Austin Kim

M&A isn’t just an opportunity for the target or buyer. For publicly traded companies, M&A announcements also bring profit-making opportunities for investors. Investment strategies are designed around the probability of a successful deal. 👉 Merger Arbitrage Merger arbitrage is a strategy where investors buy a target company's stock after an M&A announcement. The goal is to profit from the difference between the current market price and deal price. Say Company A announces it will acquire Company B at a share price of $25. Assume Company B, at the time of announcement, is trading at $20/share. If the market is 100% sure the deal will occur, the concept of efficient markets dictates that the share should trade at $25 right after the announcement. However, there are risks involved in every deal. This arbitrage spread occurs between the announcement and the merger's completion periods. The target company's stock usually trades at a discount after a merger announcement - presenting an arbitrage opportunity. Gradually, the price will convert to the offer price set by the acquirer once the completion risk diminishes. Several studies have indicated excess positive returns with this investment strategy. However, there are also signs of returns decreasing over time as markets become more efficient. Some factors that determine the successful completion of a deal: - Does the buyer lack credibility? - Does the financing source lack credibility? - Is the deal non-definitive? - Is the regulatory risk too great? - Is there a buy-side vote? Arbitrage strategies are usually carried out by sophisticated investors, i.e., financial institutions. Have you ever successfully pulled off a merger arbitrage? Share your experience 👇 . . . 𝙄𝙣𝙩𝙚𝙧𝙚𝙨𝙩𝙚𝙙 𝙞𝙣 𝙢𝙤𝙧𝙚 𝙈&𝘼-𝙧𝙚𝙡𝙖𝙩𝙚𝙙 𝙘𝙤𝙣𝙩𝙚𝙣𝙩? 𝙈𝙖𝙠𝙚 𝙨𝙪𝙧𝙚 𝙩𝙤 𝙛𝙤𝙡𝙡𝙤𝙬 𝙢𝙚. #entrepreneurship #venturecapital #startup #mergers #acquisitions Serial Entrepreneur & Investor Helping Startups Become Unstoppable – David Hauser

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What’s interesting in the sports asset class, is that folks just automatically go to teams. Not only do they go to teams, but they think teams in the big 4, and then shut down. The comment from a buddy of mine today, who is a non accredited investor (who still does a lot in real estate)- “Yeah man it’s cool, it’s sexy, but I can’t write a check big enough to buy into like, an NBA team…” Bro. Really…. So, what did I say back? “Not with that attitude!” Besides a laugh, the reality is that’s exactly what people think the sport assets class is. Far from it. So what is it… I thought you’d never ask!!!… big breath…. ANNNDDD… CPG products, sports betting, NIL, sports tech, performance, clothing, recovery, memorabilia, fan experience, sports medicine, youth sports, sports gear, media, broadcasting, exchanges, e-sports, nutrition, wellness, sponsorship programs, fantasy sports, wearables, event mgmt, ticketing and access, leagues, real estate, sports medicine….. AAAANNNNDDD… teams. And much more. My thumbs hurt. The point is, it’s time for meaningful ownership in sports. So for my buddy, yeah, it is really cool, it is sexy… and you can totally write a check big enough to play. You just have to know where acredited and non acredited investors alike can invest and truly have meaningful ownership. Alts for all! ***Hint… Champion Venture Partners plays in all these. Come invest with us!

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Warning: This is an NBA Fan/Investor niche post The NBA scouts and draft analyst predict the 2024 NBA draft is lacking in talent, some stating that it would be like starting at pick 8 or 10 in a normal year. I remember a similar conversation about the 2020 draft as it was happening, and how some claimed it was the worst draft class ever. 2020 was the year Anthony Edwards went #1, and he is (in my opinion) the best young star in the NBA today, reminding folks of Michael Jordan and Dwayne Wade with a jump shot. The draft also included Tyrese Haliburton, Tyrese Maxey, and Desmond Bane, to name a few. Coaches in the NBA at the time said that Anthony Edwards lacked competitive spirit … which is hard to believe when he is scoring 44 points in a second-round playoff matchup verses the 3x MVP. This got me thinking about investing, and how some thought 2024 was "going to be a bad year in the market", based on various anecdotes from economic data and news outlets. Yet here we are, 5 months into the year, at 5,300+ on the S&P 500, and 23 (and counting) new all-time highs since the beginning of the year. This is not to say the S&P 500 will end the year positive, or that any year will be positive for that matter, but if you stick to your plan, continue to invest (or draft the best player available in the NBA example), a few years down the road, your picks could seriously surprise to the upside.

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If you look at some of investment moves by FAs, the sports asset class is still a hidden gem. The majority still look at team ownership, but more and more folks are getting exposed to alts in sports in tech, media, sports betting, e-sports, and athlete mgmt. The kicker here- the vast majority, like… almost all, are at the accredited investor level. The interesting thing about this- the non accredited investors are those paying into sport on a daily basis. Buying tickets, paying for thier kids to be in sports, maybe paying into thier own rec league… Yet no meaningful ownership in sport itself. Frankly… probably not even knowing how to own in alts and the sports asset class. If only there was a fund to change and manage all that. 😉 Alts for all! Champion Venture Partners

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Squarespace is going private 🔔🔔🔔 Private Equity group Permira has agreed to pay $7 billion for Squarespace (a 15% premium). Over the last few years, going private has become a trend. Why? - Tech giants dominate the S&P 500, leaving smaller companies undervalued.  - High interest rates and cautious banks make traditional, large deals more difficult.  - Record-high dry powder and easy access to private credit make these deals attractive. This might be exactly what Squarespace needs—a chance to reset without the burden of quarterly reports and public scrutiny. 

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I just wrote a 7 figure check to an LP that represented a 280% IRR net of all fees. It feels very good to deliver returns like this LPs that trust us early. 💪 It's not the easiest market for emerging managers which means there are outsized returns available to the bold. #investing #venturecapital #space

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Part of the sports asset class is knowing from front to back the entire sports asset value chain, and the interconnected nature of the market. Most folks… don’t even know. At all. In fact this week alone there’s a been a handful of family offices trying to understand more about the industry from our deal flow… Everyone thinks teams, the big 4 professional leagues… and honestly those just don’t have the outsized returns (normally). Think of it this way- you go into a stadium and you buy a pretzel, a drink and go sit down at your seat. What you didn’t consider is the value chain and the companies that know the propensity of the market to get you there… a sports company focused on- digital advertising for the food and drink, maximizing your purchasing power, the POS system itself, you bought those seats on a ticket exchange platform, even the subiminal fan experiences around you that maximize your ability to enjoy… and spend both there and recurring at home. All in the sports value chain. Now imagine being in a fund that has placements in all of these from front to back bringing NAV growth, outsized returns by positioning and interconnected value of other portcos, and cash distributions. 🤔

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Ever heard of the Mendoza Line for SaaS? The Mendoza Line is baseball jargon for a .200 batting average, the supposed threshold for offensive futility at the Major League level. It refers to Mario Mendoza - the charismatic guy in the picture. While demonstrating decent skills on the field, he struggled as a batter. His fellow teammates teased him for his poor hitting ability and coined the term Mendoza Line. When a player's batting average is below the line, it means their hit rate is not good enough for Major League Baseball. In 2018, Scale Ventures Partners introduced the "Mendoza Line for SaaS". The line shows revenue growth thresholds for each stage below which a SaaS startup is not on a clear VC-backable trajectory. It's based on two main assumptions: 1. Investors prefer to invest in companies that have the potential to get to IPO (= making it to $100M+ ARR). 2. Growth rates decline over time - which is somewhat predictable. Depending on which source you use, the growth rate for a given year should be between 70% and 85% of the growth rate in the previous year. If you want to read more about it, you can check out the corresponding saas.wtf article. Do you think it's a helpful guide or useless bs? Does it hold true in the current market environment? #saas #startups #vc #venturecapital #funding #growth

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As the earnings season rolls over, the reported backward looking earnings expanded +5% YOY (pretty lame for S&P500 priced at 21x P/E). Far more importantly, the forward looking guidance offered tons of disappointments with many bellweather Consumer and Tech stocks offering ample evidence of a likely cool down or have lowered earnings guidance:  - Disney - weak  - Meta - growing expenses, slowing revenue  - ARM - soft revenue guidance  - AMD - slow  - Tesla - no matter the stock jump from the oversold levels)  - Starbucks - 6% decline in foot traffic, consumer slowing  - Airbnb - guidance fell below expectations  - Shopify - forecast its slowest quarterly revenue growth in two years

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Could then Fed go bankrupt? Nearly two years ago I wrote about the Federal Reserve’s Balance Sheet.  The Fed does not follow the accounting practices of other banks and companies. It would even be criminal for an ordinary bank to use some of the accounting rules used by the Fed. At the time of my original article, the Fed was making weekly losses. I estimated that it would not take long before it’s capital and reserves would be wiped out. Let’s re-visit and see how serious it is. Last week the Fed lost another $5 billion bringing its total losses over to $173 billion. That loss alone is more than enough top wipe out the Fed’s capital and surplus (of about $43bn). Why is the Federal Reserve losing money? Answer: Because the assets it owns (Treasury notes, bonds and mortgage-backed securities), typically have a fixed rate of interest until maturity. This could be many years hence. These assets were purchased at a time when interest rates were much lower than now.  They are earning an average of about 2.3%. On the other hand, the Fed is paying financial institutions, like banks and money-market funds, the current market rate of interest, which is about 5.4%. Earning 2.3% and paying 5.4% is a bad deal for the Fed. In the year to December 31, 2023, the Federal Reserve earned interest income of $174bn, but paid out interest to its depositors of $281bn. The difference of $107bn was a loss.  Currently the accumulated loss figure is $173bn. There is another major loss lurking, but it’s not on the Fed’s balance sheet. It’s the same kind of loss that caused the failures of Silicon Valley Bank and First Republic Bank in 2023.  The bank is facing significant losses on its bond investments, exacerbated by rising interest rates.  As of March 31, 2024, the Fed had unrealised losses of $1’047bn on its Treasury Securities and Mortgage-Backed Securities.  These losses are not shown on the Fed’s balance sheet which is reporting the assets at face value. Adding the two losses together we can calculate that it amounts to over 28 times the Fed’s capital. Could the Fed go bankrupt? The Fed is currently insolvent. This means its assets are less than its liabilities. If it were a commercial bank it would have to quickly raise capital or file for bankruptcy. In practice, it doesn’t have to do either because of its privileged position as the Central Bank. Unless every creditor came asking for their money back at the same time, it’ll be fine. They can use Peter’s money to pay Paul. What’s more one of the Fed’s liabilities is $2.3tn of Federal Reserve notes (e.g. $100 bills). Nobody can cash those in, except to receive back the same thing. In an extreme case, the Fed would need to raise more capital, either from its member banks, or from the Treasury. We are a very long way from that. The Fed isn't going bankrupt. But continuing to lose money hand-over-fist is not something which can last indefinitely.

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🌐 Executive Insight: Why Medium to Large Companies Should Leverage Private Credit Funds in a High-Interest, High-Inflation Economy 💼📈 Amidst soaring interest rates and persistent inflation, medium to large companies are in a unique position to capitalize on the burgeoning market of private credit funds. Goldman Sachs' recent record-setting $21 billion fundraise for private credit illustrates a significant shift in investment strategies, one that company executives should note. Here’s why corporate leaders should pay attention to private credit funds: 1. Access to Capital: In today's economic landscape, securing traditional financing can be challenging. Private credit offers alternative funding sources that can be more flexible and accessible than conventional bank loans, especially for growth initiatives and acquisitions. 2. Customizable Financing Solutions: Private credit funds specialize in crafting bespoke financing solutions that align with corporate strategies and cash flow needs. This is particularly valuable for companies undergoing transformation or pursuing strategic shifts. 3. Strategic Partnerships: Engaging with private credit funds isn't just about capital; it's about strategic relationships. These funds often bring sector expertise and can act as financial partners in navigating market complexities. 4. Diversification of Funding Sources: By diversifying their capital structure beyond traditional bank loans and public markets, companies can enhance their financial stability and reduce dependency on any single source of funding. 5. Speed and Efficiency: When time-sensitive opportunities arise, private credit funds can often provide quicker financing decisions compared to traditional banks, giving companies a competitive edge in fast-moving markets. 6. Long-term Investment Horizon: Many private credit funds have a longer-term investment outlook, which can be advantageous for companies planning significant long-term projects or transitions. Private credit funds represent not just a financial resource but a strategic tool that can help propel companies forward in uncertain times. As executives, embracing this alternative could mean the difference between stagnation and growth. I invite fellow executives and industry leaders to weigh in: How do you view the role of private credit in your corporate financing strategy? #CorporateFinance #PrivateCredit #BusinessGrowth #ExecutiveLeadership #InvestmentStrategy #GoldmanSachs #EconomicTrends

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Private Equity-Backed Friends What's the riskiest backdrop for a PortCo exec making a move? Answer: Mid-hold period execs in their first PE-backed assignment who are considering a move prior to an exit. We've placed our share of mid-hold period executives. There can be compelling reasons for them to make a move, such as a dangerously leveraged asset, impaired end markets, CEO turnover, a superior opportunity, etc. However, the risks are notably higher for first-time PE-backed executives in mid-hold period deals. You MUST get the fit right on your second attempt. Here’s why: 1.    Sponsors' Expectations: Sponsors want leaders who can drive to a lucrative exit. Executives with an 0-2+ track record on exits may find themselves limited to the least attractive assignments or forced back into corporate roles. 2.    Reputation Redemption: Nearly all is forgiven for executives who leave their first deal mid-hold but go on to lead a successful exit in their next assignment. A future sponsor will still diligence you on your first assignment so leave any deal with professionalism and grace, always. Due Diligence is Key: Executives should conduct thorough diligence before accepting an offer, ensuring they and the asset have a strong likelihood of reaching exit. This is even more critical for mid-hold period executives, as they might be fleeing a challenging situation which could increase the risk accepting a suboptimal next opportunity. Bottom Line: Be honest with yourself. And before accepting any offer, ensure you are truly capable of positively impacting an already solid degree of exit viability for the portfolio company. Hit pause on your career ambition to thoroughly vet the opportunity to confirm it aligns culturally and with your skills and experiences.

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The traditional path in investment banking - analyst to associate to vice president - isn't always smooth. What happens when an analyst's promotion doesn't come as expected? Let's examine the challenges and opportunities that arise in these situations.

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Carta’s valuation could be cut by $6.5 billion – partially due to a LinkedIn post. Carta is a cap table management software company that tried to expand into a platform for private stock transactions. Its valuation over the years: 2019: $1.7 billion 2020: $3.1 billion 2021: $7.4 billion 2022: $8.5 billion In early 2023, Carta was accused of using their customers' data without permission to sell shares. This forced Carta to leave the secondary trading business. Combined with lawsuits, toxic work culture accusations, and an unprofitable fund administration business resulted in a $65 million loss, despite $380 million in revenue. Carta is looking for a secondary sale at a valuation of $4 billion, but they’ll be lucky to get $2 billion.

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How does a GP prove they can generate attractive results when they haven't had exits? Some excellent points from Bain & Company's 2024 Private Equity Report.

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I'm a former investment banker, and I've seen it all. Here's a painful truth most founders don't know: The best investment bankers only take on deals where you don’t really need them. They want easy deals. Low risk, high reward, slam dunks. There’s a lot of reasons why bankers don’t want to work with you: - You’re not in the bank’s strike zone - Investors don’t like your sector right now - They don’t actually have connections to the investors you need Most founders give up when they hear "no.” But you're not most founders. How to make them fight for your deal in 4 steps: 1️⃣ Understand why you got rejected 2️⃣ Shore up your business 3️⃣ Work on your story 4️⃣ Build your own round Don't settle for being just another option on their menu. Become the dish they can't resist. Tomorrow, I'll show 2,209 founders how to get investment bankers on board. Don’t miss this. 🔔 Newsletter link in the featured section of my profile.

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Last week, mid-market companies were trading hands faster than picks at the NFL draft. 10 notable MM PE deals from the past week: ➡️ Incline Equity Partners invested in VMG Health, a TX-based compliance, strategy, and transaction advisory firm serving the healthcare industry. ➡️ Serent Capital acquired Medical Informatics Engineering, Inc., a provider of healthcare IT software for the occupational health market. ➡️ Celebrity Coaches, LLC, a TN-based portfolio company of Allied Industrial Partners, acquired Moonstruck Leasing, an entertainment coach leasing company. ➡️ Granite Creek Capital Partners, L.L.C. in partnership with Boathouse Capital, invested in DCG, a full-service strategic comms firm serving federal government clients. ➡️ Apax Digital invested in IANS, a MA-based provider of research and advisory services for the infosec market. ➡️ The Stephens Group, LLC partnered with VisionSafe Corporation - EVAS, a HI-based provider of aircraft cockpit smoke displacement systems. ➡️ Gamut Capital Management is set to acquire DEX Imaging, a provider of managed print services across industries. ➡️ Century Park Capital Partners acquired Total Access Elevator, a CA-based provider of commercial elevator modernization, maintenance, and repair services. ➡️  Shoreline Equity Partners invested in Prime Meats LLC, a GA-based processor and distributor of proteins. ➡️ Family office CC Industries acquires Foremark Performance Chemicals, a producer of formaldehyde and derivatives for the petrochemicals industries. #PrivateEquity #MergersandAcquisitions #Acquisitions #PE #Acquisitions

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Insurance Money 🤝 Private Credit Investing As many market participants tell me, it's a win-win combination. The argument for the incredible boom in private credit firms investing insurance money is that this effectively matches the maturities of assets and liabilities. Dawn Lim and Silas Brown have a deep-dive today into what's going on, and also explain the risks. They write: Regulators fret about how investors could sell private loans in an emergency, and whether they’re being valued correctly. The International Monetary Fund has warned of stability risks from “entities with particularly high exposure to private credit markets, such as insurers influenced by private equity firms.” Stung by the loss of lucrative lending work, Wall Street bosses such as JPMorgan Chase & Co.’s Jamie Dimon want tougher oversight of what they’ve called their shadow bank rivals. https://lnkd.in/dBfmy3qK #privatecredit #insurance #privateequity

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