PE Week Wire — Friday, August 19

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No lengthy column today in Dan’s absence, just a quick endorsement of iCon, a book about Steve Jobs, and a quick thought. I’m only up to page 111, or 1984, but it happens to be the point in time where, according to the author, then-Apple board member Arthur Rock, one of the venture capital market’s founding fathers, pushes then-CEO John Sculley to really take charge of Apple and push Jobs into a different role. I’m always interested to hear stories where a VC or buyout investor actually steps in to do this sort of thing, because more often than not the private equity backers wait too long to push for personnel changes. It’s arguably easier for buyout investors, since they have majority control, than it is for minority-stake VCs. But in my view, handling personnel may be the greatest weakness of VCs. I’d love to hear something more insightful on the matter. Please email me at adam.reinebac! Have a great weekend.

    Top Three

Tech sellers are salivating over today’s news that Google plans to sell a secondary stock offering worth $4 billion. The search engine is being vague about its intentions, but did mention acquisitions as a possibility in its filing with the SEC. Not surprisingly, a trip to Google’s news section shows the rampant and diverse range of speculation about how the money will be used.

BBC News is reporting that Permira has bought a stake in Gala Casinos for 200 million pounds sterling, raising the value of the company to 1.8 billion pounds. Permira, whose stake is rumored to be 30 percent, joins existing majority investors Candover and Cinven, which bought the company for 1.2 billion pounds in 2003.

NBGI Private Equity is backing the £40 million management buyout of Superglass Ltd., a Stirling, Scotland-based insulation manufacturer currently owned by Encon Ltd. As part of the deal, NBGI secured a £7 million credit facility from Clydesdale Bank and a mezzanine loan from Investec. In addition, NBGI secured a Regional Selective Assistance grant of £850,000 from the Scottish Executive. The Superglass management team involved in the buyout consists of seven people, led by John Smellie, managing director

    VC Deals

Patient Care, a New Orleans, La.-based healthcare advocacy company, has raised $1 million of venture financing. The round includes the newly formed Louisiana Technology Fund, which is aimed at seed and early-stage companies in the state of Louisiana. The fund was established by Louisiana’s four research parks its Certified Capital Companies, which include Whitecap Louisiana Growth Fund, Enhanced Louisiana Capital and Advantage Capital Partners. Terry Jones was the lead on the transaction and will join the Patient Care board. The company was founded in 2002 and advocates for employees, employers and consumers.

SoftBrands Inc., a global supplier of enterprise software, has sold 18,000 shares of 6% Convertible Preferred Stock and warrants to purchase 1,200,000 shares of common stock for a total of $18 million to ABRY Partners and existing investor Capital Resource Partners (CRP). ABRY purchased $15 million in stock and warrants and CRP purchased the remaining $3 million.

    Buyout Deals

Dow Jones is reporting that Advent International has hired Commerzbank Corporate & Markets as sole lead arranger on an 80 million euro debt package to support its acquisition of Herlitz AG, a German maker of stationary and paper products. The deal is expected to close in early October.

    Fund & Firm News

American Capital Strategies Ltd. has raised $249 million in equity commitments from a group of institutional investors for its European Capital fund in addition to the $617 million the firm itself is committing. The fund, which was previously reported in Buyouts Magazine, will focus on mid-sized buyouts.

Finistere Partners, a San Diego-based venture capital firm, recently launched a fund targeting life sciences companies in New Zealand by October. The Finistere-Oceania Partners fund, with an initial target of $21 million, has already exceeded that target, according to published reports. According to the firm’s web site, fund raising will be finished by October. The fund will focus on agricultural biotech, medical devices, industrial and environmental biotech and other areas of life sciences. Finistere manages two other funds, including a $25 million U.S. VC fund called Finistere-Chicago Partners.

MDS Capital Corp. has agreed to become the sole shareholder in Canadian Venture Capital Management Corp., which transfers ultimate control of BC Medical Innovations Fund, a Labour-sponsored, Vancouver-based VC fund that focuses on life sciences companies in British Columbia, to MDS. MDS is already a 50% shareholder in CVCMC and has assisted in managing BCMIF since 2004.

Australia’s Mariner Group has set up a private equity fund to invest in undervalued consumer companies, the Financial Standard is reporting. The investment vehicle, called Mariner Brand Capital Ltd., will be managed by Scott Graham, executive director.

    Human Resources

Bill Gates on Wednesday repeated his call for the easing of U.S. immigration restrictions at a meeting of the National Conference of State Legislatures in Seattle, according to Knight-Ridder. Gates said that the restrictions keep brilliant students and innovators out of the country and subsequently put American technology companies at a competitive disadvantage.


The U.S. Department of Agriculture has announced the approval of $34.6 million in funds to help support the development of rural telecommunications, to companies in select rural locations in Alabama, Indiana, Maryland, Michigan, New Hampshire and Virginia. Companies which received loans include International Broadband Electrical Communications, Bay Broadband Communications, and Allband Communications. The financing was provided through the USDA’s Rural Development program.

InnovationValleyPartners, based in Knoxville, Tenn., has launched a $35 million fund that will focus on early-stage venture capital, according to published reports. The fund will be affiliated with, and managed by Battelle Ventures, a VC fund based in Princeton, N.J.


Just Linking Around

Good political scandals eventually have at least a passing connection to private equity, and the Duke Cunningham mess is no exception.

Yet another example of insider hype outpacing market adoption: The majority of blog readers don’t know what RSS is, let alone how to use it.

I’m thinking this will be the norm in every major American city within the next five years.

Bill Burnham on how to lower financial tension between investors in the same company.

Publishing note: I’ll be out tomorrow (need to drive to Nowhere, Maine for a wedding), so Adam Reinebach will be pinch-hitting.

    Top Three


Activant Solutions Inc., an Austin, Texas-based business process management company, has agreed to acquire Prophet 21 Inc. for $215 million from Thoma Cressey Equity Partners and LLR Partners. Prophet 21 is a Yardley, Pa.-based provider of vertical-market-focused enterprise software and services for the distribution industry. Activant is controlled by Hicks, Muse, Tate & Furst, and is in registration for a $200 million IPO.

HealthCare Ventures of Princeton N.J. has closed its eighth fund with $375 million in capital commitments, according to a regulatory filing. Limited partners include the Pennsylvania State Employees’ Retirement System.

J. Crew Group Inc., a New York-based clothing retailer, has filed to raise $200 million via an IPO of common stock. It plans to trade on the NYSE under ticker symbol JCG, with Goldman Sachs and Bear Stearns serving as lead underwriters. Texas Pacific Group is J. Crew’s majority shareholder, based on a 1997 recapitalization.

    VC Deals

Pavad Medical Inc., a Hayward, Calif.-based provider of technologies to treat obstructive sleep apnea, has raised $7.5 million in Series B funding, according to a regulatory filing. Canaan Partners and Vivo Ventures joined return backer MedVenure Associates on the deal.

NovoStent Corp., a Mountain View, Calif.-based developer of helical stent technology for vascular therapies, has raised an additional $3.1 million in additional second-round funding. Sanderling Ventures led the deal, and was joined by Montreux Equity Partners Forward Ventures, Mitsui & Co. Venture Partners, The Band of Angels Fund and Peninsula Equity Partners also participated. The round total now stands at $12.75 million.

20/10 Perfect Vision, a Germany-based provider of non-invasive laser vision correction and therapeutic eye operations, has raised 4.1 million euros in new venture capital funding from groups like French 123Venture and the Dutch Entrepreneurs Fund.

Magnum Semiconductor Inc., a recent spin-off of Cirrus Logic‘s video group, yesterday announced its formation as a Fremont, Calif.-based supplier of ICs, software and reference platforms for recording, viewing and managing audio and video content. It also said that it has raised an undisclosed amount of venture capital funding from Inv*stcorp Technology Venture and August Capital.

Sorrent Inc., a San Mateo, Calif.-based developer and publisher of mobile entertainment, has raised $7.75 million in additional Series D funding, according to a regulatory filing. This brings the round total to $27.75 million, with participants including Granite Global Ventures, BA Venture Partners, New Enterprise Associates, Globespan Capital Partners and Sienna Ventures.

    Buyout Deals


Riverlake Partners has acquired the Decorative Systems division of UK-based automotive company Pressac PLC. The $30 million deal gives Riverlake a 70% ownership position, while the group’s existing management team is expected to remain in place. LaSalle Bank provided a senior credit facility, while Key Principal Partners and GIV Capital provided a junior financing package. Riverlake will rename the unit Advanced Decorative Systems, and maintain its facilities in both Millington, Mich. and in Glasgow, Scotland.

Papa John’s International Inc. (Nasdaq: PZZA) has agreed to sell 84 company-owned restaurants in Colorado and Minnesota to a new franchise acquisition group formed by private equity firm Milestone Capital Management. No financial terms were disclosed.

Veritas Capital has agreed to purchase selected assets of MZM Inc., a Washington-based service provider to the national security community. No financial terms were disclosed for the deal, which is expected to close in mid-September.

Beverly Enterprises Inc. (NYSE: BEV), a Ft. Smith, Ark.-based nursing home operator, has agreed to be acquired for approximately $1.9 billion ($12.80 per share) by a newly-created entity called North American Senior Care Inc. The deal comes several months after Beverly rejected a $1.24 billion ($11.50 per share) offer from a private equity group that included Formation Capital, Appaloosa Management and Franklin Mutual Advisors. The deal is structured with around $320 million in equity from unnamed inv*stors, $1.325 billion in debt financing from Wachovia Bank and $550 million in operating loans from CapitalSource Financing.

Advent International has retained UBS to find a buyer for German PVC company Vinnolit GmbH & Co., according to various European press reports.

Inchon Oil Refinery Co. of South Korea has received six buyouts bids. The interested parties include: Citigroup Venture Capital, Morgan Stanley Emerging Markets, China-based Sinochem International Co., SK Corp., S-Oil Corp. and STX Corp. A South Korean court is reviewing the offers.

Tommy Hilfiger Corp. (NYSE: TOM) has put itself on the auction block, according to Women’s Wear Daily. The fashion company has retained JPMorgan to run the process, which could generate bids in excess of $1.8 billion.

Pacific Equity Partners has agreed to buy the share-registry business jointly held by the Australian Stock Exchange and Perpetual Trustees Australia Ltd. for Au$132 million.

HeinekenNV has agreed to acquire Ivan Taranov Breweries of Russia. No financial terms were disclosed for the deal, which is expected to close in late September. Among the selling parties will be Texas Pacific Group, which holds a 38% position in Ivan Taranov.

TechBooks Inc., a Fairfax, Va.-based electronic content outsourcing company, has completed a recapitalization that included a $45 million infusion of convertible preferred equity and subordinated debt from American Capital Strategies. Bank of America provided a revolving credit facility.

    PE-Backed IPOs

Vector Intersect Security Acquisition Corp., a San Francisco-based blank check acquisition company focused on the homeland security, national security and command/control industries, has filed to raise $150 million via an IPO. Isaac Applbaum, a partner with Lightspeed Venture Partners, is the company’s chairman and executive vice president, while Marc c: QCOM) has acquired Elata Ltd., a UK-based provider of mobile content delivery software, for approximately $57 million in cash. Elata had raised VC funding from Royal Bank Ventures, NewMedia Spark, The Hugh Symons Group and Frontiers Capital. !

QinetiQ PLC, a UK-based defense research firm, has retained CSFB, JPMorgan and Merrill Lynch as financial advisors for a possible IPO. The Carlyle Group bought a 31% stake in the company in 2003 from the UK Ministry of Defense, with the Ministry holding the remaining position. Press reports suggest that the IPO could be designed to raise anywhere between Gbp500 million and Gbpo1.1 billion.

The New York Mercantile Exchange today is expected to receive a $1.2 billion IPO proposal from J.P. Morgan Chase & Co., according to various press reports. The idea — and the $1.2 billion valuation — comes as Battery Ventures, Blackstone Group and General Atlantic continue to be interested in acquiring a 20% stake in NYMEX.

    PE-Backed M&A

Apprise Media LLC, a New York-based niche media company, has acquired CFW Enterprises Inc., a Burbank, Calif.-based publisher of paintball and martial arts enthusiast magazines. No financial terms were disclosed. Apprise Media is backed by Spectrum Equity Inv*stors.

Performance Fibers Holdings Inc., a Colonial Heights, Va.-based portfolio company of Sun Capital Partners, has acquired the North American business of Diolen Industrial Fibers Inc. No financial terms were disclosed.

    PIPE Deals

Warburg Pincus has agreed to invest $70 million into Secure Computing Corp. (Nasdaq: SCUR), in the form of convertible preferred stock with warrants. The deal is in conjunction to Secure Computing’s pending $295 million acquisition of CyberGuard Corp. (Nasdaq: CGFW).

    Firm & Fund News

The Carlyle Group has closed its first Asian real estate fund with $410 million in capital commitments.

Jerusalem Capital is looking to raise $100 million for its inaugural fund, according to PE Week. The Israel-based venture capital firm is focused on early-stage, tech-enabled service companies.

    Human Resources

David Pakman has been promoted to president and CEO of digital download service provider Inc. He previously served as COO, and will maintain his managing director role with Dimensional Associates, the private equity arm of JDS Capital.


Random Ramblings

The leveraged buyout world seems smitten with tech. Just the past week alone has seen the $11.3 billion deal for SunGard close, a $2.65 billion deal for Agilent’s chip business get signed, HP apparently engage in talks to sell its ProCurve unit, Blackstone Group hire a high-profile tech chief and Francisco Partners continue to market its $2.5 billion-targeted second fund. Elevation Partners might even hold a final close on its own inaugural fund one of these days. In fact, some reactionaries have gone so far as to suggest an LBO market paradigm shift from Old Economy to New Economy.

Before throwing in my lot with such folks, however, it’s worth noting that the LBO market is vast and contains multitudes. In other words, LBO firms aren’t adding tech at the expense of old line industry practices, but they are adding tech while maintaining old-line industry practices. Consider it like the perfectly-equipped bedroom, where private equity firms own the makers of both your mattress and high-def idiot box.

No industry seems to be making this point more clearly right now than energy. I’m not talking clean-tech here, but nonrenewable, dirty oil, coal and natural gas (before telling me gas isn’t dirty, please compare it to wind). I don’t have any hard numbers in front of me, but anecdotal evidence rooted in compiling news each morning tells me that there is just a ton of big-dollar activity in the space. Examples include Warburg Pincus agreeing to pay $2.35 billion for Dynegy’s midstream assets and the very successful IPO for drill-maker Dresser-Rand (owned by First Reserve). Just today we had another energy IPO (Bronco Drilling) and a $580 million acquisition by PE-backed Complete Energy Holdings.

Perhaps most important, the recently-passed federal energy bill is expected to promote future energy-related private equity deals (even though it did virtually nothing to reduce our dependence on foreign oil, or to increase fuel emission standards). Ari Nathanson of Buyouts Magazine has the details at Again, multitudes over exclusion, which should please diversity-conscious LPs.

*** I told you last week that I don’t own an I-pod, nor do I download podcasts via my computer. Both things remain true. However, I was interviewed yesterday by John Furrier of, which means that soon I will be a part – albeit an infinitesimally small one – of the podcasting phenomenon. More on this when John puts it online (probably next week).

*** We reported yesterday that Vivo Ventures closed its new fund. Just felt I should re-emphasize that we told you yesterday.

*** Interesting play yesterday for LifeMed, the healthcare multimedia company that raised over $6 million in a Series A round led by Battery Ventures. It seems to make sense from all accounts, particularly since its revenue model will be based more on user fees (such as fees for special services, research, database use, etc.) than on advertising, which is a major plus. Moreover, I wrote two years ago that the VC space for diabetes – the disease LifeMed is first targeting via its dLife platform – had gotten saturated on the glucose monitoring/insulin delivery sides of things, and that investors needed to look for new angles if they wanted to make money. I have a generally healthy skepticism for media deals in general (outgrowth of first-hand experience), but the company and Battery seemed to answer most of my pointed questions well. Still not completely convinced that dLife can overta! ke the robust – and free – offerings of the American Diabetes Association, but it’s a worthy gamble. Also, expect LifeMed’s next platform to target heart disease…

    Top Three


The Blackstone Group has completed its $3.24 billion acquisition of Dallas-based hotel company Wyndham International Inc. (AMEX: WBR).

Rockwood Holdings Inc., a Princeton, N.J.-based chemicals company, priced 20.4 million common shares at $20 per share (below $23-$26 range), for an IPO take of approximately $408.2 million. Goldman Sachs and CSFB served as co-lead underwriters. Kohlberg Kravis Roberts & Co. was listed as Rockwood’s pre-IPO majority shareholder, with DLJ Merchant Banking Partners holding a minority stake. Both firms sold shares as part of the offering.

Picolight Inc., a Boulder, Colo.-based maker of optical transceivers and components, has raised $7 million in additional Series H equity funding from Inv*stor Growth Capital. It also secured $7.5 million in debt financing from ORIX Venture Finance. The entire round is now valued at $27.5 million, following an earlier $13 million close that included BA Venture Partners, Vesbridge Partners and Coral Capital Management. To date, Picolight has raised nearly $130 million in total private funding since its 1996 inception.

    VC Deals

ClairMail Inc., a Novato, Calif.-based provider of workforce mobility solutions, has raised around $8.3 million in Series A funding, according to a regulatory filing. Participants include Norewest Venture Partners and Outlook Ventures.

BA Research International, a Houston, Texas-based provider generic analytical services for pharmaceutical companies, has received an undisclosed amount of private equity funding from Summit Partners.

Peppercoin Inc., a Waltham, Mass.-based payment technology company, has raised $8 million in Series C funding. Wall Street Technology Partners led the deal, and was joined by Pan Series Management and return backer Pod Holdings.

Alfalight Inc., a Madison, Wis.-based maker of diode lasers, has raised $7 million. GF Private Equity Group led the deal, and was joined by return backers ARCH Venture Partners, Advanced Technology Ventures, EDF Ventures, CenterPoint Ventures, Venture Investors, Wisconsin Alumni Research Foundation and Advantage Capital Partners. The company has raised approximately $67 million in total VC funding since its 1998 inception.

Cruise Planners Inc., a Coral Springs, Fla.-based cruise franchisor, has received an undisclosed amount of private equity funding from Palm Beach Capital Partners.

Voxware Inc., a Princeton, N.J.-based provider of voice-directed logistics for warehouse operations, has raised $6 million in VC funding. Participants included Cross Atlantic Capital Partners, Edison Venture Fund and Nash Fitzwilliams Ltd.

    Buyout Deals


The Neiman Marcus Group Inc. (NYSE: NMG.A, NMG.B) shareholders yesterday overwhelmingly approved a proposed $5.1 billion company acquisition by Texas Pacific Group and Warburg Pincus. Shareholders will receive $100 per outstanding share.

Watermill Ventures has acquired a 100% stake in PFI LLC (a.k.a. Vertex Fasteners), a Pawtucket, R.I.-based distributor of industrial fasteners, fastener products and rivets. No financial terms were disclosed for the deal, which included participation from company management.

Monomoy Capital Partners and Hilco Equity Management have completed their $25 million buyout of Awrey Bakeries Inc., a Livonia, Mich.-based maker of frozen baked goods. The deal will include a recap of Awrey’s balance sheet, and the installation of Alden Knowles as CEO. Knowles has held senior management and turnaround positions at the bakery divisions of Bunge Foods and Hazelwood Bakeries.

Goldin Capital Management, a New York-based private equity firm, has acquired the assets of Skin Nuvo International LLC, in a $15 million bankruptcy auction. The company operates a chain of 37 medical spas in the Western U.S., and has been renamed Lumity.

PAI Partners of France has received European Commission approval for its proposed Gbp800 million buyout of UK car repair chain Kwik-Fit from CVC Capital Partners.

TDC AS, a Danish telecom carrier, is receiving acquisition interest from several private equity firms, according to The Wall Street Journal. The deal could be valued at upwards of $9 billion, with interested groups including a consortium of Apax Partners, Permira, NBlackstone Group and Providence Equity Partners. An alternate possibility includes KKR and BC Partners.

Eaton Corp. (NYSE: ETN) has completed its purchase of Tractech Holdings Inc. from a shareholder group led by Edgewater Capital Partners. No financial terms were disclosed. Tractech is a Warren, Mich.-based manufacturer of specialized differentials for the commercial and specialty vehicle markets.

Citigroup Venture Capital has acquired a 10.5% stake in department store chain La Curacao, according to The Wall Street Journal. No financial terms were disclosed.

    PE-Backed IPOs

Bronco Drilling Company Inc., an Oklahoma City-based provider of contract land drilling services to the oil and natural gas industries, priced 5.1 million common shares at $17 per share, for an IPO take of approximately $86.7 million. It originally filed to price 4.7 million shares at between $14 and $16 per share. Johnson Rice & Co. and Jefferies & Co. served as lead underwriters. The company was formed in June 2001 by affiliates of Wexford Capital, which held a 100% pre-IPO ownership stake and a 72% post-IPO stake.

Team Health Inc., a Knoxville, Tenn.-based provider of outsourced physician staffing and administrative services to hospitals and other healthcare providers, has filed to raise $172.5 million via an IPO of common stock. It plans to trade on the NYSE under ticker symbol THH, with Lehman Brothers and Merrill Lynch serving as lead underwriters. Significant shareholders include Madison Dearborn Partners (36% stake), Cornerstone Equity (36%) and Beecken Petty O’Keefe & Co. (8%).

    PE-Backed M&A

Symantec Corp. (Nasdaq: SYMC) has agreed to acquire Sygate Technologies Inc., a Fremont, Calif.-based provider of endpoint compliance solutions. No financial terms were disclosed. Sygate has raised around $35 million in VC funding since its 1995 inception, from firms like Trident Capital, Trinity Ventures, CIR Ventures, Intersil Corp. and MVC Capital.

EMC Corp. (NYSE: EMC) has agreed to acquire Rainfinity Inc., a San Jose, Calif.-based provider of virtualization solutions for heterogeneous networked attached storage and file system environments. The deal is valued at less than $100 million, and is expected to close later this month. Rainfinity has raised $42 million in VC funding from firms like Carlyle Venture Partners, Alloy Ventures, New Enterprise Associates, Intel Capital and Invesco Private Capital.

Complete Energy Holdings LLC has completed its $580 million acquisition of La Paloma Generating Company LLC, from a creditor group that included financial institutions and hedge funds. Complete Energy counts private equity firm Engage Inv*stments among its owners.

Interwoven Inc. (Nasdaq: IWOV) has acquired Scrittura Inc., a New York-based provider of document automation technology. The deal is valued at approximately $16.3 million in cash, plus the possibility of an additional $2 million if certain revenue and operating contribution goals are achieved by December 31. Scrittura had raised VC funding from firms like LV Equity Partners, Walden Capital Partners, Penny Lane Partners, Hudson Venture Partners and Middlebury Venture Partners.

Syndesis Inc., an Ontario-based provider of end-to-end provisioning and activation solutions for service offerings, has agreed to acquire CoManage Corp., a Wexford, Pa.-based provider of data integrity management solutions for telecom service providers. No financial terms were disclosed. Syndesis has raised VC funding from such firms as Greylock, Helix Inv*stments,Pequot Capital Management, Sequoia Capital and VenGrowth. CoManage has raised VC funding from Adams Capital Management, Apax Partners, Bessemer Venture Partners, Columbia Capital, Goldman Sachs, Highland Capital Partners and Lucent Venture Partners.

    Firm & Fund News

RBS Leveraged Finance is opening a Tokyo office, according to PrivateEquityOnline. It will be run by new managing director Satoshi Kitahama, who previously was in charge of leveraged and project finance for the specialty finance division of Japan-based Shinsei Bank.

    Human Resources

Javed Kahn has joined The Blackstone Group as deputy managing director of the firm’s newly-opened office in Mumbai, India. He previously served as a director with DLJ Merchant Banking, and soon will relocate from London to Mumbai.

Jan Gaulding has been named chief financial officer of General Bandwidth Inc., an Austin, Texas-based VoIP equipment manufacturer. She previously served as CFO of General Bandwidth shareholder Sevin Rosen Funds.

Andrew Brown and Ryan Magee have joined Westport, Conn.-based Patriot Capital Funding Inc. (Nasdaq: PCAP) as vice president and assistant vice president, respectively. Both men previously worked with GE Commercial Finance‘s global sponsors group.

Raymond Nolte has joined Citigroup Alternative Inv*stments has CEO of its hedge funds-of-funds group, effective September 1. He previously served as a managing director and vice chairman of the Deutsche Bank Absolute Return Strategies Fund-of-Funds and the Single Manager Hedge Fund business.


Tuesday Talkback

The sun is shining, Canadian VC disbursements jumped sharply in Q2 and Iraqi inability to meet constitutional deadline has been termed a “tribute to democracy.” (note to editor: my future inabilities to meet deadline will heretofore be referred to as tributes to journalistic diligence). In other words, it’s time for Tuesday Talkback:

Most inbox comments relate to last Friday’s column on Mayfield, which lost at least seven top-tier limited partners while raising its new fund. Of specific interest was my assertion that VCs justifiably care about the “quality” of their limited partners. D writes: “There is a huge difference in the value of dollars coming from a VC and an LP investor (even a ‘high quality’ one). The talent, resources, contacts, network, input, aura, direction etc. that Kleiner or Sequoia provide to their funded companies truly have the ability to turbo-charge a startup (even an already-promising one like PodShow), and allow it to quickly dominate a sector and suck talent from competitors. I have never heard the same said about any specific LP. From a GP’s perspective, what matters most isthe ability of an LP to deliver their capital commitment when capital is called, grow with the f! und through time,and otherwise remain a silent partner.”

Michael adds: “When it comes to money being green, I guess I’d say that LP money is more homogenous than the GPs putting it to work. And that is the one disconnect in your logic. To your point, Mayfield will still do well, and they were oversubscribed — even if arrogant and unprofessional as your article suggests. There is simply oversupply of LP money and a shortage of quality, proven PE shops to put it to work. I’m guessing that the 7 brand name investors have other places they can go, so they cut back their allocations at Mayfield and increase it elsewhere, while the newcomers were happy to have a chance to put money with a quality firm with a reputation for generating returns. While currencies are a commodity, quality investors are not.”

I certainly understand this point of view, and the flood of email helped sway me a bit. But please keep two things in mind: (1) The “quality” LPs Mayfield lost have been in this market for a long time, and will remain there going forward. The same cannot yet be said for the longevity of most public pensions, corporate LPs, European LPs or high-net-worth individuals. (2) Many GPs not only want to make money for LPs, but want to make money for LPs who then use that money for people/causes that the GP cares about. For example, lots of VCs try to get their alma matters (either undergrad of b-school) into their funds, while others are particularly interested in certain charitable foundations or local unions (firefighter, police, etc.).

An LP source for the column left a voice mail that said, in part: “One thing you kind of missed was that firms like NEA and Greylock had budgeted management fees from the late 80’s to mid-90’s et a higher carry. they got the higher carry because they got lower fees. But if you come back and say ‘we’re only kidding’ about the lower fees and keep the higher carry — like Mayfield did — it becomes a major issue.”

Finally, a bunch of emails like the following from Rob: “It seems as though Mayfield has forgotten who the customer is (the LP), simply doesn’t care, or believes it isn’t accountable in any way for poor performance. Thank God the vast majority of GP’s don’t have this view of their customers.”


    Top Three


NetDevices Inc., a Sunnyvale, Calif.-based developer of services gateway products for enterprise branch networks, has raised $25 million in Series B funding. Castile Ventures led the deal, and was joined by return backers ComVentures, Columbia Capital, Artiman Ventures and JumpStartUp. The company had raised a $15 million Series A round in August 2003.

General Atlantic has completed a $75 million inv*stment for secondary shares in Net1 U.E.P.S. Technologies Inc. (Nasdaq: UEPS), a South Africa-based provider of electronic payment systems for developing markets. In related news, Florian Wendelstadt, head of General Atlantic’s London office, has joined the Net1 board of directors.

Fred Reynolds is leaving Evercore Partners, just one month after joining as its president and CEO. He will return to his former employer Viacom as CFO of CBS. He previously had served as CFO of Viacom’s television stations group.

    VC Deals

Regado Biosciences Inc., a Morrisville, N.C.-based drug development company focused on antidote-controlled antithrombotics, has raised $20 million in Series B funding. Domain Associates and Quaker BioVentures co-led the deal, and were joined by return backer Aurora Funds. Regado was a spinout from the Duke University Medical Center’s surgery department.

Canada‘s Venture Capital & Private Equity Association (CVCA) and Thomson MacDonald & Associates today released Q2 2005 disbursement figures, showing that VCs disbursed Cdn$627 million into Canadian companies. This is up from both the Cdn$326 million raised in Q1 2005, and from the Cdn$409 million raised in Q2 2004.

LifeMed Media, a Westport, Conn.-based healthcare multimedia company focused on chronic disease populations, has raised $6.215 million in Series A funding. Battery Ventures led the deal.

SmartPay Jieyin Ltd., a China-based provider of online payment services, has raised an undisclosed amount of strategic funding from RRE Ventures. The company also received additional capital from return backers Accel Partners, Icon Ventures Asia and Lunar Group.

OncoGenex Technologies Inc., a Vancouver, Canada-based biotech company developing targeted therapeutics for cancer, has raised US$12.8 million in Series B-2 funding. WHI Morula Fund (managed by William Harris Inv*stors) and BC Advantage Funds were joined by return backers include Ventures West, H.I.G. Ventures, the Working Opportunity Fund (managed by GrowthWorks Capital) and the Business Development Bank of Canada.

Intel Capital announced that its $200 million China Technology Fund has added its first three portfolio companies: Chipsbrand Microelectronics Co. Ltd., a fabless semiconductor company; Onewave Technologies Inc., a broadband entertainment technology solutions provider; and Verisilicon Holdings Co. Ltd., an application-specific integrated circuit design foundry.

Sensys Networks Inc., a Berkeley, Calif.-based provider of wireless sensor networking, has raised a Series B funding round led by ComVentures.

Avvenu Inc., a Palo Alto, Calif.-based provider of P2P imaging content solutions, has raised $7.5 million in Series B funding, according to a regulatory filing. Participants include Charles River Ventures, Worldview Technology Partners and Motorola Ventures.

Transera Communications Inc., a Cupertino, Calif.-based provider of virtual call center solutions, has raised $10 million in Series B funding, according to a regulatory filing. Accel Partners and Apax Partners were joined on the deal by return backer Storm Ventures.

Sparkplug Inc. of Chicago has raised venture funding from Ignition Venture Partners, according to a regulatory filing. No additional information was disclosed.

    Buyout Deals


Advent International has acquired a 65% interest in Herlitz, a German manufacturer and supplier of stationery, greeting cards and gift-wrapping paper. No financial terms were disclosed. Advent bought the position from a consortium of banks, which had assumed their position following a 2001 financial restructuring of Herlitz. The remaining 35% is held by free-float shareholders, and is listed on the German stock exchange. Advent today issued a voluntary public tender offer to the free-float shareholders to acquire their interest.

    PE-Backed IPOs

Union Drilling Inc., a Bridgeville, Pa.-based provider of contract land drilling services and equipment to natural gas companies, has filed to raise $150 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol UDRL, with JPMorgan serving as lead book-running manager. The company was formed in 1997 by Morgan Stanley Capital Partners (81% pre-IPO stake) and Somerset Capital Partners.

    PE-Backed M&A

Alliance Medical Corp. of Phoenix has agreed to merge with Vanguard Medical Concepts Inc. for Lakeland, Florida. Both companies are independent third-party re-processors of single-use medical devices. No financial terms were disclosed for the deal, which is expected to close by year-end. Alliance has raised over $38 million in VC funding, from firms like Apax Partners, Delphi Ventures, Coral Ventures, Valley Ventures, Merrill Lynch and Affinity Capital. Vanguard was acquired in 2002 by RoundTable Healthcare Partners.

Pfizer Inc. (NYSE: PFE) has acquired Bioren Inc., a San Carlos, Calif.-based provider of antibody optimization technologies. No financial terms were disclosed. Bioren was founded in 2002 with funding from Bay City Capital, and later raised additional funding from Stone Canyon Venture Partners and unnamed individuals.

Border Media Partners, a Houston-based broadcasting company serving Hispanic listeners in the Southwestern U.S., has completed its $18.6 million acquisition of four Austin, Texas stations from Dynamic Radio Broadcasting. The deal includes KEGL, KFON, KKBL and KTXZ. Border Media Partners has raised over $115 million in private equity funding from Vestar Capital Partners, Goldman Sachs Urban Investment Group, Darby-BBVA Latin America Private Equity Fund and RGC Capital Partners.

    Firm & Fund News

Vivo Ventures of Palo Alto, Calif. has raised $172.97 million for its fifth fund, according to a regulatory filing.

Banco BilbaoVizcaya Argentaria (BBVA), a top Spanish bank, is expected to receive regulatory approval to launch a pair of publicly-traded venture capital funds.

    Human Resources

Ken Martin has joined Onset Ventures as an associate in the Menlo Park, Calif.-based firm’s medical technology practice. He previously served as vice president of engineering with startup Hansen Medical Inc.

Brian Berliner, creator of open-source code product control CVS, has joined Sevin Rosen Funds as an entrepreneur-in-residence. He most recently served as co-founder, founding CTO and executive vice president of IT automation software company Cassat Corp.

Harry Taylor and Nigel Howard have joined TA Associates as vice presidents. Taylor previously was a senior associate with MMC Capital, while Howard served as an associate with both JPMorgan Partners and Goldman Sachs Capital Partners.

Harris Williams & Co. has made the following promotions: Patrick Crocker to managing director, Bram Hall to director, Chip Meyer to director, John Arendale to vice president, James Clark to vice president, Andrew Spitzer to vice president, Derek Swaim to vice president and Marshall Schutt to associate.

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    Top Three


Warburg Pincus has closed its ninth private equity fund with $8 billion in limited partner commitments.


Agilent Technologies Inc. (NYSE: A) has agreed to sell its semiconductor products division to Kohlberg Kravis Roberts & Co. and Silver Lake Partners for approximately $2.66 billion. The deal is expected to create the world’s largest privately-held semiconductor company.

Maytag Corp. (NYSE: MYG) said that its board has withdrawn its recommendation to accept a $14 per share buyout offer from Ripplewood Holdings. Instead, the board will recommend a $21 per share offer from rival appliance maker Whirlpool Corp. (NYSE: WHR). The decision likely will cost Maytag $40 million, due to a termination agreement with Ripplewood.

    VC Deals

M-Qube Inc., a Watertown, Mass.-based mobile channel enabler, has raised $10 million in a fourth-round deal led by HarbourVest Partners led the deal, and was joined by unnamed return backers. The company has raised around $42 million in total VC funding, from backers like Bain Capital, General Catalyst Partners, Globespan Capital Partners and Sigma Partners.

Triage Wireless Inc., a San Diego-based medical device maker focused on “cuff-less” blood pressure measurers, has raised $3 million in Series A funding. Sanderling Ventures and 3i Group co-led the deal.

VisEn Medical Inc., a Woburn, Mass.-based provider of optical molecular imaging solutions, has raised $4 million in additional Series A funding. Flagship Ventures led the deal, and was joined by return backer Bollard Group.

Guardium Inc., a Waltham, Mass.-based provider of database security and compliance solutions, has raised $5.5 million in third-round funding. Ascent Venture Partners led the deal, and was joined by return backers Cedar Fund, Veritas Venture Partners and Stage One Ventures. The company has raised approximately $15 million in total VC funding.

G2 Microsystems Inc., an Oakland, Calif.-based provider of integrated circuits for the mobile resource management market, has received additional Series A funding from the UPS Strategic Enterprise Fund. The company announced a $6 million first close on the deal in March, with Starfish Ventures and DB Capital Partners participating.

    Buyout Deals


SunGard (NYSE: SDS) said that its $11.3 billion acquisition has been completed, making it the second-largest leveraged buyout in history. Participants included Silver Lake Partners, Bain Capital, The Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co., Providence Equity Partners and Texas Pacific Group.

Kirtland Capital Partners has acquired MicroGroup Inc. from MCM Capital Partners and National City Equity Partners for an undisclosed amount. MicroGroup is a Medway, Mass.-based supplier of made-to-order precision manufactured components and assemblies used in the medical device and analytical instrumentation markets. Harris Williams & Co. served as exclusive advisor to Microgroup and the selling parties.

Circle Peak Capital has sponsored a recapitalization of Hill & Valley Inc., a Rock Island, Ill.-based manufacturer of baked sugar-free and no-sugar-added sweet goods. The deal is being done in partnership with senior management, while the founding Colin family will cash out. No financial terms were disclosed.

Chicago Growth Partners has lead sponsored a recapitalization of eInstruction Corp., a Denton, Texas-based provider of real-time interactive response pad technologies. Also participating were Goldman Sachs, PPM America Capital Partners, Capital Source and company management. As of a result of the transaction, the Staubach Group of Dallas (headed by ex-NFL QB Roger Staubach) is no longer a major inv*stor in eInstruction. No financial terms were disclosed.

ECI Partners has sponsored a Gbp52 million management buyout of Racal Acoustics from J.F. Lehman & Co. Racal Acoustics is a UK-based maker of “ruggedized” specialist personal communications equipment for the defense and avionics sectors. It was acquired by J.F. Lehman from The Thales Group last year.

Platinum Equity has agreed to acquire U.S. Robotics Corp., a Schaumburg, Ill.-based provider of Internet connectivity and networking solutions. No pricing terms of the all-cash deal were disclosed.

Electra Partners reportedly has offered to buy UK-based bar operator Urbium PLC for approximately Gbp114 million. Urbium is publicly traded on the London Stock Exchange.

BA Capital Partners Europe has retained Lazard to auction off its 85% stake in Finnish insulation company Paroc Group Oy, according to Dow Jones. The sale is expected to be worth upwards of 500 million euros.

    PE-Backed IPOs

Basic Energy Services Inc., a Midland, Texas-based provider of well site services to oil and gas drilling and production companies, has filed to raise $258.75 million via an IPO of common stock. It plans to trade on the NYSE under ticker symbol BAS, with Goldman Sachs and Credit Suisse First Boston serving as lead underwriters. DLJ Merchant Banking is Basic Energy’s majority shareholder, based on a December 2000 recapitalization. First Reserve, Fortress Capital and Southwest Partners also hold equity positions.

    PE-Backed M&A

Siemens AG has acquired Transmitton Ltd., a UK-based railway services company, from Alchemy ICS Group for an undisclosed amount.

Evraz Group SA has acquired a 75% stake in Italy-based steel plate re-rolling company Palini e Bertoli SpA. Selling shareholders included MPS Venture SGR, the private equity unit of Monte dei Paschi Group. www.Evrazholding.Ru

Financial Dynamics, a UK-based business communications firm controlled by Advent International, as acquired Westhill Partners, a New York-based provider of business and management consulting services. No financial terms were disclosed.

    Firm & Fund News

Keiretsu Forum, a Bay Area angel inv*stor network known for its venture capital activities, has diversified into real estate by committing capital to the Fidelity Partners CAP IV Fund.

    Human Resources

Chris Schorr has joined The Blackstone Group as a senior managing director, focused on private equity deals in the technology sector. He previously served as managing partner of Citigroup Venture Capital Equity Partners, where his deals included the buyout of Fairchild Semiconductor from National Semiconductor.

Dennis Mahr has joined RiverVest Venture Partners of St. Louis as a managing director. Wahr is a cardiac medicine specialist who served as founder, president and CEO of Velocimed LLC until its recent acquisition by St. Jude Medical.

William Haseltine, chairman and CEO of Human Genome Sciences Inc. (Nasdaq: HGSI), has joined CMEA Ventures as a senior life sciences advisor. He also is an advisor to Frazier Healthcare Ventures.

Correction: Refco Inc. priced 26.5 million common shares at $22 per share, for an IPO take of approximately $583 million.

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