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Investments

127

Portfolio Exits

7

Funds

2

About Capstone Partners

Capstone Partners is a Seoul-based venture capital firm.

Capstone Partners Headquarter Location

Maru180 3F 180, Yeoksam-ro, Gangnam-gu

Seoul, 06248,

South Korea

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Latest Capstone Partners News

Private equity firms use more debt to score midmarket deals

Sep 23, 2021

Private equity firms use more debt to score midmarket deals High volumes of unspent capital among both private equity buyers and lenders are fuelling increased leverage in buyouts of midsize companies By Thursday September 23, 2021 1:42 pm Private equity deal activity involving midsize companies is running at full tilt as cash-flush lenders help buyout firms finance acquisitions, driving leverage to levels not seen since before the financial crisis. Private equity firms invested a total of $264.6bn across 1,721 midmarket deals in the US during this year’s first half, or more than two-thirds of the $393.5bn invested across 2,662 deals in all of last year, according to research provider PitchBook. The data provider said the industry is on track to surpass the record annual total of $416.3bn for the segment reached in 2019. The researcher defines the US “core” midmarket as businesses valued from $100m to $500m. Firms are looking to take advantage of an economic rebound and low interest rates to invest their part of what data provider Preqin estimates is $955.7bn of undeployed capital, or “dry powder,” earmarked for North America and amassed during years of robust fundraising, credit experts said. On the sell side, PitchBook said business owners are eager to cash in on soaring valuations while Congress and the White House are signaling an increase in capital-gains taxes is on the way. Private-equity firms focused on the U.S. midmarket are flush with cash, having raised $538.5bn from 2016 through last year, or 55% more than they collected in the previous five years, according to PitchBook. These firms raised $68.4bn across 87 funds in this year’s first half as well. Meanwhile, private credit funds focused on North America are sitting on $230.8bn in undeployed capital, according to Preqin. Buyout shops and growth investors are getting support from these funds and other well-capitalized lenders that are attracted by the higher rates they can charge to midmarket businesses compared with larger companies, according to the experts. Researchers also cite robust demand for high-yield debt. “A lot of it is due to investors continuing their search for yield,” said Lyuba Petrova, a senior director at Fitch Ratings  who leads the credit-rating firm’s US leveraged finance practice. “[The] middle market generally offers higher yields on the loans compared to the broader syndicated loan market because you’re dealing with smaller issuers who, because of their size, tend to be riskier.” A total of $4.7bn worth of loans financed US midmarket businesses during the second quarter, the highest quarterly total in nearly four years, according to a report from investment bank Capstone Partners. Leveraged buyouts and other acquisitions accounted for roughly half of that volume, Capstone said. Competition for deals among private-credit providers and other lenders is lifting the amount of debt used in midmarket transactions, Capstone added. In aggregate, debt backing these transactions during this year’s second quarter was 5.7 times the acquired companies’ earnings before interest, taxes, depreciation and amortization, the highest leverage multiple for the segment since 2005, Capstone said. Another factor driving up leverage is the higher prices private-equity firms and other buyers are paying for midmarket businesses, Petrova said. “With valuations rising, sponsors have to put on more debt to finance their acquisitions,” she said. So far, default rates on buyout loans remain low as a recovering economy and favourable loan terms help businesses service their debt. Defaults on high-yield bonds are at the lowest level since 2007 and could finish below 1% by year’s end, Fitch has said. “Given the easy financial conditions and strong economic growth, the outlook for loan defaults is expected to remain benign well into next year,” Rachelle Kakouris, a director at S&P Global Market Intelligence’s Leveraged Commentary & Data unit, said by email. While some credit experts said a lasting increase in interest rates in response to rising inflation could increase distress risk in the credit markets and  curb investor appetite  for leveraged buyouts, Petrova said such changes could be delayed for quite a while, as many borrowers have already locked in favourable interest rates for loans. “Interest rates are really, really low,” she said. “It will take a long time, or it will take quite an increase, for interest rates to meaningfully impact LBO volumes.” Write to Luis Garcia at  luis.garcia@wsj.com

Capstone Partners Investments

127 Investments

Capstone Partners has made 127 investments. Their latest investment was in Danggeun Market as part of their Series D on August 8, 2021.

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Capstone Partners Investments Activity

investments chart

Date

Round

Company

Amount

New?

Co-Investors

Sources

8/17/2021

Series D

Danggeun Market

$162M

No

Altos Ventures, Aspex Management, DST Global, Goodwater Capital, Kakao Ventures, Reverent Partners, Softbank Ventures Asia, and Strong Ventures

14

8/10/2021

Series B - II

AKUODIGITAL

$17.44M

No

Hana Financial Investment, HB Investment, Korea Investment Private Equity, SB Partners, and Undisclosed Investors

1

8/4/2021

Series A

1/3

$10.49M

No

Altos Ventures, Delight Room, and DSC Investment

3

7/12/2021

Seed VC

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$99M

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10

7/5/2021

Series C

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$99M

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10

Date

8/17/2021

8/10/2021

8/4/2021

7/12/2021

7/5/2021

Round

Series D

Series B - II

Series A

Seed VC

Series C

Company

Danggeun Market

AKUODIGITAL

1/3

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Amount

$162M

$17.44M

$10.49M

$99M

$99M

New?

No

No

No

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Co-Investors

Altos Ventures, Aspex Management, DST Global, Goodwater Capital, Kakao Ventures, Reverent Partners, Softbank Ventures Asia, and Strong Ventures

Hana Financial Investment, HB Investment, Korea Investment Private Equity, SB Partners, and Undisclosed Investors

Altos Ventures, Delight Room, and DSC Investment

Sources

14

1

3

10

10

Capstone Partners Portfolio Exits

7 Portfolio Exits

Capstone Partners has 7 portfolio exits. Their latest portfolio exit was Atreez on June 16, 2021.

Date

Exit

Companies

Valuation
Valuations are submitted by companies, mined from state filings or news, provided by VentureSource, or based on a comparables valuation model.

Acquirer

Sources

6/16/2021

Acquired

1

00/00/0000

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10

00/00/0000

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10

00/00/0000

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10

00/00/0000

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$991

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10

Date

6/16/2021

00/00/0000

00/00/0000

00/00/0000

00/00/0000

Exit

Acquired

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Companies

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Valuation

$991

Acquirer

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Sources

1

10

10

10

10

Capstone Partners Fund History

2 Fund Histories

Capstone Partners has 2 funds, including Industry 4.0 (4차산업혁명 펀드).

Closing Date

Fund

Fund Type

Status

Amount

Sources

6/17/2019

Industry 4.0 (4차산업혁명 펀드)

$42.17M

7

5/23/2016

433 United-캡스톤 청년창업투자조합

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$99M

10

Closing Date

6/17/2019

5/23/2016

Fund

Industry 4.0 (4차산업혁명 펀드)

433 United-캡스톤 청년창업투자조합

Fund Type

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Status

Amount

$42.17M

$99M

Sources

7

10

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