Happy Friday. Here’s what we’ve got today…

• A look at Silicon Valley’s new interest in accounting roll-ups

• Plus, restructuring advisor AlixPartners could be up for sale

Buying your customers:

A handful of venture investors are pushing into one of 2024’s most active buyout investment themes and are now attempting to acquire mature accounting firms.

The angle they're playing: AI-led automation.

"For 2025, I see a new asset class emerging around AI enabled roll ups," writes Marc Bhargava, managing director at General Catalyst.

Bhargava and other Silicon Valley investors believe there's an opportunity to transform legacy professional services, and they think the best way to do so might be via a departure from the traditional venture model.

GC’s strategy is to first invest in an AI-native startup and then provide more capital for the startup to acquire companies that would normally be its customers. The firm has allocated $1.5 billion from its recent $8 billion fundraise to its Creation strategy, which executes this playbook in a small group of target verticals.

"We’ve funded AI-enabled buyout teams in call centers, HOA management, HR solutions, mobile gaming, property management, MSPs, legal, healthcare, and accounting," says Bhargava.

"Unlike private equity, we rely less on debt funding and cost cutting, and focus on adding software and AI-oriented productivity improvements," Bhargava adds.

One of the firm's first attempts at this approach is Accrual, led by former Brex CTO Cosmin Nicolaescu, which has raised an initial $16 million to acquire and technologically transform accounting practices.

"We do think there's a huge opportunity to roll up accounting firms and automate a lot of the workflow and let the same accounting firms take twice as many clients,” says Bhargava. “The idea is not to cut people with AI, the idea is to enable them to do two-to-three times the work."

Bessemer Venture Partners has also been active in the space, but they've taken a more opportunistic approach through co-investments with later-stage partners.

In November, Centerbridge brought Bessemer into its deal to invest in accounting firm Carr, Riggs & Ingram (CRI). According to CRI CEO Bill Carr, Centerbridge sought out Bessemer specifically to add AI expertise and accelerate implementations at CRI.

Carr thinks AI-driven growth can push CRI, which generated $502 million in revenue last year, to $1.2 - 1.3 billion topline within five years.

Bessemer and Thrive Capital also joined private equity firm ZBS Partners last May with an investment in Crete Professionals Alliance.

Brian Feinstein, a Bessemer partner focused on enterprise software, acknowledges the speculative nature of the AI thesis: "There's not some magic AI accounting product today that automates the audit function or the tax function or the bookkeeping function. But there are dozens of startups that are doing exciting things in these areas."

“In a base case, we expect this to be a really good private-equity deal,” Feinstein told the Wall Street Journal, referring to both CRI and Crete. “The tech automation and the AI tailwind is a source of upside that helps us get to a home-run case.”

Not all early-stage investors share the enthusiasm.

Slow Ventures partner Yoni Rechtman thinks the more obvious roadblocks built into the accounting thesis—particularly for firms without intensive roll-up expertise—are enough reason to steer clear.

"These assets are going to be insanely competitive and we don't think it's worth doing,” says Rechtman.

"The only part of the market that isn't insanely competitive are the smallest deals — there's nowhere to grow into: you're going to be forever stuck doing really small deals and that will put a cap on how quickly you can grow.”

“There are few-to-no midsize CPA firms and the prospect of needing to do 50-plus deals per year is brutal," Rechtman adds.

He also sees fundamental flaws in the core AI strategy.

While agreeing that "there's lots of rote work that AI should make much more efficient," he cautions that the second-order consequence of such automation could just as easily backfire on investors.

"There's a real chance LLMs are value destructive: the work will be commoditized, automated, and cheap instead of newly margin rich."

"The product is obvious and hard to differentiate. You're not going to rebuild the actual tax preparation, so instead everyone is building the same admin and customer communications."

• CDPQ, Public Sector Pension Investment Board, and Investcorp are exploring the sale of AlixPartners, a US-based consulting and restructuring advisory firm, which could be valued at more than $5 billion.

• Blackstone is considering an exit of Sesac, its performance rights organization with music royalties and song licenses from artists like Bob Dylan and Adele, and has received interest from sponsors including Apollo Global Management, Warburg Pincus, and Temasek Holdings for the potential $3 billion-plus asset, per Bloomberg.

• Maverick Carter is working with a group of investors hoping to raise $5 billion for a new international basketball league to rival the NBA, with UBS and Evercore advising on the fundraising effort.

• KKR agreed to acquire a stake in Gulf Data Hub, a UAE-based data center operator, with both parties committing over $5 billion to expand data center capacity across the Middle East.

• Macquarie Asset Management led a $12 billion investment in Aligned Data Centers, including $5 billion in primary equity and $7 billion in debt commitments to fund 5+ GW of planned capacity across the Americas.

• QXO (Nasdaq: QXO) is moving to nominate board directors after its proposal to acquire roofing materials distributor Beacon Roofing Supply (Nasdaq: BECN) for $11 billion was rejected.

• CC Capital Partners raised its takeover offer for Insignia Financial (ASX: IFL), an Australian wealth manager, to A$4.60 per share, valuing the company at A$3.1 billion and topping rival bidder Bain Capital's recent A$4.30 per share offer.

• UnitedHealth Group (NYSE: UNH) agreed to acquire FlexCare Infusion, a six-clinic network of ambulatory infusion centers, from River Cities Capital, per Axios.

• CAPZA acquired a majority stake in INAXE, a French real estate health and safety diagnostics firm, from Turenne Emergence.

• CogentHub acquired InfoSync Services, a provider of accounting and payroll services, from Staple Street Capital.

• Helia Capital acquired a majority stake in GoLaser, a Toronto-based laser hair removal provider.

• Presidio Investors acquired Hellas Verona, a soccer club in Italy’s Serie A, from Maurizio Setti.

• Leeds Equity Partners acquired Learnosity, a Battery Ventures-backed edTech providing online learning assessment products.

• SeaFort Capital acquired GHY International, a customs brokerage and trade services platform.

• Symbotic (NYSE: SYM) agreed to acquire Walmart's (NYSE: WMT) Advanced Systems and Robotics business for $200 million in cash plus up to $350 million in contingent payments.

• Carlyle has hired Barclays to advise on a potential exit for Calastone, a UK-based funds network and data processor, which could be valued at over £600 million, per Reuters.

• Kingswood Capital Management is exploring the sale of Mountain Equipment Co., a Canadian outdoor retail chain, per The Globe and Mail.

• CVC Capital Partners acquired a 49 percent stake in StarVision, a South Korean contact lens brand, from PS Alliance and Pearl Investment at a company valuation of around $460 million.

• Flowco, a Houston-based oilfield equipment and services provider backed by Genesis Park, White Deer Energy, and Global Energy Capital, raised $427 million in its NYSE IPO, pricing above its expected range.

• HBX Group, a Spain-based travel technology company owned by Cinven and CPP Investments, plans to raise up to €725 million through a Spanish IPO at a potential €5 billion valuation.

• InTandem Capital Partners invested in Healthfuse, a Milwaukee-based hospital RCM software platform.

• Abu Dhabi Investment Authority invested in Innocap Investment Management, a Montreal-based managed account platform for alternatives.

• Revelstoke Capital Partners acquired Omega Systems, a Reading, Pennsylvania-based managed IT security services provider, from Pfingsten Partners.

• Brookfield Asset Management and Antin Infrastructure Partners invested $1 billion in Origis Energy, a Miami-based utility-scale solar and battery storage developer.

• PSG invested $80 million in Core Sound Imaging, a North Carolina-based provider of medical imaging workflow platforms.

• FIGS (NYSE: FIGS), a direct-to-consumer healthcare apparel retailer, rejected an unsolicited takeover offer from Story3 Capital Partners.

• TransUnion (NYSE: TRU) acquired a 68 percent stake in Buró de Crédito, a Mexican consumer credit bureau, for $818 million from BBVA, Santander, Banorte, HSBC, and Scotiabank.

• Bridges Consumer Healthcare, a Charlesbank Capital Partners portfolio company, acquired KT Tape, a kinesiology tape brand for drug-free pain relief and muscle support, from Palladin Consumer Retail Partners.

• Brimar Industries, a portfolio company of Blue Point Capital Partners, acquired traffic control products supplier UAT.

• FS Vector, a portfolio company of Stone-Goff Partners, acquired APPROVED Licensing, a tech-enabled financial services licensing platform.

Tech, Vertical SaaS, & Misc. Enterprise

• Harvey, an AI legal platform for law firms, raised $300 million in Series C funding led by Sequoia Capital, with participation from Coatue Management.

• Eve, an AI-powered legal platform for plaintiff law firms, raised $47 million in Series A funding led by Andreessen Horowitz, with participation from Lightspeed Venture Partners and Menlo Ventures.

• Prophecy, a data copilot company, raised $47 million in Series B extension funding led by Smith Point Capital, with participation from HSBC, Berkeley SkyDeck, DallasVC, Insight Partners, JPMorgan Chase, and SignalFire.

• Shippeo, a real-time multimodal transportation visibility platform, raised $30 million in new funding led by Woven Capital, with participation from Battery Ventures, Partech, NGP Capital, Bpifrance Digital Venture, LFX Venture Partners, Shift4Good, and Yamaha Motor Ventures.

• Vividly, a trade promotion management platform for CPG brands, raised $30 million in Series B funding led by Centana Growth Partners.

• Reeco, an AI-driven procurement platform for hotels, raised $15 million in Series A funding led by Aleph VC, with participation from Net Capital Ventures and Joule Ventures.

• Coram AI, a developer of AI-powered video security software, raised $13.8 million in Series A funding led by Battery Ventures, with participation from 8VC and Mosaic Ventures.

• Reown, an onchain UX platform developer, raised $13 million in Series B funding co-led by Union Square Ventures and 1kx, with participation from Global Digital Asset Holdings, Shopify Ventures, Kraken Ventures, Crypto.com Capital, Figment, Kiln, Everstake, BitGo Ventures, and Fenbushi.

• Hyperline, a revenue management platform for SaaS, raised $10 million in seed extension funding led by Index Ventures, with participation from Adelie Capital.

• Guidesly, a workflow optimization platform for outdoor recreation guides, raised $9.5 million in Series A funding led by Aspen Capital Group, with participation from YETI Capital, HalfCourt Ventures, Derive Ventures, Elysian Park Ventures, and Marquee Ventures.

• Nexos.ai, an AI orchestration platform, raised $8 million in seed funding led by Index Ventures, with participation from Creandum and Dig Ventures.

• Botika, a developer of AI-generated fashion model tech for e-commerce, raised $8 million in seed funding co-led by Stardom and Secret Chord Ventures, with participation from Seedcamp.

Fintech

• 1Money, a Layer 1 blockchain network for stablecoin payments, raised $20 million in seed funding from F-Prime Capital, Galaxy Ventures, Hack VC, Tribe Capital, Portage, Ethereal Ventures, CMT Digital, and Kraken Ventures, among others.

• Dfns, a crypto wallet-as-a-service platform, raised $16 million in Series A funding led by Further Ventures, with participation from White Star Capital, Hashed, Semantic, Techstars, Bpifrance, Motive Partners, Wintermute, and Motier Ventures.

• Olé Life, a Latin American digital life insurance platform, raised $13 million in Series B funding led by PayPal Ventures, with participation from Mundi Ventures, AV8, and Advent Morro.

• Nilus, an AI-powered treasury management platform, raised $10 million in new funding led by Felicis and Vesey Ventures, with participation from Cerca Partners, Bessemer Venture Partners, Better Tomorrow Ventures, and BTV.

• Rainbow, a digitally-enabled managing general underwriter, raised $8 million in Series A funding led by Zigg Capital.

Consumer & Media

• Leap, a physical retail platform for brands, raised $20 million in new funding co-led by Tribeca Venture Partners and DNX Ventures.

Healthcare

• Umoja Biopharma, a developer of in vivo CAR T cell therapies, raised $100 million in Series C funding co-led by Double Point Ventures and DCVC Bio, with participation from ARK Invest, Cormorant Asset Management, MPM Capital, Qiming Venture Partners USA, RTW Investments, Alexandria Venture Investments, SoftBank Vision Fund 2, CaaS Capital, Emerson Collective Investments, K2 HealthVentures, and Myeloma Investment Fund.

• Conceivable Life Sciences, a biotech developing fully automated IVF lab technology, raised $18 million in Series A funding led by ARTIS Ventures, with participation from Atlantic Health Venture Studio, Muse Capital, Scrub Capital, ACME Capital, Black Opal Ventures, Cadence Healthcare Ventures, Future Positive Capital, Stride.VC, and Time BioVentures.

• IntusCare, a predictive analytics platform for geriatric care providers, raised $11.5 million in follow-on funding led by Deerfield Management, with participation from Citi Impact Fund and Jumpstart Nova.

• Teal Health, a developer of at-home cervical cancer screening devices, raised $10 million in seed funding co-led by Emerson Collective and Forerunner, with participation from Serena Ventures, Metrodora, and Labcorp.

Industrials, Greentech, & Other

• Stoke Space, a developer of fully reusable rockets, raised $260 million in Series C funding from Breakthrough Energy Ventures, Glade Brook Capital Partners, Industrious Ventures, Leitmotif, Point72 Ventures, Seven Seven Six, University of Michigan, Woven Capital, and Y Combinator.

• NEURA Robotics, a German cognitive and humanoid robotics developer, raised €120 million in Series B funding led by Lingotto Investment Management, with participation from BlueCrest Capital Management, Volvo Cars Tech Fund, InterAlpen Partners, Vsquared Ventures, HV Capital, Delta Electronics, C4 Ventures, and L-Bank.

• BeZero Carbon, a London-based carbon ratings agency, raised $32 million in Series C funding led by GenZero, with participation from Japan Airlines, Translink Innovation Fund, EDF Pulse Ventures, Hitachi Ventures, Illuminate Financial, Intercontinental Exchange, Molten Ventures, Qima, and Quantum Innovation Fund.

• Moment Energy, a Vancouver-based EV battery recycler, raised $15 million in Series A funding co-led by Amazon Climate Pledge Fund and Voyager Ventures, with participation from In-Q-Tel, Version One Ventures, Overture Ventures, WovenEarth Ventures, Fika Ventures, MCJ, One Small Planet, and Climate Capital.

• Origen, a limestone-based carbon removal startup, raised $13 million in Series A funding led by Barclays Climate Ventures, with participation from Shell Ventures, Exascale Fund, Elemental Impact, and Hatch.

• Metafuels, a Swiss developer of sustainable aviation fuel, raised $9 million in new funding led by Celsius Industries, with participation from RockCreek, Fortescue Ventures, Verve Ventures, Energy Impact Partners, and Contrarian Ventures.

• Ardian raised $30 billion for its ninth secondaries fund, the largest-ever secondaries raise.

• Cohere Capital Partners raised $215 million for its second tech-enabled lower middle market buyout fund and secured a minority investment from TPG NEXT.

• Insight Partners raised $12.5 billion across its thirteenth flagship fund, a dedicated buyout co-invest fund, and its second Opportunities Fund, coming in below its previous $20 billion flagship vehicle.

• Sky Island Capital raised $300 million for its second lower middle market manufacturing fund, exceeding its $225 million target.

• Ridgewood Infrastructure raised $1.2 billion for its second lower middle market essential infrastructure fund, above a $1 billion target.

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