PE Week Wire: Fri., Jan. 25, 2008

Last Friday, SEIU protesters at Wharton accused the private equity industry of being a callous job killer. Then The Private Equity Council released a study purporting to show that its members were actually magnanimous job creators. Not surprisingly, the truth is found somewhere in the middle.

A massive new academic study called “The Economic Impact of Private Equity” was released today at The World Economic Forum in Davos, and includes detailed findings on private equity employment. Among them:

• Two years prior to a buyout, PE-backed companies cut 4% more of their employees than do companies that are not acquired by PE. The indication here is that the typical PE-backed company is in relatively tougher shape to begin with. Worth wondering if that number would have been a bit lower had the study’s 1980-2005 time period been extended by two years, given the industry’s boom-time propensity for buying already-strong mega-companies…

• PE-backed companies cut, on average, 7% of its existing workforce over the first two years post-buyout. But they also added jobs over the same amount of time, resulting in just a 1% net employment decrease. Job growth balances out with the non-PE control group in years four and five. Expect the SEIU and other critics to inquire as to the “quality” of those new jobs — in terms of location, salary and benefits.

The study examined around 5,000 PE transactions, and was co-led by Josh Lerner of Harvard Biz School and Steven Davis of U Chicago. I’ll have more on this later at peHUB and in this space on Monday, once I read through it all. In the meantime, you can download a copy here.

*** I haven’t seen a formal announcement, but Hummer Winblad Venture Partners has closed its sixth fund with $200 million in capital commitments.

*** Speaking of Hummer Winblad, partner Will Price has written a strong piece on the venture capital market in a recessionary economy. If you’re interested in submitting a similar piece for your own industry sector (VC, mid-market LBO, mega-LBO, mezz, etc.), please let me know. I’d like to begin posting these regularly.

*** Quiz Time: Can you name the mid-market lender (more of an arranger, really) that is preparing to shut down? Hint: Its original capital came from private equity firms.

*** Three Jamdat Mobile co-founders have quietly re-teamed to form a startup called Gogii Inc. (pronounced: Go-Gee). The trio — Scott Lahman, Austin Murray and Zack Norman — also has secured $5.175 million in Series A funding led by Kleiner Perkins Caufield & Byers. Anyone else surprised they didn’t go with Benchmark, which both backed Jamdat and recently hired ex-Jamdat CEO Mitch Lasky as CEO? I’ve got a bit more info here, but got “no comments” from both KP and Benchmark.

*** Steve Schwarzman makes sense on sovereign wealth funds.

*** I’ll be spending parts of the next two weekends at Harvard Business School. First I’m helping to judge an international biz plan this Sunday, and then moderating a digital media/VC panel the following Saturday at the school’s Venture Capital & Private Equity Conference. Then I’ve gotta rush home to begin preparations for the next day’s Super Bowl party here in Framingham. If only I could travel forward in time… Have a great non-football weekend.

Top Three

PRC LLC, a Plantation, Fla.-based provider of outsourced customer management, has filed for chapter 11 bankruptcy protection. The move comes just 14 months after Diamond Castle Holdings acquired PRC from IAC/Interactive Corp. for $286.5 million (including $130m of equity). Under terms of the proposed restructuring, PRC creditors will provide up to $30 million in DIP financing, plus post-reorganization financing if/when PRC emerges from bankruptcy protection.

Naseeb Networks, a Pakistani consumer Internet company, has raised an undisclosed amount of VC funding from ePlanet Ventures. Naseeb provides such services as online recruitment, social networking and classifieds.

RiskMetrics Group Inc., a New York-based provider of financial risk management and corporate governance products and services, raised $245 million in its IPO. The company priced 14 million common shares at $17.50 per share ($17-$19 range), for an initial market cap of approximately $1.01 billion. The company will trade on the NYSE under ticker symbol RMG, while Credit Suisse, Goldman Sachs and Banc of America Securities served as co-lead underwriters. RiskMetrics spun out of JPMorgan in September 1998, and later completed a $122 million recapitalization sponsored by Spectrum Equity Investors (27.99% pre-IPO stake), General Atlantic (27.99%) and Technology Crossover Ventures (12.31%). TCV plans to purchase up to $10 million in common stock from the underwriters, as part of the IPO.

VC Deals

The HealthCentral Network, an Arlington, Va.-based provider of online health and wellness information, has raised around $50 million in new VC funding, according to PaidContent. IAC is leading the round n exchange for a minority stake, with return backers including Sequoia Capital, Carlyle Venture Partners and Polaris Venture Partners.

BrightHeart Veterinary Centers, an Armonk, N.Y.–based operator of advanced-care veterinary hospitals, has raised $28.5 million in private equity funding. LLR Partners led the round with a $25 million infusion, while existing lender Caltius Mezzanine added $3.5 million in equity. It is not a control deal for LLR. Get more info.

Integrated Media Measurement Inc., a San Mateo, Calif.-based provider of data and analytics to media companies and advertisers, has raised $25 million in Series C funding. Kantar Media Research, the media research division of WPP Group, led the deal, and was joined by return backers Draper fisher Jurvetson and Advanced Technology Ventures. The company had previously raised around $15 million.

Adchemy Inc., a Redwood City, Calif.-based provider of online customer acquisition technology, has raised $19 million in Series C funding. Mayfield Fund led the deal, and was joined by Hellman & Friedman and return backer August Capital.

Ooyala Inc., a Mountain View, Calif.-based online video and advertising platform, has raised $8.5 million in Series B funding. Sierra Ventures led the round, with managing director Mark Fernandez taking a board seat. Original angel investors also participated.

AviaraDx Inc., Carlsbad, Calif.-based developer of oncology diagnostics, has raised $8 million in Series A funding, according to a regulatory filing. The company was formed with assets from VC-backed Arcturus Bioscience, which was mostly acquired by Molecular Devices Corp. in 2006.

Zuora Inc., a Mountain View, Calif.-based software-as-a-service startup, has raised $6.5 million in Series A funding, according to a regulatory filing. Benchmark Capital led the deal, with Benchmark partner Peter Fenton taking a board seat.

Desi Hits, a San Francisco-based operator of a multimedia South Asian entertainment portal, has raised $5 million in Series B funding. Backers include D.E. Shaw Group, Draper Fisher Jurvetson and Trident Capital.

IGA Worldwide, a New York-based in-game advertising network, has raised $5 million in additional Series B funding from Translink Capital, Presidio STX and ITOCHU Corp. This brings the round total to $30 million, following a $25 million first close from GE/NBC Universal’s Peacock Equity, KTB Ventures, Easton Capital, Morgenthaler Ventures, Intel Capital and DN Capital.

Marquiss Wind Power Inc., a Folsom, Calif.-based developer of roof-top wind turbines, has raised $1.3 million in Series A funding. Velocity Venture Capital led the round, and was joined by Strategis Early Ventures.

EVO Landing, a Seattle-based domain monetization platform, has raised an undisclosed amount of Series A funding led by Monster Venture Partners. It had previously been funded by Seattle-area angels.

Buyout Deals

3Com Corp. (Nasdaq: COMS) said that it will hold a special meeting on February 29, for shareholders to vote on a proposed $2.54 billion buyout by Bain Capital and Huawei Technologies Co.

Catterton Partners has lowered its offer for retailer Restoration Hardware Inc. (Nasdaq: RSTO) from $6.70 per share to $4.50 per share. The move lowers the deal’s cash tranche by about one-third, or down to $179 million. Restoration also has around $106 million in outstanding debt. The revised agreement gives Restoration about one month to solicit additional offers, which could include a revised bid from Sears, which previously had submitted a $6.75 per share offer

The Carlyle Group has acquired, a Swiss provider of enterprise resource planning services. No financial terms were disclosed.

The Halifax Group has acquired North American Video, a provider of video surveillance and security systems. No financial terms were disclosed. NAV founder Cynthia Freschi will remain as CEO, and retain a significant ownership position.

Red Diamond Capital has acquired the W.C. Wood Group of Companies, a Guelph, Ontario-based manufacturer of freezers, refrigerators and dehumidifiers for the consumer and commercial markets. No financial terms were disclosed, except that CIT Group and Bank of Montreal provided credit facilities. W.C. Wood has annual revenue in excess of $200 million, and was advised on the deal by KPMG Corporate Finance.

Arthur Patrick Partners, a Las Vegas-based private equity firm, has agreed to acquire a majority stake in Fit Fuel LLC, a retailer of healthy living products via vending machines. No financial terms were disclosed.

PE-Backed IPOs

IPC The Hospitalist Company Inc., a North Hollywood, Calif.-based network of hospitalist physicians, raised $75.2 million in its IPO. The company priced 4.7 million common shares at $16 per share ($15-$17 range), for an initial market cap of approximately $236.99 million. It plans to trade on the NYSE under ticker symbol IPCM, while Credit Suisse and Jefferies & Co. served as co-lead underwriters. Shareholders include Scale Venture Partners (31.79% pre-IPO stake), Morgenthaler Ventures (25.46%), Bessemer Venture Partners (17.41%) and CB Health Ventures (14.88%).

PE Exits

Cogdell Spencer Inc. (NYSE: CSA) has agreed to acquire 100% of Marshall Erdman and Associates, a designer and builder of healthcare facilities in the U.S. The total deal is valued at $247 million, and is expected to close by the end of February. The deal includes an $85 million rollover of equity held by current Marshall Erdman shareholders Baird Capital Partners and Lubar & Co.

GSI Commerce Inc. (Nasdaq: GSIC) has agreed to acquire e-Dialog Inc., a Lexington, Mass.-based provider of email marketing solutions. The deal is valued at $157 million, including $147.8 million in cash and $9.2 million worth of restricted GSI Commerce shares. It is expected to close within the next 30 days. E-Dialog has raised around $20 million in VC funding since 1999 from firms like Commonwealth Capital Ventures and Flagship Ventures. It was advised on the sale by Jefferies & Co.

Firms & Funds

InnoVentures Capital Partners has closed its second fund with $12 million available in venture debt commitments for small companies in Utah and surrounding states.

Human Resources

Atlas Venture has promoted Peter Shannon to the position of principal in the firm’s technology group. Peter joined Atlas in 2005 as an associate.

TVM Capital has promoted Kia Parssanedjad to principal. He joined the firm’s life science practice in early 2007 as a senior associate, after having been an engagement manager with McKinsey & Company.

Quadrangle Group has promoted Sachin Khajuria to principal and Daniel Fine to vice president. Khajuria works in London, and joined the firm in March 2007. Fine joined in 2005 and works in New York.