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

• A look at Oaktree’s Thrasio rebuke

• Plus, Permira sweetens its offer for Squarespace

Oaktree places blame:

In a June letter to investors, Oaktree Capital Management emphatically blamed Silver Lake and Advent International for the poor outcome of the trio's investments in Amazon aggregator Thrasio, which filed for bankruptcy earlier this year. The rebuke, seen this week by the Financial Times, is unusual in both the severity of its external-facing commentary and because of the firms’ long history of partnering together on various deals and financings.

"We believed that Advent and Silver Lake, experienced PE firms with whom we have partnered numerous times, would be steady hands at the helm and able to professionalise the business," wrote the Oaktree team, including co-founder and CIO Bruce Karsh and two portfolio managers. "This proved to be incorrect."

“We didn’t have appropriate controls in place and instead relied on our alignment with the sponsors,” they continued. “This was clearly an error: we expected more judicious and cautious deployment of capital for growth, but our trust was misplaced.”

Founded in 2018, Thrasio was one of the earliest attempts to roll-up third-party Amazon retailers into a scaled platform. At its peak, the company was acquiring two to three brands per week and reached a $6 billion valuation in 2021 — at one point holding talks with Michael Klein’s Churchill Capital over a potential $10 billion SPAC deal.

The company's February Chapter 11 filing blames a post-pandemic slowdown in consumer spending, made worse by the company's prior attempts to ramp up operations at the peak of the cycle. Struggling to meet demand and defend market positioning, Thrasio overcorrected and fell into a mess of inventory over-purchasing, logistics complexities, and bloated headcount. By the time it brought in AlixPartners to lead a late-2022 restructuring, the company had accumulated over $700 million of excess inventory, which it had spread across 200 different leased warehouses.

The company’s filing listed nearly $3.4 billion in outstanding debt and preferred equity financing that had been burned through in a matter of years. According to unsecured creditors, a result of “possible self-dealing, gross negligence, mismanagement, and breach of fiduciary duties.”

Oaktree says Silver Lake and Advent should have foreseen these obvious missteps and blames them for overly optimistic projections. "Thrasio did extraordinarily well during the pandemic, and it mistakenly extrapolated consumers' strong spending on goods well into the future and used these expectations to justify paying more for acquisitions," they wrote.

Various e-commerce publications cite Thrasio deals with EBITDA multiples in the mid-to-high single-digits range for 'brands’ whose sole channel was Amazon. Prior to the emergence of aggregators like Thrasio, a 1-to-3x multiple was standard for such assets.

The letter goes on to state that Oaktree's "trust was misplaced" in Silver Lake and Advent.

Oaktree also faults itself for not pushing for changes. "In hindsight, we now realize that we should have replaced the management team earlier rather than waiting for the equity sponsors to act."

The letter's attempt at reputation preservation hasn't gone entirely to plan. The Financial Times quotes one limited partner who expressed skepticism: "I appreciate their candor, but on the other hand, that is not something one should be proud of. Frankly, you are a $16 billion fund, do you really need to learn not to outsource [oversight] to other partners?"

Thrasio emerged from bankruptcy in June with a new $90 million first-out term loan and a $276 million second-out term, though S&P promptly assigned a CCC issuer rating and noted that, absent drastic changes, "a default is inevitable in the subsequent six months."

"We believe its capital structure remains unsustainable due to its negative EBITDA, negative FOCF generation, and tight liquidity of about $60 million upon emergence."

Lenders under the pre-petition Thrasio credit facility received take-back debt and equity in the reorganized entity.

• Permira increased its takeover bid for website-building platform Squarespace (NYSE: SQSP) to $46.50 per share in cash ($7.2 billion) after ISS issued a recommendation that shareholders vote against the previous $44 per share offer.

• Bain Capital and Parthenon Capital are in talks to sell a minority stake of up to 25 percent in healthcare payments company Zelis at a $17 billion valuation, per Bloomberg.

• StandardAero, a Carlyle-owned aircraft maintenance provider, filed for an IPO following reports earlier this year that Carlyle was considering a sale of the business at a valuation of around $10 billion.

• Accel and HPS Investment Partners are nearing a deal to invest in Aston Martin Formula One at a valuation between £1.5bn and £2bn, per Sky News.

• Elis (Paris: ELIS) offered to acquire Vestis (NYSE: VSTS), a workforce uniform rental business trading at a market value above $1.9 billion.

• Salesforce (NYSE: CRM) agreed to buy Own Co., a data protection provider, for $1.9 billion in cash.

• Perpetual Capital Partners acquired Novatech, a provider of managed office solutions for businesses.

• Progress (Nasdaq: PRGS) agreed to acquire ShareFile, a document collaboration platform, from Cloud Software Group for $875 million.

• Nexus Capital Management agreed to acquire discount retailer Big Lots (NYSE: BIG) through a court-supervised bankruptcy sale process.

• Methanex Corporation (Nasdaq: MEOH) agreed to acquire OCI Global's international methanol business for $2.05 billion.

• Quilter (LSE: QLT) agreed to acquire NuWealth, a platform for individual investor portfolio creation.

• Unical Aviation, backed by Platinum Equity, acquired eCube Solutions, an aircraft storage, disassembly, and transition services provider, from Baird Capital.

• Reynolda Equity Partners acquired Carlton Industrial Solutions, a provider of industrial weighing and precision measurement services.

• Madison Dearborn Partners invested in Harmonia Holdings Group, a Virginia-based provider of technology solutions to the federal government.

• MNC Capital Partners increased its all-cash buyout offer for Vista Outdoor (NYSE: VSTO) to $43 per share from $42 per share, valuing the company at $2.51 billion, and gave Vista until Monday to decide.

Tech, Vertical SaaS, & Misc. Enterprise

• Finally, an all-in-one finance and HR suite for SMBs, raised $50 million in Series B funding led by PeakSpan Capital.

Fintech

• Drip Capital, a digital trade finance platform for SMEs, raised $113 million in new funding, including $23 million in equity from GMO Payment Gateway and Sumitomo Mitsui Banking Corporation, and $90 million in debt financing led by International Finance Corporation and East West Bank.

• Korint, an insurtech startup, raised €5 million in Series A funding led by Ventech, with participation from 360 Capital.

Healthcare

• Superluminal Medicines, a generative biology startup developing small molecule drugs, raised $120 million in Series A funding led by RA Capital Management, with participation from Insight Partners, NVentures, Catalio Capital Management, Eli Lilly and Company, and Gaingels.

Industrials, Greentech, & Other

• 24M Technologies, a battery manufacturing startup, raised $87 million in Series H funding led by Nuovo+, valuing the company at $1.3 billion post-money, with participation from Kyocera Corporation, ASAHI Kasei, Dai Nippon Printing Company (DNP), Lucas TVS, and Mitsui O.S.K. Lines.

• 6K, a producer of engineered materials for lithium-ion batteries, raised $82 million in the first close of its Series E funding from Anzu Partners, Energy Impact Partners, LaunchCapital, Material Impact, and Volta Energy Technologies.

• Castik Capital raised €2 billion for its third fund European buyout fund.

• Five Point Energy raised $1.4 billion for its fourth energy infrastructure fund.

• Atomico raised $1.24 billion across two new funds: a $754 million growth fund targeting Series B to pre-IPO companies and a $485 million early-stage fund focused primarily on Series A investments.

• Schroders Capital raised €400 million for its third European middle market private equity fund.

• Gryphon Investors raised a continuation fund for Vessco Water with backing from Apollo S3, Lexington Partners, and Glendower Capital.

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