CFOVILLE

Jon Feingersh Photography Inc/Getty Images

Rubber bands. Bubble gum. A punk’s earlobes. Your favorite pair of jeans. Some things are made to be stretched, but private equity hold times have been stretched nearly to their limits; exits are happening, yes, but with less frequency and at lower values.

More specifically, “sponsors are holding their largest, highest-value assets off the market,” according to a report by PitchBook on second-quarter US private equity data, and hold times are growing beyond their standard five-year roadmaps, Mario Peshev, CEO of revenue ops consultancy DevriX, told CFO Brew.

“We see a growing number of unsold companies, we see that the hold periods are getting longer…now we see more companies in their late sixth year, even seventh year, not necessarily ready to [be bought],” Peshev, who advises PE portfolio companies, added.

Stretch equity. What happened to lengthen hold times? Private equity co-investment group CapitalPad in a June report pointed to PE buyers being more selective about exits, and the exit market last year “shrank faster than portfolios did.”

The biggest shift for portco CFOs is that “operational value creation stopped being a differentiator, but an industry standard,” Peshev said in an email. “Financial engineering delivered returns when capital was cheap. Now, unchanged LP return expectations have to be met by actual business performance, not by moving capital and debt around.”

The financial model has to “stay honest” across a longer horizon.—DL

      

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Car insurance sounds like it should be simple, but anyone dealing with claims notes, call transcripts, policy docs, legal correspondence, and other bits of unstructured insurance data knows that’s far from true.

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To learn more about how AI can make the experience faster and fairer, watch their full interview here.

M&A

Adobe Stock

PayPal, one of the earliest names in fintech, is now a takeover target. Stripe, a fintech rival, and private equity firm Advent International have made a joint $53 billion bid to buy PayPal, according to press reports.

The deal is valued at $60.50 a share and includes $17 billion in equity from Stripe, Advent and Block, CNBC reported.

PayPal, Stripe, and Advent declined to comment. Block did not respond to a request for comment by the time of publication.

PayPal helped revolutionize consumer-to-consumer and consumer-to-merchant payments. Once the payments unit of eBay, PayPal soared to a $360 billion market cap in 2021, when the Covid-19 pandemic forced many businesses to operate digitally.

PayPal’s share price has dropped more than 80% since the middle of 2021. In April, PayPal reorganized into three business units, and it reportedly plans to eliminate about 20% of its employees over the next few years. In March, the company brought in new CEO Enrique Lores after a review by the board of directors found “the pace of change and execution was not in line with the [b]oard’s expectations.”

PayPal’s product with the fattest margins faces intense competition.—LB

      

TECH

Morning Brew Inc.

As AI models compete for users amidst uncertain government regulation, experts say that the ability to replace AI systems is crucial for maintaining business operations.

In June, Anthropic temporarily disabled its most advanced frontier models, Fable 5 and Mythos 5, after the Trump administration ordered the company to suspend access to those models for all foreign nationals. The administration’s move reportedly stemmed from concerns over the potential for those models to be jailbroken and misused, particularly in cyberattacks.

Victor Wieczorek, SVP for offensive security at GuidePoint Security, said the temporary shutdown raised the question of whether organizations and their IT teams should plan for disruptions to their AI setups. For example, a company that previously relied on a single model for its AI work might consider a mix of frontier, legacy, and open-weight models, or even a balance between cloud-based and on-prem AI.

“This injected a lot of uncertainty, and what you have to do with uncertainty is take a step back and plan,” Wieczorek said. “So, now we’re getting a lot of people who are planning better than what they ever did.”

IT Brew explains why you should consider using more than one model for AI.—CN

      

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market forces

Francis Scialabba

Today’s top finance reads.

Stat: $5.9 billion. That’s how much cash Google parent company Alphabet burned through in the second quarter, fueled by soaring AI spending. (Reuters)

Quote: “I would never suggest that popcorn buckets are the reason people go to the movies, or that movie-themed merch is saving the industry, but over the last few years they’ve become a big part of the conversation around major releases.”—Nels Storm, AMC’s VP of food and beverage product strategy (New York Times)

Read: Recent grocery price hikes have more people shopping at private-label chain grocers—a shift toward value irrespective of income level. (Reuters)

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