of deals under the microscope

Between Jonathan Kanter’s Department of Justice antitrust division and Lina Khan’s Federal Trade Commission, billions of dollars worth of deals are on the chopping block. As of mid-July, the FTC has sued to block nine mergers and led interested parties to abandon 13 more in an 18-month period, Khan told Congress last week. And, as of Monday, another deal is under the microscope: IQVIA’s planned acquisition of Propel Media. Earlier this month, Politico reported that the Department of Justice may challenge Thoma Bravo’s acquisition of cybersecurity company ForgeRock. 

The current administration isn’t taking on as many antitrust cases as regulators have in the past, and it isn’t always winning its battles, either: The FTC ended up withdrawing its complaint against Meta over its deal for virtual reality company Within, and, just last week, a California judge blocked its initial attempt at stopping the Microsoft-Activision Blizzard deal, for example. Even so, regulators are taking a decisively more aggressive tone towards private market investors, in particular—especially when compared to the last administration—and it’s spooking an already rocky private equity market. 

Private equity rollups—where firms merge portcos and can take advantage of cost savings—never drew much attention from antitrust regulators during the Trump administration. But, following a record year for private equity in 2021 with fat exits, regulators under the Biden administration have changed their tune. Last June, Deputy Assistant Attorney General Andrew Forman said that the DOJ is looking into “enhancing antitrust enforcement” around a “variety of issues surrounding private equity,” including potential antitrust enforcement on private equity rollups and whether there are “filing deficiencies” when it comes to HSR filings, which must be submitted to the FTC and DOJ ahead of an acquisition. That same month, Khan detailed her thoughts on private equity and the PE “playbook” that can sometimes “saddle businesses with debt and shift the burden of financial risk in ways that can undermine long-term health and competitive viability.” Kanter has made similar assertions. The sentiment is being matched abroad, with the United Kingdom’s Competition and Markets Authority making private equity rollups a priority for its enforcement.

Since spring 2022, there have been two settlements in the U.S. Both involving a PE firm scooping up veterinary clinics. And at the end of last year, the FTC published a policy statement, which some argued would broaden the action regulators could take to challenge PE rollups. Now, as we wait to see whether the DOJ will sue Thoma Bravo by the end of the month, it may only be a matter of time until we start to see these regulatory actions really start to pick up. Tack the threat of a FTC lawsuit onto the rising cost of debt eating at portco profits and the pace of exits being worse than it was during the financial crisis and it’s a lousy time to try to get into the business of buyouts. Naturally, this enhanced scrutiny has already been enough to strike fear in the hearts of private equity firms—or companies looking for bidders—and for legal firms to post a series of warnings online.

Khan has made some enemies, as we saw last Thursday at the House Judiciary hearing. How did House Judiciary Committee Chairman Jim Jordan (R-Ohio) describe Khan’s approach with Twitter again? Oh, right: “This is outrageous, this is unacceptable, and it’s the kind of behavior that occurs in banana republics, not in the United States of America.” But accusations from former FTC Commissioner Christine Wilson made two years ago about Khan “muzzling staff” and “short-circuiting public input” (and later in her resignation letter) have done little to deter Khan thus far. Kanter may just be getting started.

Whatever way you look at it—it’s certainly another wrinkle for anyone hoping the deal spigot would open soon.

Crypto VC fundraising isn’t dead just yet…Crypto-focused Polychain Capital has raised around $200 million for the first close of its fourth fund, a person familiar with the matter told my colleague, Leo Schwartz. Polychain has also let go of three members of its research team, as it focuses on some new investing priorities. Read the full piece here.

The people behind the bots…It’s not just “machines” behind the large language models redefining our society. It’s millions of annotators, who are working long, strange hours for sometimes less than $3 an hour to label images—often with no idea who they work for. “You might miss this if you believe A.I. Is a brilliant, thinking machine. But if you pull back the curtain even a little, it looks more familiar, the latest iteration of a particularly Silicon Valley division of labor, in which the futuristic gleam of new technologies hides a sprawling manufacturing apparatus and the people who make it run,” reads the feature story published by The Verge and New York Magazine. The story is worth your time, and you can read it here.

That’s all for now. See you tomorrow,

Jessica Mathews
Twitter: @jessicakmathews
Email: [email protected]
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Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Tractable, a London-based car and home assessment company, raised $65 million in Series E funding. SoftBank Vision Fund 2 led the round and was joined by Insight Partners and Georgian. 

- Hammerspace, a San Mateo, Calif.-based global data access platform, raised $56.7 million in funding. Prosperity7 Ventures led the round and was joined by Pier 88 Ventures, ARK Invest, and others.

- SURGE Therapeutics, a Cambridge, Mass.-based cancer immunotherapy company, raised $32 million in Series B funding. Bioluminescence Ventures led the round and was joined by KdT Ventures, Piedmont Capital, 8VC, Alumni Ventures, Camford Capital, Cancer Research Institute, Intuitive Ventures, Khosla Ventures, and Pitango HealthTech.

- Torch Dental, a New York-based dental supply partner for dental practices, raised $28 million in Series B funding. Health Velocity Capital led the round and was joined by Bessemer Venture Partners, FJ Labs, Felicis Ventures, Tectonic Ventures, Raga Partners, Town Hall Ventures, and others.

- Wing Cloud, a Tel Aviv-based software solutions provider for developers and DevOps teams, raised $20 million in seed funding. Battery Ventures led the round and was joined by Grove Ventures, StageOne Ventures, Secret Chord Ventures, Cerca Partners, Operator Partners, and other angels. 

- Cognaize, a New York-based intelligent document processing company, raised $18 million in Series A funding. Argonautic Ventures led the round and was joined by Metaplanet and others.  

- Rocsys, a Rijswijk, Netherlands-based autonomous charging solutions provider for electric fleets, raised $16 million in Series A funding. SEB Greentech Venture Capital led the round and was joined by Graduate Entrepreneur and Forward.One.

- Anduin, a Los Altos, Calif.-based investor relationship platform, raised $15.6 million in Series B funding. 8VC led the round and was joined by GC1 Ventures and others. 

- KOMI, a West Hollywood, Calif.-based creator commerce platform, raised $12 million in Series A funding. RTP, Third Prime, Antler, E& Capital, and Contour Ventures co-led the round and were joined by Sony Music Entertainment, Live Nation, and Laffitte Management Group. 

- Prospective, a New York-based, interactive analytics and data visualization tool for large and streaming datasets, raised $6 million in seed funding. Point72 Ventures led the round and was joined by Silicon Badia, Irregular Expressions, Essence Ventures, Giant Machines, and REFASHIOND Ventures.

- Huq Industries, a London-based mobility intelligence company, raised £4 million ($5.22 million) in funding. 24 Haymarket led the round and was joined by ACF Investors. 

- Vibrant, an Albuquerque, N.M.-based nondestructive testing technology company, raised $3.35 million in funding led by Advantage Capital. 

- Teleskope, a New York-based data protection platform, raised $2.2 million in pre-seed funding led by Lerer Hippeau.

- Metafold, a Toronto-based 3D engineering platform, raised $1.78 million in seed funding. Differential Ventures led the round and was joined by Active Impact Investments, Jetstream, and Standup Ventures.

PRIVATE EQUITY

- BVP Forge recapitalized Parsec Automation Corp, an Anaheim, Calif.-based manufacturing operations management software company. Financial terms were not disclosed. 

- PesCo Holdings, a Thompson Street Capital Partners portfolio company, acquired 5 Star Pest Solutions, an Indianapolis-based commercial pest control services provider. Financial terms were not disclosed. 

IPOS 

- Aleph Group, a Buenos Aires- and Dubai-based digital ad company, withdrew its plans for an initial public offering.

FUNDS + FUNDS OF FUNDS

- CoinFund, a New York-based crypto-native investment firm, raised $158 million for a fund focused on pre-seed and seed stage Web3 Investments. 

PEOPLE

- YL Ventures, a Mill Valley, Calif.- and Tel Aviv-based venture capital firm, hired Dave Reed as CFO. Formerly he was with PowerPlant Partners.