Some notes before I hop a plane to New York, where at 4pm I’ll be moderating an LP panel at the IPQC Private Equity Outlook conference…
*** Private equity collusion will clearly go down as one of this year’s most over-hyped private equity stories. There have yet to be any formal allegations – save for what’s in that sloppy class-action suit – and the DoJ inquiry letters were vague enough to double as RFPs for a Private Equity for Dummies tome. In short, it is a meatless bone that we reporters keep gnawing on in hope of scandalous marrow (i.e., the stuff we use as a substitute for high salaries).
But the media feeding frenzy in this case might be more than just self-sustaining. It might also be self-generated.
Before continuing, let me clearly state that I have absolutely no inside information as to why the DoJ sent out its inquiry letters. But I’ve now heard a near-identical theory from three different senior members of three different brand-name buyout firms, and figure it’s worth sharing with you. It goes like this:
On October 16, 2005, Andrew Ross Sorkin of the New York Times authored an article titled “One Word Nobody Dares Speak.” The word to which Sorkin referred was “collusion,” and his second paragraph went like this:
Virtually any big company that puts itself up for auction these days is deluged with interest from private equity firms, which have too much money and too little time to spend it. Witness the $15 billion sale of Ford’s Hertz rental car unit to a consortium of private equity players including Clayton, Dubilier & Rice Inc., the Carlyle Group and Merrill Lynch Global Private Equity. Or the $11.3 billion sale of SunGard to a supersized group of seven buyout firms led by Silver Lake Partners. What has gone largely unquestioned is whether the formation of these consortiums of firms, or ”clubs” in industry parlance, has the potential to artificially depress buyout prices and hurt corporate shareholders.
Notice something very important about this paragraph. Specifically, the four firms Sorkin cites are the exact same firms reported to have received DoJ letters of inquiry. This limited scope has always seemed odd, particularly given that a relatively small player like Merrill Lynch was lumped in with Carlyle, CD&R and Silver Lake. Oh, and the fact that established market heavyweights like Apollo, Bain, Blackstone, Goldman Sachs, KKR, TPG, etc. apparently didn’t get letters.
So the theory goes like this: Someone in the DoJ’s New York office picked up his Sunday Times, read Sorkin’s article and thought: “I don’t know really what private equity is, but I sure know what collusion is. In fact, it’s my job to investigate collusion. But we’ll keep it low-level for now. No need to bother the big boys in DC… Now where is the cream cheese?”
Again, this might not be accurate. But it certainly is becoming conventional wisdom.
*** Cartesian Group – the private equity shop formed earlier this year by AIG castaways like Peter Yu, Bill Jarosz and Tom Armstrong – is well on its way to closing its inaugural fund. Multiple sources tell me that it already has held a first close on around $450 million in capital commitments.
*** EQT Partners is Sweden is about to close on a $700 million fund earmarked for buyouts in China, according to my colleague Mark Cecil. This is EQT’s second China fund, having raised a $322 million vehicle called ICP-Asia in 1999. MVision is serving as placement agent this time around.
*** Speaking of colleagues, I have two new ones. Erick Bergquist has joined as an associate editor with Buyouts Magazine, after having spent the past six years as a staff writer with the American Banker. He is based in New York. Also, Joanna Glasner has joined Venture Capital Journal as a senior editor based in San Francisco. She has been freelancing for the past few years, before which she spent five years with Wired News as a reporter and editor. Big welcome to both of them…
*** Some additional Internship Rodeo listings were posted late yesterday afternoon in the MBA Forum section of www.peHUB.com.
*** I continue to be interested in the personnel moves of former Testa Hurwitz employees, in part because I haven’t yet erased my giant whiteboard chart. What we’re getting now is second-generation moves, like this: Kathleen Taradash has joined Cambridge Associates as its head of fund-of-funds and secondary fund research. She had originally joined Proskauer Rose after Testa imploded. Taradash takes the place of Peter Mooradian, who has moved to co-head of venture capital research with Theresa Hajer.
Investcorp and Hicks Holdings LLC have agreed to acquire a majority stake in Greatwide Logistics Services from Fenway Partners for $730 million. GreatWide is a Dallas, Texas-based provider of third-party logistics services. Fenway acquired the company in 2000, and will retain a minority stake. www.greatwide.com
MontaVista Software Inc., a Santa Clara, Calif.-based provider of Linux operating systems and development tools, has raised $21 million in new venture capital funding. Siemens Venture Capital led the deal, and was joined by NEC, Alloy Ventures, US Venture Partners and Aplix. The company has raised over $90 million in total VC funding since its 1999 inception. www.mvista.com
ARCIS Group has acquired the entire private equity portfolio of EDF Capital Investissement, the private equity subsidiary of Electricité de France. No financial terms were disclosed. The portfolio includes limited partner positions in funds from Emertec, EPF, Sofinnova, Ventech and Electropar France.
Liquavista BV, a Dutch fables display manufacturer, has raised Euro 12 million in Series A funding co-led by Amadeus Capital Partners and GIMV. New Venture Partners, which led the spinout of Liquavista from Philips Research in April, also participated. www.liquavista.com
Azureus, a Palo Alto, Calif.-based maker of the Zudeo P2P application for the distribution of large files, has raised $12 million in Series B funding. Redpoint Ventures led the deal, and was joined by Grecroft Partners, CNET chairman Jarl Mohn and return backer BV Capital. www.zudeo.com
Goodmail Systems Inc., a Mountain View, Calif.-based provider of an email certification platform, has raised $12 million in third-round funding. SoftBank Capital led the deal, and was joined by return backers DCM and emergence Capital Partners. The company has now raised over $24 million. www.goodmail.com
OrthoMimetics Ltd., a UK-based medical device spinout from the Cambridge-MIT Institute, has raised Gbp5 million in Series A funding. Participants include Oxford Capital Partners, Schroders Investment Management, Sloane Robinson Private Equity and an unnamed I-bank. OrthoMimetics is developing off-the-shelf products to improve the efficacy of first-line surgical procedures for the regenerative repair of defects in articular cartilage, ligaments and tendons. www.orthomimetics.com
Redfern Integrated Optics Inc., a Santa Clara, Calif.-based maker of optical transmitters for the telecommunications, data transmission and other markets, has raised $7 million in new venture capital. A regulatory filing indicates that the deal is a Series A-1 recap. Backers include TMT Ventures, Tallwood Venture Capital and Jolimont Capital. The company previously had raised around $25 million over three rounds of funding. www.rio-inc.com
Ampla Pharmaceuticals Inc., a La Jolla, Calif.-based drug startup, has raised $5.47 million in Series A funding, according to a regulatory filing. Backers include Advent International, Crabtree Ventures and Integra Ventures.
Hoana Medical Inc., a Honolulu, Hawaii-based maker of hospital patient monitoring systems, has secured around $5.45 million of a $25 million Series D round, according to a regulatory filing. Shareholders include Oceanit Laboratories Inc., Kolohala Venture Fund, Sulphur Creek Ventures and GT Investments. www.hoana.com
Service-now.com, a Solana Beach, Calif.-based provider of on-demand IT service management solutions, has raised $5 million in Series B funding from JMI Equity. www.service-now.com
mInfo Inc., a Chinese mobile search company, has secured $3.36 million of a $5.4 million Series A round led by Staenberg Capital, according to a regulatory filing.
BioPetroClean, a Tel Aviv, Israel-based provider of commercial-grade bioremediation systems for oil containment, has raised $3 million in Series A funding from 21Ventures. www.biopetroclean.com
Hardmetrics Inc., a Philadelphia-based provider of “end-user self-service” performance management solutions, has raised $2 million in Series A funding, plus another $2 million in earn-out commitments. NextStage Capital and Osage Ventures co-led the deal, and were joined by return backer SilkRoad Equity. www.hardmetrics.com
Mobile Complete Inc., a San Mateo, Calif.–based company that develops, tests and deploys mobile applications and services, has raised an undisclosed amount of Series B funding. Motorola Ventures led the deal, with return backers Innovacom VC also participating. www.mobilecomplete.com
The Carlyle Group and Chinese power distributor State Grid Corp. reportedly have partnered on a bid for the National Transmission Corp., the Philippines’ government-owned power grid. Other bidding groups include: Newbridge Capital and Tenaga Nasional (Malaysia); and Terna (Italy) and Citadel Holdings (Philippines). The bids are expected to come in at between $2.5 billion and $3 billion. www.carlyle.com
Leonard Green & Partners has agreed to sponsor an $847 million recapitalization of Gaithersburg, Md.-based commercial landscaping company Brickman Group Ltd., according to a regulatory filing discovered by The Deal. Leonard Greed will provide $222 million in equity, with Lehman Brothers arranging a $350 million term loan and $50 million revolving credit facility. TCW/Crescent Mezzanine will provide $225 million in subordinated notes and $50 million in equity. CIVC Partners currently holds a 36% position, while the remainder is held by the founding Brickman family and company management. The Deal reports that CIVC and company management will reinvest around $250 million for a 48% stake. www.brickmangroup.com
Advent International has acquired Grupo La Mansion, an operator of casual dining restaurants in Mexico. No pricing terms of the all-equity transaction were disclosed. Javier Gavilan, who recently worked with Advent portfolio company Aerocomidas, will take over as Grupo La Mansion CEO. www.adventinternational.com
Catalyst Investors of New York has acquired Aplus.net, a San Diego-based provider of website presence solutions, including domain registration services, web hosting, dedicated server hosting, web design and web marketing services to approximately 90,000 small- and medium-sized businesses. No financial terms were disclosed. Gabriel Murphy, co-founder of CommuniTech.Net (sold to Web.com in 2002) will take over as CEO. SG Capital advised Aplus.net on the sale. www.aplus.net
Monomoy Capital Partners has acquired and recapitalized Rossborough Supply Company Inc., a manufacturer of magnesium and aluminum auto parts. No financial terms were disclosed, except that the founding Schlotz family also participated and will continue to hold a minority position. David Scholtz will take over as CEO, while Brad Scholtz will serve as COO. Current CEO Chet Scholtz will retire. RSC has offices and facilities in Cleveland, Albany, Ore. and Matamoros, Mexico. www.mcpfunds.com
ImaRx Therapeutics Inc., a Tucson, Ariz.-based drug company using nanotech therapies for stroke and cancer, has withdrawn registration for a $75 million IPO, due to “unfavorable market conditions.” It had planned to trade on the Nasdaq, with CIBC World Markets serving as lead underwriter. Edison Moore Healthcare Ventures is a 7% stakeholder. www.imarx.com
ESPN has agreed to acquire NASN, the only European cable channel dedicated to North American sports, from Setanta Sport Holdings and Benchmark Capital Europe. No financial terms were disclosed for the deal, which is expected to close early next year. ESPN is 80% owned by ABC and 20% owned by Hearst Corp. www.espn.com www.nasn.com
Trintech Group PLC (Nasdaq: TTPA) has agreed to acquire substantially all of the assets and assume certain liabilities of Concuity Inc., a Vernon Hills, Ill.-based provider of technology solutions for the healthcare industry. The deal is valued at up to $8.25 million in cash. Concuity had raised over $42 million in VC funding since its 2000 inception, from firms like Three Arch Partners, Versant Ventures, Mobius Venture Capital and Gabriel Venture Partners. www.trintech.com www.concuity.com
IBM has agreed to acquire Consul Risk Management, a Delft, Netherlands-based provider of compliance and security audit software. No financial terms were disclosed for the deal, which is expected to close in Q1 2007. Consul then will become part of IBM’s Tivoli software unit. Consul raised around $13 million in VC funding over two rounds in 1999 and 2001, from firms like Kennet Venture Partners, Softbank, Nesbic Group and Dresdner Kleinwort Wasserstein. www.ibm.com www.consul.com
WebTrends Inc., a Portland, Ore.-based provider of Web analytics, has acquired ClickShift Inc., a San Bruno, Calif.-based provider of online advertising optimization solutions. No financial terms were disclosed. WebTrends is owned by Francisco Partners. ClickShift raised $6 million in Series A funding earlier this year from El Dorado Ventures and U.S. Venture Partners. www.webtrends.com www.clickshift.com
Key Principal Partners has closed its third fund with $500 million in capital commitments. The Cleveland-based firm makes non-control mezzanine and control equity investments in middle-market companies. www.keyprincipalpartners.com
Aureos Capital plans to double its capital under management from $600 million to $1.2 billion by 2008/2009. The London-based private equity firm focuses on unlisted mid-market companies in Asia, Africa and Latin America. Among the new fund efforts will be a $120 million Central Asia Fund (first close in Q1 2007) and a $300 million Latin American Fund (first close on $150m in Q2 2007). www.aureos.com
Pequot Capital has secured $183 million in capital commitments for its fourth private equity fund, according to a regulatory filing. The fund’s target is $200 million, with limited partners including The State of Michigan, Erie Insurance Exchange and GE Pension Trust. Benedetto, Gartland & Co. is serving as placement agent. www.pequotcap.com
Jason Calcanis has joined Sequoia Capital as an “entrepreneur-in-action.” He recently resigned as general manager of AOL Netscape, which had bought his company Weblogs. He previously published the now-defunct Silicon Alley Reporter magazine. www.sequoiacap.com
Dana LaForge has joined Brera Capital Partners as a partner based in New York. He previously founded private equity firm Colonnade Financial Group and, before that, headed North American financial institutions I-banking at Deutsche Bank. www.brera.com
EDS (NYSE: EDS) has promoted Ron Rittenmeyer to the position of president. Rittenmeyer also will retain his current role as chief operating officer. He joined EDS in July 2005, before which he had been a managing director with The Cypress Group. www.eds.com