Clearlake Capital Group’s Quest Software is running its second debt exchange in three months, offering holders of its fifth-priority loan a below-par swap into a new 3.5-out term loan that will sit ahead of the sponsor’s fourth-out.

That fifth-out tranche was formed just this May when existing second-lien lenders exchanged into new first-lien fifth-out at par as part of a $350 million injection of new capital to fill the hole left by persistent operational cash deficits.

By mid-2024, Quest’s debt load had ballooned to more than $3.5 billion, up from $2.1 billion when Clearlake bought the business in early 2022, according to S&P Global Ratings. S&P cites the impact of a weak macro environment on corporate IT spend, as well as Quest's efforts to transition from sales of one-time licenses to a recurring revenue model.

A logical value creation effort, but one that's fallen short of plan: "For nearly three fiscal years, Quest reported a revenue decline at a moderate pace in the low-single-digit percent area while ACR/ARR continued to grow in the mid-single-digit percent area. Although the firm has been able to grow its SaaS and term licenses revenue, the growth has not been sufficient to offset persistent weakness in perpetual licenses ... due to a shift to a subscription-based revenue model."

As part of the May exchange, consenting creditors (90 percent of first-lien and 65 percent of second-lien holders) exchanged into a new first-lien second-out at 92 cents on the dollar. First-lien lenders left out of negotiations were allowed to swap 30 percent of their exposure into second-out at 77 cents and the balance into third-out at 77.

The new loan is paying 6.75 percent in-kind and cash interest of S+100.

Clearlake also rolled its first-lien holding into a fourth-out at par, but with a preferential interest arrangement, reports Bloomberg.

Despite the improved liquidity, S&P cautioned that leverage “remains elevated at around 11x” and that “the company’s elevated leverage, business execution risks, and weak cash generation after debt servicing could make its long-term capital structure unsustainable.”

It didn’t take long to prove out that prediction: This month's exchange will allow holders of fifth-priority paper to swap into the higher-ranking debt at 85 cents on the dollar, further reducing stated debt. The new 3.5-out sits between the third- and fourth-out layers and subordinates Clearlake's own fourth-out to make room.

In between the busy liability management schedule, Clearlake has also been exploring various options for the business. Bloomberg previously reported that the firm has considered combining parts of portfolio company RSA Security with Quest, a possible minority sale, or a divestiture of Quest’s One Identity unit.

• Perplexity, an AI search startup lsat valued at $18 billion, made an unsolicited $34.5 billion offer to acquire Chrome browser from Google.

• KKR is preparing to launch an auction next month for Viridor, a UK recycling group, which could be valued at around £7 billion, per the Financial Times.

• Race Communications, backed by Oak Hill Capital, agreed to acquire Atherton Fiber, a fiber-to-the-home provider serving over 5,000 homes in San Mateo County, California.

• Advent International agreed to acquire Sapiens (Nasdaq: SPNS), an Israeli insurance software provider, for $2.5 billion at $43.50 per share, representing a 47.5% premium.

• Centrica (LSE: CNA) and Energy Capital Partners agreed to jointly acquire the Grain LNG terminal, Europe's largest liquefied natural gas import facility, from National Grid (NYSE: NGC) for $2.04 billion.

• Apollo agreed to acquire Kelvion, a German cooling equipment manufacturer, from Triton for around €2 billion.

• Hillenbrand (NYSE: HI), a Batesville, Indiana-based plastic parts manufacturer with a nearly $2 billion market cap, is exploring a possible sale, per Bloomberg.

• TPG and Qatar Investment Authority offered to acquire Kangji Medical, a Hong Kong-listed medical device maker, for around $1.4 billion.

• EG Group, a UK gas station operator backed by TDR Capital, agreed to sell its Australian unit to Ampol (ASX: ALD) for A$1.1 billion.

• Bank of Montreal (TSX: BMO) is exploring the sale of its transportation finance arm, which could fetch around $1 billion and has $11 billion in assets, per Bloomberg.

• Bain Capital is preparing a $340 million tender offer for Japanese electricity wholesaler Rezil, per Nikkei.

• DWB Consulting Services, a Canadian environmental consultancy owned by CAI Capital Partners, merged with Chartwell Resource Group to create a multidisciplinary consulting firm with nearly 300 employees.

• Oaktree Capital Management will take control of TPI Composites (Nasdaq: TPIC), a Scottsdale-based wind turbine blade manufacturer, as part of a Chapter 11 restructuring.

• Blue Sea Capital acquired MicroCare, a Connecticut-based provider of precision cleaning solutions, from Heartwood Partners.

• Adamantem Capital agreed to acquire Nexon, an Australian IT services provider, from EQT.

• THL Partners agreed to acquire Headlands Research, a Florida-based network of clinical trial sites focused on CNS disorders, vaccines, and metabolic diseases, from KKR.

• Altus Group (TSX: AIF), a Canadian real estate software firm, is exploring a sale, per Reuters.

• Orion Breweries, a Japanese beer maker owned by Carlyle and Nomura, plans to list on the Tokyo stock exchange as early as next month, per Bloomberg.

• Surge Private Equity invested in White Plains Linen, a Peekskill, New York-based commercial laundry service provider.

• Rallyday Partners invested in Elder Care Homecare, a Northeast-based senior home care agency.

• Nexa Equity invested in Facility Grid, a Brookline-based provider of construction commissioning and operational readiness software.

• LawnPRO, an HCI Equity Partners portfolio company, acquired Concord Custom Lawn Care, a New Hampshire-based lawn services provider.

• Milrose Consultants, a portfolio company of Southfield Capital, acquired ARC, a Florida-based provider of permitting and code compliance services.

• Westland Insurance, a portfolio company of Ontario Teachers, acquired Paul Ayotte Insurance Brokers, a northern Ontario-focused insurance brokerage with five regional offices.

• Agility Retail Group, a portfolio company of San Francisco Equity Partners, acquired Infinity Retail Services, a Wisconsin-based manufacturer of telecom retail fixtures and displays.

Tech, Vertical SaaS, & Misc. Enterprise

• Cerebras Systems, an AI chip developer, is in talks to raise $1 billion in new funding led by Fidelity Investments.

• Rivos, a semiconductor startup developing RISC-V-based server chips for AI workloads, raised $250 million in Series A-3 funding led by Matrix Capital Management, with participation from Dell Technologies Capital, Koch Disruptive Technologies, Intel Capital, MediaTek, Cambium Capital, Hotung Venture Group, and Walden Catalyst.

• Titan, an AI company for IT services, raised $74 million in Series B funding led by General Catalyst, while simultaneously acquiring RFA, a managed service provider serving the financial services industry.

• 1Kosmos, a passwordless identity verification platform, raised $57 million in Series B funding co-led by Forgepoint Capital and Origami's Oquirrh Ventures, with participation from NextEra Energy Ventures, Gula Tech Adventures, and a $10 million line of credit from Bridge Bank.

• Plancraft, a Hamburg-based platform digitizing construction trade workflows, raised €38 million in Series B funding led by Headline, with participation from Creandum, HTGF, and xdeck.

• Topline Pro, a platform for home service businesses, raised $27 million in Series B funding led by Northzone, with participation from Tactile Ventures, Industry Ventures, Forerunner Ventures, Bonfire Ventures, TMV, Flybridge, and BBG Ventures.

• Protege, a platform for secure exchange of proprietary data for AI training, raised $25 million in Series A funding led by Footwork, with participation from CRV, Bloomberg Beta, Flex Capital, Shaper Capital, and Liquid 2 Ventures.

• Evertune, an AI marketing optimization platform, raised $15 million in Series A funding led by Felicis Ventures, with participation from Eniac Ventures, NextView Ventures, and other strategic investors.

• Create, an AI-powered app development platform, raised $8.5 million in funding led by Bessemer Venture Partners.

• Mako, a NYC-based AI company that generates GPU kernel code, raised $8.5 million in seed funding led by M13, with participation from Neo, Flybridge, K5 Global, and Irregular Expressions.

• Continua, a developer of AI agents for group chat collaboration, raised $8 million in seed funding led by GV, with participation from Bessemer Venture Partners.

• Thread, an AI platform that automates service desk operations for managed service providers, raised $8 million in Series A funding led by Integr8d Capital, with participation from Headline.

• Infinity Loop, an AI platform for optimizing enterprise vendor contracts and spending, raised $5 million in seed funding co-led by Glasswing Ventures and TIAA Ventures, with participation from Plug and Play and Restive Ventures.

Fintech

• Appcharge, a payment platform for mobile game publishers, raised $58 million in Series B funding led by IVP, with participation from Playrix, Creandum, Play Ventures, Glilot Capital Partners, Smilegate Investment, Moneta Ventures, BITKRAFT Ventures, and Corundum.

• Confido, a financial operations platform for CPG brands, raised $15 million in Series A funding led by Footwork, with participation from Y Combinator, BFG Partners, Barrel Ventures, The Fintech Fund, and Watchfire Ventures.

• Cache, a fintech platform for tax-efficient stock diversification, raised $12.5 million in Series A funding at a $125 million valuation led by First Round Capital, with participation from Quiet Capital.

• Bumper, a BNPL platform for car repairs, raised $11 million in Series B extension funding led by Autotech Ventures, with participation from Jaguar Land Rover's InMotion Ventures, Suzuki Global Ventures, Porsche Ventures, and Shell Ventures.

• Onerway, a UK-founded payments infrastructure provider, raised $10 million in Series A+ funding at a valuation approaching $200 million led by Yunqi, with participation from Lanchi Ventures, Eminence Ventures, and Enlight Growth Partners.

• Inclined Technologies, a fintech platform for maximizing cash value from whole life insurance policies, raised $8 million in Series B funding led by HSCM Ventures, with participation from Northwestern Mutual Future Ventures and other existing investors.

• Coverd, a gamified personal finance platform, raised $7.8 million in seed funding from Yolo Investments and a16z.

Consumer & Media

• Jump, a sports tech platform for fan experiences and gameday operations, raised $23 million in Series A funding led by Seven Seven Six, with participation from Courtside Ventures, Will Ventures, Forerunner Ventures, and Drive by DraftKings.

Healthcare

• Merge Labs, a brain-computer interface startup co-founded by Sam Altman, is raising $250 million at an $850 million valuation with most funding expected to come from OpenAI Ventures.

• Reprieve Cardiovascular, a company developing therapy for heart failure management, raised $61 million in Series B funding led by Deerfield Management, with participation from Arboretum Ventures, Lightstone Ventures, Sante Ventures, Genesis Capital, Rex Health Ventures, Cadence Capital, and an undisclosed strategic investor.

• Gameto, an Austin-based biotechnology company developing stem cell therapies for reproductive health, raised $44 million in Series C funding led by Overwater Ventures, with participation from Insight Partners, RA Capital, Two Sigma Ventures, BOLD Capital Partners, Future Ventures, Ingeborg Investments, Arcadia Investment Partners, PAGS Group, Pontiva Healthcare Partners, and Portfolia.

• Conformal Medical, a developer of stroke prevention technology for atrial fibrillation patients, raised $32 million in Series D extension funding from a new undisclosed partner and existing investors.

• Citizen Health, a platform for rare disease care, raised $30 million in Series A funding led by 8VC, with participation from Transformation Capital and Headline.

• Fountain Life, a health and longevity company specializing in early disease detection, raised $18 million in Series B funding led by EOS Ventures, with participation from existing board members.

• Isaac Health, a virtual dementia care platform, raised $10.5 million in Series A funding led by Flare Capital Partners, with participation from Black Opal Ventures, Industry Ventures, Meridian Street Capital, B Capital, and Primetime Partners.

Industrials, Greentech, & Other

• National Renewable Network, an Australian platform providing zero-upfront cost solar and battery systems for virtual power plants, raised A$67.2 million in Series A funding led by Investible and Virescent Ventures, with participation from Electrifi Ventures, Ecotone Partners' Planet Fund, and Infradebt.

• Audax raised $1.3 billion for a fund dedicated to backing private equity continuation vehicles.

• DTCP is raising €500 million for a European defense-tech fund, with Porsche and Deutsche Telekom in talks to serve as cornerstone investors, per Bloomberg.

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