PE Week Wire — Friday, January 7

Get The Wire in your inbox each morning! Just send us an email.


A Slow Burn

Boston-based law firm Testa, Hurwitz & Thibeault has officially become a meat market, with almost every single one of its attorneys (partner and associate alike) being wined and dined by prospective employers. The end may not be here yet, but it is fast approaching.

For the uninitiated, THT has long been the East Coast’s leading private equity law firm, and a pretty strong player in the technology market to boot. At the center of all that success was firm patriarch Dick Testa, who engendered tremendous loyalty from both partners and clients. A rival attorney recently told me that he would regularly try to pilfer THT clients, only to be told at the last minute that the client had gotten cold feet about leaving, “because it would really disappoint Dick.” In fact, it might be fair to say that he was the single most influential and respected member of Boston’s entire private equity community.

When Testa died unexpectedly in December 2002, however, there was no longer any legitimate thread holding together the THT partnership. Basic inertia and a desire to maintain Testa’s legacy worked for a while, but partners gradually began leaving for greener pastures, particularly now that their client rosters were a bit more portable (many clients had been loyal to Testa the man, not to THT the firm). Some folks have suggested that Tom Beaudoin’s defection to Wilmer Cutler Pickering Hale & Dorr really opened the floodgates, but the camel’s back was more significantly broken by last month’s news that seven partners had agreed to join Proskauer Rose, while another three would move to Bingham McCutchen (within the High Street offices of THT, these folks apparently are referred to as the seven dwarves and three stooges, respectively).

From that point on, it has been every attorney for him and herself. There has been a lot of talk about potential merger or acquisition partners (and a number of conversations have been held), but no deal seems particularly imminent. One THT attorney I spoke with said that he had expected an acquisition throughout December, but now has given up most hope. Not surprisingly, he currently is sifting through a variety of offers, including informal ones from folks who will be out the door as of March 31 (THT is holding its partners to that contractual deadline, although I sense that some negotiations could be underway).

The most recent confirmed defection, of course, is fund formation guy Bill Schnoor, who will be headed over to Goodwin Procter (some of his clients sound likely to follow). I also have a list of at least four other partners who have given notice, but I don’t have quite enough confirmation to feel comfortable sharing their names with you just yet. THT spokesman Steve Barrett confirmed the Schnoor departure, but says that the firm’s new policy is to not comment on the comings or goings of individual partners. That responsibility, he says, is being left to the actual partner or his/her new firm. Smart move, since the new firms are trying to keep their poaching activities very quiet. After all, none of them want a repeat of the debacle in California, where the estate of deceased law firm Brobeck, Phleger & Harrison accused poacher firms like Morgan Lewis and Clifford Chance of leading to its dissolution. So far, Brobeck is said to have covered tens of millions of dollars via out-of-court settlements.

Anyway, this story isn’t going away anytime soon, as THT still has a whole bunch of attorneys in its stable. Moreover, I know that each of the major dailies in Boston, plus a bunch of trade pubs (including yours truly), are floating an obscene number of trial balloons. In fact, I’ve already seen some published reports that I know to be untrue. I’ll discuss this more next week, and should be writing something a bit more formal and informative in the next issue of Venture Capital Journal. In the meantime, any insights are always appreciated, and anonymous tips can be left by going to, and clicking on the “top secret” button ad.

Have a great weekend.


Forstmann Little & Co. has sold a portion of its holdings in Minneapolis-based Capella Education Co. for $42.5 million to Technology Crossover Ventures ($35 million) and existing Capella shareholder Maveron ($7.5 million). In other Capella news, Pearson PLC sold its position in the company for $20 million, via a $15 million sale to Insight Venture Partners and a $5 million sale to Watershed Capital.

Harvest Partners has agreed to sell Edgen Corp., a Baton rouge, La.-based provider of carbon and alloy pipe and components, to Jefferies Capital Partners and certain members of Edgen management. The deal is valued at $124 million, and is expected to close later this month.

Cradle Holdings has spun out fragrance subsidiary L’Artisan Parfumeur as an independent company. Private equity firm Fox Paine & Co. will remain the controlling shareholder of both Cradle Holdings and L’Artisan Parfumeur, with former Cradle Holdings CEO Rip Mason joining fox Paine as a senior managing director.

Rally Software Development Corp., a Boulder, Colo.-based provider of on-demand software development management solutions, has raised $4.5 million in Series B funding. Return backers Mobius Venture Capital and Boulder Ventures participated on the deal, which brings Rally Software’s total venture capitalization to $8 million since its 2001 inception.

Imalux Corp., a Cleveland-based medical device company, has raised over $4.38 million in Series B funding. BIOMEC led the deal, and was joined by Early Stage Partners, Symark LLC, RMS Investment Corp., BioInfo Accelerator, Reservoir Venture Partners and several Cleveland-area angel investors. The company has raised $10.4 million in total VC funding since its 1996 inception.

DivXNetworks Inc., aSan Diego-based developer of video compression technology, has received an undisclosed amount of strategic funding from Samsung Ventures America.

DailyAccess Corp., a Mobile, Ala. provider of tech-based services and products to retirement plan sponsors, has raised $2.5 million in CAPCO funding. Investors included The Alabama Opportunity Fund (co-managed by Stonehenge Capital Partners and Jemison Investment Co.) and the Whitecap Alabama Growth Fund (co-managed by Greer Capital Advisors and Whitecap Capital).

FishNet Security Inc., a Kansas City-based provider of information security solutions, has raised $12 million in venture funding from Edgewater Growth Capital Partners.

Kodeos Communications Inc., a South Plainfield, N.J.-based provider of optical subsystems, has raised $6 million in new VC funding from return backers Highland Capital Partners and JVP.

VenGrowth Capital Partners has invested an undisclosed amount of venture capital into Ontario-based Lakeport Brewing Corp.

Bear Stearns Merchant Banking has acquired The John Henry Co., a Lansing, Mich.-based specialty printing and packaging company serving the pharmaceutical, horticulture and floriculture markets. No financial terms were disclosed.

Bally Total Fitness Holding Corp. is considering a sale of up to 40% of the company for up to $125 million to Tennenbaum Capital Partners, Apollo Management and Texas Pacific Group, according to The Deal. Tennenbaum already is a Bally bondholder.

GIMV and food industry veteran Chris De Wolf have teamed up to acquire both Rejo CVA and Pellicula NV, Belgium-based producers of seasonings and food ingredients, respectively, for the meat industry. Existing family shareholders will retain a financial interest in the combined company. No financial terms were disclosed.

OptionsXpress Holdings Inc., a Chicago-based provider of an online retail brokerage platform, has set its proposed IPO terms to 12 million common shares being offered at between $14.50 and $16.50 per share. The company’s largest shareholder is Summit Partners, which led an $88.4 million recapitalization earlier this year.

MediciNova Inc., a San Diego-based drug company, has set its proposed IPO terms to 30 million common shares to be offered at between $2.75 and $4.75 per share on the Osaka Securities Exchange. The company has raised more than $73 million in total VC funding since its 2000 inception, including a $44.82 million Series C deal last fall. Significant shareholders include Essex Woodlands Health Ventures, Tanabe Holding America Inc., Aqua RIMCO and JAFCO.

Probitas Partners, a provider of alternative investment solutions, has added three professionals: Roger Pett comes aboard as a London-based director, after having served as founder and managing director of Eiger Capital; Jack Wills joins the San Francisco office after having worked with Citigroup Private Equity; and Jeff Mills is a new associate on Probitas’ investment management team, and comes over from Siebel Systems.

Herbert Frerichs has joined Saul Ewing LLP as a partner in the law firm’s business department, after having served as a partner in the Baltimore office of DLA Piper Rudnick Gray Cary.

The Alternative Investment Management Association (AIMA) has announced the election of its council for the term to September 2006. It includes: Kim Ivey of Vertex Capital Management (Australia); James McGovern of Arrow Hedge Partners (Canada); Bernard Dennery of BNP Paribas (France); Achim Putz of SJ Berwin (Germany/Austria); Christophe Lee of SHK Fund Management (China); and Neil Brown of Citigroup Alternative Investments Inc. (USA). The complete list can be found at

Frank Carlucci, chairman emeritus of The Carlyle Group, has transitioned to a chairman emeritus role with Neurogen Corp. (Nasdaq: NRGN), where he had served as chairman for the past 15 years. He will be succeeded by former Pfizer executive Craig Saxton.

Dominick DeChiara has been named a partner in the private equity practice of law firm King & Spaulding LLP. He previously served as a partner in the M&A/private equity group of O’Melveny & Myers LLP.

David Atterbury has joined HarbourVest Partners as a London-based vice president focused on non-U.S. secondary partnership investments. He most recently served as a director of private equity with Abbey National treasury Services PLC.

Jason Carlson, lead strategist for private equity firm Trafalgar Capital Group, has joined the board of Presidion Solutions Inc. (OTC BB: PSDI).

S.J. Higgins, a senior management director of International Equity Partners (IEP), has joined the board of Aero Marine Engineering Inc. (OTC BB: AOME).

Frank McKenna may have to wait before becoming Canada’s ambassador to the U.S. The former New Brunswick premier is under a bit of fire for his relationship to The Carlyle Group, which includes a spot on the firm’s Canadian advisory board.

Ronald Henriksen has been named CEO of Semafore Pharmaceuticals Inc., an Indianapolis-based drug development company focused on cancer therapies. He previously served as chief investment officer of Semafore shareholder Twilight Venture Partners.

Burrill & Co. announced that the size of its next life science-focused VC fund would be between $300 million and $500 million.

  Thursday, January 6


First Closes and False Funds

Huge news day, including word that Gov. Schwarzenegger would like to convert California pension funds like CalPERS and CalSTRS into 401(k)-type plans (i.e., terminate them). Oh, and Testa Hurwitz has lost yet another partner from its already-decimated private equity practice group. Let’s move on, however, to some stuff you haven’t yet read about.

* The Carlyle Group has held a first close on nearly $5 billion for its latest fund, with another $1.5 billion expected to come in within the next couple of months. You can read more about this in the next edition of the new-look Buyouts Magazine (which also will include an extensive Q&A with Carlyle founder David Rubenstein). In the meantime, I’ve been trying to figure out if this is the largest-ever first close for a private equity fund. I’m limiting this exploration to U.S.-based funds, because euro vs. dollar conversion issues could confuse the matter (for example, did you realize that AlpInvest, not CalPERS, is now the world’s top private equity investor, due to recent currency fluctuations).

Anyway, there only have been eleven $5 billion-plus funds raised by U.S.-based firms, excluding the latest effort from Carlyle. Included are a number that definitely held first closes on less than $5 billion, including Blackstone Capital Partners IV, Warburg Pincus Private Equity VIII and DLJ Merchant Banking Partners III and three funds from KKR. JPMorgan Partners seems to have held a first close on more than $5 billion, although it isn’t necessarily comparable, since the majority of that capital came from the bank itself. Still outstanding are a $5 billion vehicle from Warburg Pincus (although I doubt it held just one close), a fund from Texas Pacific Group and one from Thomas H. Lee Partners. I’ve got a bunch of calls out, and will let you know what comes back in. If nothing else, it’s likely that Carlyle raised the most money in the shortest period of time, having only sent out books last September.

* Many of you read a news report yesterday that Austin Ventures is raising an $800 million fund focused on later-stage private equity investing, in addition to the $500 million fund-raising effort that already has been reported in this space. While it made pretty good copy, it simply isn’t true. John Thornton of Austin Ventures formally denied the report, but declined to go into further detail (I think his attorneys were perched above him, with muzzles at the ready).

The real situation goes as follows, according to multiple sources: Austin Ventures has engaged in what are best described as a pair of joint ventures, in addition to its regular fund-raising effort (of which approximately one-third will be devoted to later-stage investing). The first joint venture is with Texas Growth Fund, a late-stage private equity firm that only invests in Texas-based companies. Under terms of the agreement, Austin Ventures is introducing all of its existing limited partners to Texas Growth Fund, which is in the midst of raising a new vehicle. Perhaps it’s best described as a sponsorship agreement. Ditto for the other joint venture, which is a “venture debt” fund to be run by former Comerica Bank investor Tony Schell. Combined, the two funds are targeted at around $500 million, not $800 million. Also, the article suggested Mike Schmitz of Austin Ventures would be running the phantom private equity fund. He’s involved in the joint ventures, but no firm! worth its salt would put a senior associate just out of b-school in charge of an $800 million vehicle, even if it did exist.

* Finally, a word of clarification: Yesterday’s Wire noted that Fidelity Ventures has added Jonathan Tower as an associate. It is worth noting that this is a different Jonathan Tower from the one who currently serves as a managing director with Citron Capital. The Fidelity guy is Jonathan D. Tower, and the Citron guy is Jonathan S. Tower.


The Carlyle Group has held a first close of just under $5 billion for its fourth generalist private equity fund, and expects to close on an additional $1.5 billion in LP commitments within the next eight weeks.

Alexza Molecular Delivery Corp., a Palo Alto, Calif.-based, has raised $52 million in Series D funding. Alloy Ventures and Delphi Ventures co-led the round, and were joined by fellow new investors Abingworth Bioventures, MDS Capital, Pacific Rim Ventures, T. Rowe Price and WestRiver Capital. Return backers include Frazier Healthcare Ventures, Versant Ventures, 5AM Ventures, Burrill & Co., CMEA Ventures, New Enterprise Associates and clients of the Zesiger Capital Group.

Chrysalis Ventures announced that managing director Irv Bailey will transition from his managing director role to that of a senior advisor, following the confirmation of his wife Cathy as U.S. Ambassador to Latvia. Bailey will continue to serve on the Chrysalis investment committee and participate in Monday morning meetings via telephone. He does not expect to engage in Latvian venture capital investing, due to laws against diplomats, or their spouses, investing in countries in which they are serving.

Digital Fuel Technologies Inc., a San Mateo, Calif.-based provider of governance software for outsourced IT and business services, has raised $20 million in fourth-round funding. Apax Partners led the deal, and was joined by return backers Benchmark Capital, Israel Seed Partners and Sigma Partners. The company has raised over $35 million in total VC funding since its 2000 inception.

Tejas Networks, a Bangalore, India-based provider of SDH/SONET optical networking products, has raised $15 million in Series C funding. Battery Ventures led the deal (its first-ever investment in India), and was joined by return backers Intel Capital, IL&FS Investment Manager and Dr. Desh Deshpande.

Cinemark Inc., a Plano, Texas-based movie theater operator controlled by Madison Dearborn Partners, has received a $50 million investment from Quadrangle Capital Partners, in exchange for a minority ownership position.

Realm Systems Inc., a Las Vegas-based provider of a universal mobile computing platform, has raised $8.5 million in Series A funding led by GMG Capital and New York financier David Mimran. No investor details were disclosed.

FatPipe Networks Inc., a Salt Lake City-based provider of Internet networking devices, has received $500,000 in subordinated debt funding from return backer UTFC Financing Solutions LLC.

BEZ Systems Inc., a Boston-based provider of predictive performance management software, has raised $2.6 million in Series B funding. Velocity Equity Partners led the deal, and was joined by Brooke Private Equity Advisors and return backer JMI Equity. www.bez.comScience Venture Corp., the VC arm of the Industrial Bank of Taiwan.

Norwest Equity Partners has completed a recapitalization of portfolio company Norwesco Inc., a St. Bonifacius, Minn.-based manufacturer of plastic agricultural and septic tanks. The deal closed on December 29, with minority shareholder Brockway Moran & Partners also participating. No financial terms were disclosed.

The Riverside Co. has sold portfolio company Carborundum Electrite AS to global abrasives provider Tyrolit Schlefmittelwerke Swarovski. No financial terms were disclosed. Carborundum Electrite AS is a manufacturer of abrasives in the Czech Republic and Slovakia, and was acquired by Riverside back in 1999.

Morgenthaler Partners has acquired Phillips & Temro Industries, an Eden Prairie, Minn.-based supplier of products for the diesel engine market. No financial terms were disclosed for the deal, which included debt funding from American Capital strategies. Morgenthaler did say that it hopes to acquire other companies that would help it expand the PTI platform.

The Jordan Co. has sold portfolio company Permatex Inc. to Illinois Tool Works Inc. (NYSE: ITW) for an undisclosed amount. Permatex is a Hartford, Conn.-based maker and distributor of specialty chemical products primary sold in the automotive aftermarket. Goldsmith Agio Helms advised Permatex on the deal.

GoldK Inc. of Waltham, Mass., and The Retirement Plan Co. of Brentwood, Tenn. have agreed to merge operations. As part of the deal, existing GoldK backers Lazard Technology Partners and TH Lee Putnam Ventures have provided an undisclosed amount of growth capital for the combined company.

Penson Worldwide Inc., a Dallas, Texas-based provider of security clearing services to the financial industry, has acquired Tick Data Inc., a Great Falls, Va.-based financial data provider. No financial terms were disclosed. Penson Worldwide is a portfolio company of Technology Crossover Ventures.

End2End Holdings Ltd., a UK-based B2B managed service solution provider for mobile data services and content, has acquired Dutch SMSC operator MIGway AS from TDC Mobile and LogicaCMG. No financial terms were disclosed. End2End has raised over $150 million in VC funding from firms like Cisco Systems, Draper Fisher Jurvetson ePlanet Ventures, Hewlett-Packard and DB Venture Partners.

Ever SA, a France-based provider of enterprise content management solutions, has acquired Mediapps, a France-based provider of corporate portal software. No financial terms of the all-stock deal were disclosed. In related news, existing Mediapps investor Advent International has infused the company with an additional 2 million euros. Mediapps has raised venture capital from AGF Private Equity, 3i Group, PAI Partners, Partech International and Advent, while Ever has been supported by AXA Private Equity and BNP Private Equity.

GlassHouse Technologies Inc., a Framingham, Mass.-based provider of storage consulting and services, has acquired Fortified Technologies Inc., a Wakefield, Mass.-based storage solutions provider. No financial terms were disclosed. GlassHouse Technologies has raised over $13 million in VC funding since its 2001 inception, from backers like Sigma Partners, GrandBanks Capital, Jafco and Kodiak Venture Partners.

Altiris Inc. (Nasdaq: ATRS) has acquired Tonic Software Inc., an Austin, Texas-based provider of Web application management software. No pricing terms of the all-cash deal were disclosed. Tonic raised approximately $38 million in total VC funding, from firms like Austin Ventures, BA Venture Partners, HLM Venture Partners, Sevin Rosen Funds, Trellis Partners, Dell Ventures and Intel Capital.

Paul Hazen, chairman of Accel-KKR, has joined the board of Alias Inc., a Toronto-based provider of 3D graphics technology. Alias was acquired from SGI (NYSE: SGI) in June 2004 by Accel-KKR, the Ontario Teachers’ Pension Plan and company management.

Reeta Kapani has joined the Silverfern Group (f.k.a. Kiwi Securities), as a managing director who will launch a private equity fund-raising platform. Kapani has previously worked with both The Blackstone Group and DLJ Merchant Banking, according to a Silverfern press release.

William Melton, a general partner with GIV Venture Partners, and Pete Musser, chairman of Safeguard Scientifics, have joined the board of GIV portfolio company Amperion Inc., an Andover, Mass.-based provider of broadband-over-power line equipment.

Exponent Private Equity reportedly has added six investment professionals to help it invest its GBP400 million inaugural fund. They are: Simon Baines from Bain & Co.; Kris Cudmore from Booz Allen & Hamilton; Jack Edmondson from McKinsey & Co.; Arthur Mornington from BC Partners; and Richard Lenane from Apax Partners. Craig Vickery also has joined as finance director, after previously having worked with PricewaterhouseCoopers.

H.I.G. Ventures, an affiliate of Miami-based private equity firm H.I.G. Capital, has held a $250 million first close on its second fund. The firm is hoping to hold a $300 million final close within the next few weeks.

   Wednesday, January 6

On Blogs 

Mixed among this morning’s news items is word that blogging software company Six Apart Ltd. plans to acquire blogging software company LiveJournal. Not surprisingly, this scoopalicious nugget comes from a tech biz reporter’s blog (Om Malik’s broadband blog, to be exact).

Blogging is the hottest topic among journalists right now, in large part because we are forever fascinated with our own navels. The latest edition of Venture Capital Journal, for example, has devoted its cover story to the phenomenon (although it focuses on VC blogging, not journalist blogging). In an expression of good will toward men (otherwise known as cross-promotion), I’ve put the cover story online for free at In fact, I’ve put almost all of this month’s VCJ up for free on the site, including a dozen 2005 Outlook Q&As with VCs like Brook Byers, Steve Jurvetson, Pierre Lamond and more. They will go back behind the password-protected curtain at 5pm EST, so read quick. If you like what you see, click the “subscribe” button on the VCJ website, or call Rob Mills at 917-408-5254. It really is worth the subscription price, particularly if the money is coming out from your corporate credi! t card, rather than from your personal one.

As I wrote above, the VCJ article is devoted to VC blogging, rather than to journalistic blogging like this column (although I recognize that the once-a-day email format is not a blog in the pure RSS-feed sense of things). The former helps investors generate everything from deal leads to ideas that can help either the management or technology of existing portfolio companies. It is a good thing for all involved, so long as it doesn’t become too time-consuming.

Journalistic blogging, on the other hand, is concerning me more and more (insert irony here). Of specific apprehension is the absolute glee in which many journalistic bloggers are heralding the fall of mainstream media (or even alternative media), and the ascension of the blogosphere. The free press only used to be for those with a physical press, they argue, but no longer. Everybody gets a say.

That’s all well and good, but it ignores the single most important facet of the mainstream press: editors. Certainly such checks and balances occasionally fail or are corrupted, but they generally serve the purpose of double-checking, or at least questioning, a reporter’s facts and conclusions. Most blogs, on the other hand, are neither checked nor balanced, save for ones affiliated with mainstream media organizations. If something is wrong (either intentionally or not), it needn’t be corrected, save for situations where it is dictated by reader comments or blogger conscience.

This space is a bit different for two reasons. First off, as most of you know from reading the occasional afternoon correction email, I do rectify my mistakes. And while I write this column independently each morning (and, unfortunately, without much reflection) with some copy-editing assistance, I answer to editors and publishers who sign my checks and control the keys to this particular castle. Enough significant screw-ups, and those keys would be wrested away. That’s untrue of most blogs, which are sole proprietor shops.

Anyway, enough navel-gazing and belly-aching, and on to the news and one free day of Venture Capital Journal.


DexCom Inc., a San Diego-based developer of blood glucose monitors for those suffering from diabetes, has raised $22.5 million in Series D funding. Warburg Pincus led the deal, and was joined by fellow new investor The Vertical Group. Return backers included Canaan Partners, Federated Kaufmann Fund, Fog City Fund, RWI Group and St. Paul Venture Capital. The company has raised approximately $75 million in total VC funding since its 1999 inception.

Warburg Pincus has acquired InfoGenesis, a Santa Barbara, Calif.-based provider of IT for the hospitality and food-services industries. No financial terms were disclosed. The transaction closed on December 29, at which point InfoGenesis founder Karl Willig retired from his CEO post, and was replaced by Terry Cunningham, former president of both Seagate Software and Veritas Software.

UGS Corp., a Plano, Texas-based product lifecycle management company, has agreed to acquire Tecnomatix Technologies Ltd. (Nasdaq: TCNO), a provider of manufacturing process management software for the automotive, electronics and aerospace industries. The deal is valued at approximately $228 million in cash, or $17 per share. UGS was acquired last year from Electronic Data Systems Corp. (NYSE: EDS) for $2.05 billion by Bain Capital, Silver Lake Partners and Warburg Pincus.

XLHealth Corp., a Baltimore-based disease management company, has raised $63.75 million in private funding from Goldman Sachs Capital Partners and Norman Payson, former chairman and CEO of Oxford Health Plans.

JiWire Inc., a Folsom, Calif.-based provider of an online Wi-Fi hotspot atlas, has raised $2.35 million in second-round funding led by DFJ Frontier, according to The Sacramento Bee.

Caritor Inc., a San Ramon, Calif.-based IT solutions provider with offshore facilities in India, has received an undisclosed amount of strategic funding from Citigroup Venture Capital International.

Infinity Pharmaceuticals Inc. of Cambridge, Mass. has entered into a collaborative agreement with Novartis AG (NYSE: NVS), to jointly design a collection of novel small molecules to be synthesized by Infinity using its chemical technology platform. As part of the agreement, Novartis will make a “significant” equity investment into Infinity, which previously had raised over $150 million in VC funding from Novartis, Advent Venture Partners, Amgen, Boston University Community Technology Fund, Prospect Venture Partners, Tallwood Venture Capital, Venrock Associates, Vulcan Capital and HBM BioVentures.

VisionCare Ophthalmic Technologies Inc., a Saratoga, Calif.-based developer of visual prosthetic devices for the treatment of age-related macular degeneration, has raised $20 million in Series D funding. Boston Scientific Corp. led the deal, and was joined by return backers Pitango Venture Capital, Onset Ventures, Three Arch Partners and Infinity Venture Capital. VisionCare has raised over $45 million in total VC funding since its 1995 inception.

AgION Technologies Inc., a Wakefield, Mass.-based provider of engineered anti-microbial solutions, has raised $6.19 million in Series C funding co-led by Motorola Ventures and Paladin Capital Group. The company has raised $36.5 million in total VC funding since its 1997 founding.

MDVIP Inc., a Boca Raton, Fla.-based provider of concierge medicine, has raised $6 million in venture capital funding from Summit Partners.

Efficas Inc., a Boulder, Colo.-based biotech company, has raised $3 million in Series A-3 funding. Bay Area Equity Fund led the deal, and was joined by Boston Life Science Venture Corp., the VC arm of the Industrial Bank of Taiwan.

Charlesbank Capital Partners and Grotech Capital Group have co-led a management buyout of Captain D’s Inc., a Nashville, Tenn.-based seafood restaurant chain. The only disclosed financial terms were that Wachovia Capital Markets and Wells Fargo Bank arranged $100 million in senior debt financing.

KRG Capital Partners has completed a $187 million recapitalization of portfolio company The Tensar Corp., an Atlanta-based provider of technology-driven real estate site development. The deal provides KRG investors with approximately 100% of their invested capital, while still allowing them to maintain their entire stock ownership stake in the company. GE Capital led a syndicate that provided $130 million of senior financing for the recap, while over $77 million in junior debt financing was co-led by Merrill Lynch PCG and American Capital Strategies.

Weston Presidio and Dorset Capital have acquired a minority stake in Glendale, Calif.-based William Pitt Inc., the parent company of engagement ring maker Robbins Bros., according to The Deal. No financial terms were disclosed.

Willis Stein & Partners has sponsored a leveraged management recapitalization of Education Corp. of America, which operates for-profit, post-secondary Virginia College. Under terms of the deal, Willis Stein will become ECA’s lead investor, with founding investor Prospect Partners retaining a small minority position. No pricing details were disclosed.

Six Apart Ltd., a San Mateo, Calif.-based provider of blogging software and services, has agreed to acquire blogging software provider Live Journal for an undisclosed amount, according to Om Malik’s blog. Six Apart is backed by VC firm August Capital.

DealerTrack Inc., a Melville, N.Y.-based provider of an online auto finance platform for automotive dealers, has acquired substantially all of the assets of GO BIG! Software Inc., a Longwood, Fla.-based provider of an online menu selling solution for automotive finance and insurance professionals. No financial terms were disclosed. DealerTrack has raised around $50 million in VC funding since its 2001 inception, from firms like GRP Partners and JPMorgan Partners.

Conversent Communications LLC and FiberNet LLC, both facilities-based integrated communications providers, have agreed to merge. Each company will retain its respective brand identity in markets that it currently serves. No financial terms were disclosed. Conversent has received VC funding from BancBoston and Seaport Capital, while FiberNet is affiliated with The Blackstone Group, Charter Communications and Fanch Communications Inc.

Happ Controls LLC of Elk Grove Village, Ill. and Suzo International BV of The Netherlands have agreed to merge, in order to create a global manufacturer and distributor of gaming and amusement parts and accessories with nearly 400 employees. Pfingsten Partners, which acquired Happ Controls last June, will be the combined company’s majority shareholder.

Burrill & Co. has made the following promotions: Giovanni Ferrara to managing director; Richard Haiduck to managing director; James Watson to managing director and head of the merchant banking practice; Bryant Fong to principal; Stephen Kujawa to director; David Hasselwood to senior associate; and Rizwan Velji to senior associate. In addition, the firm named Ann Hanham, John Kim, Roger Wyse, Mike Ullman, John Haag and Tim Young as general partners in the Burrill Life Sciences Capital Fund III, which is slated to hold a first close at the end of Q1 2005.

Frank Panaccio and Jonathan Tower have joined Fidelity Ventures as associates. Panaccio previously worked as an associate in the M&A division of Broadview International LLC, while Tower had been involved in strategic venture and M&A investments for IBM Corporate Development.

Harald Einsmann, an operating partner with EQT Partners, has joined the board of Checkpoint Systems Inc. (NYSE: CKP).

NeoMed Management, an Oslo, Norway-based life sciences VC firm, has held a 38 million euro first close on its fourth fund. Limited partners include Norwegian fund-of-funds Argentum Fondsinvesteringer, Swedish pension fund Tredje AP-Fonden and UK-based Hoegh Capital Partners. The final fund target is 100 million euros, with subsequent closings expected to occur in a few months.

Symphony Capital has held a $315 million first close on a pair of private equity funds that will invest in novel biopharmaceutical products.

Mirae Asset Partners No. 1. Private Equity Fund and Woori No. 1 Private Equity Fund both filed with South Korean financial regulators Monday, making them the first South Korean private equity funds ever to do so. Mirae plans to manage 100 billion won (approx. $96 million), while Woori will manage 210 billion won (approx. $200 million). South Korea recently relaxed its restrictions on locally-owned private equity funds

Ropes & Gray LLP has completed its acquisition of Fish & Neave LLP, a New York-based law firm focused on intellectual property matters. The combined firm features more than 750 attorneys, including 200 working in the IP practice.

   Tuesday, January 5

Random Ramblings

Tons of news this morning, so just time for a few quick notes as I continue to dig out from under the weight of last week’s vacation.

* I’m putting together an introduction to Venture Capital Journal’s annual Year-in-Review package, but have been struggling to find a unifying theme. For example, I wrote last year that 2003 was the year of rebuilding the VC franchise, after several years of turmoil and loss (both in terms of reputation and capital). Going back 12 more months, I remember suggesting that 2002 was marked by a pendulum shift in the GP vs. LP power dynamic, with traditionally-subservient LPs making their voices heard and getting results (the pendulum has, of course, shifted back). But this year I’m a bit stuck. My inclination is simply to write that 2004 was a continuation of 2003, with most of the big issues – disclosure, LP overhang, financial PE group spinouts, emergence of secondary market importance, etc. — being rooted in 2003. I kind of feel like this tact is the equivalent of a copout, but it’s the best I’ve got so far.

* A bit more VC-backed IPO data for you: Of the 91 VC-backed IPOs that priced on U.S. exchanges in 2004, 68 were trading at, or above, their IPO prices as of market close on December 31. The average aftermarket performance was around 31%, with the biggest percentage gainer being Shanda Interactive Entertainment (286.36% jump), and the biggest percentage loser being Xcyte Therapies Inc. (-65.5% loss).

* It’s always nice to see conventional wisdom turned on its head: Supporters of social security privatization argue that public stock market investments will outperform government bonds over a person’s lifetime. Even opponents generally concede this point as fact. Stanley Logue of San Diego, however, does not, and he’s done the math.

* Finally, a big welcome to Connie Loizos, who is the newest member of our editorial team. She most recently toiled under the corporate overlords of Dow Jones, and also has written for BusinessWeek, the San Francisco Chronicle and Red Herring. She will work out of our San Francisco office, and write for both Venture Capital Journal and PE Week. Her email is, so feel free to flood her inbox with welcoming emails.


Rayovac Corp. (NYSE: ROV) a global consumer products company with a diverse portfolio of world-class brands, has agreed to acquire United Industries Corp., a St. Louis-based provider of consumer products for lawn care, garden care and household insect control. The deal is valued at a total of $1.2 billion, including 13.75 million shares of Rayovac common stock, $70 million in cash, the assumption of approximately $880 million in United Industries debt and a cash tax benefit of $140 million. Thomas H. Lee Partners currently owns 83% of United Industries Corp. on a fully-diluted basis, and would own a 25% position in Rayovac following the transaction.

Vitae Pharmaceuticals Inc., a Ft. Washington, Pa.-based drug company that recently changed its name from Concurrent Pharmaceuticals Inc., has raised $34 million in additional Series B funding. New investors Atlas Venture and Wellcome Trust were joined by return backers Prospect Venture Partners, Venrock Associates and New Enterprise Associates. The company previously closed on $15 million in Series B funding in late 2003, and has raised a total of $75 million since its 2001 inception. Inc., operator of China’s largest B2B website, will not list on any public market in 2005, according to CEO Jack Ma. The company raised $82 million in Series D funding last year at a post-money valuation of approximately $182 million, and had been thought to be an imminent IPO candidate. Investors include Fidelity Investments, Goldman Sachs, Granite Global Ventures, Softbank China VC, Investor AB, Transpac Capital and Venture TDF.

Nereus Pharmaceuticals Inc., a San Diego-based drug company that uses marine microbial sources, has raised $42.6 million in Series D funding. The deal is split out into two tranches, with $24.3 million already called down and the remaining $18.3 million to be called upon the completion of certain development milestones. HBM BioVentures and HBM BioCapital led the round, and were joined by fellow new investors Advent International, InterWest Partners, Genavent Partners and Red Abbey Venture Partners. Return backers included Alta Partners, Forward Ventures, GIMV, Novartis Bioventure Fund, Pacific Venture Group, FirstBio and Lotus BioScience Ventures. The company had previously raised a total of $38 million in VC funding since its 1998 inception.

Trinity Convergence Inc., a Morrisville, N.C.-based provider of embedded communications software for developers of VoIP and V2IP end-points, has raised $5.6 million in Series C funding. Participants included Core Capital Partners, Intersouth Partners and Mid-Atlantic Venture Funds. Trinity Convergence has raised $16.1 million in total VC funding since its 2001 inception.

XMPie Inc., a New York-based provider of dynamic publishing software, has raised $5.5 million in VC funding from return backer JVP.

VFA Inc., a Boston-based provider of software and consulting services for managing facilities portfolios, has raised $3 million in new venture capital funding. Return backer Edison Venture Fund contributed $2 million, while the Vanderweil family provided the additional $1 million. Gary Vanderweil serves as chairman of VFA’s board of directors.

BlueTarp Inc., a Portland, Me.-based provider of financial and technological services to the building industry, has raised $14 million in VC funding, according to The Portland Press Herald. Highland Capital Partners and IDG Capital co-led the deal.

Qcept Technologies Inc., an Atlanta-based provider of chemical metrology solutions for semiconductor manufacturing, has raised $3.25 million in additional Series B funding led by Siemens Venture Capital.

Lumber Liquidators Inc., a Toano, Va.-based direct retailer of hardwood flooring, has received a $35 million private equity investment from TA Associates, in exchange for a minority ownership position.

Shamrock Holdings Inc., the private investment company of the Roy E. Disney family, has completed its acquisition of the Guam Telephone Authority, which was the last government-owned local exchange carrier in the U.S. When the deal was announced last summer, it was said to be valued at $140 million in cash, plus a $10 million promissory note. CoBank of Greenwood Village, Colo. led the financing syndicate.

The Sterling Group has sold Deer Park, Texas-based industrial cleaning services provider HydroChem Holding Inc. to an acquisition vehicle controlled by Oaktree Capital Management. No financial terms were disclosed for the deal. Harris Williams & Co. served as exclusive advisor to HydroChem and The Sterling Group.

Linsalata Capital Partners has acquired The Augusta Sportswear Group, an Augusta, Ga.-based provider of athletic-themed apparel, sportswear and related accessories. Company management will continue its current role, and is co-investing in the transaction. No deal terms were disclosed.

GSC Partners is selling its 4.8% position on printing company R.R. Donnelley & Sons Co. (NYSE: RRD) for approximately $360 million. R.R. Donnelley will repurchase approximately $200 million of the shares, while Goldman Sachs will purchase the remainder.

Celanese Corp., a U.S. holding company for German chemicals maker Celanese AG, has set its proposed IPO terms to 50 million common shares being offered at between $19 and $21 per share. It expects to trade on the NYSE under ticker symbol CE. Celanese was acquired last year for over Euro 3.2 billion by The Blackstone Group, which owns a 91.3% pre-IPO interest.

Celerity Group Inc., a Milpitas, Calif.-based provider of gas and chemical delivery process modules used to manufacture semiconductors, has withdrawn registration papers for its proposed IPO on the Nasdaq. In April 2004, the company (then known as Kinetic Concepts Inc.) entered into a restructuring agreement that gave ownership to a private equity consortium that included MidOcean Partners, Behrman Capital and Gryphon Partners.

Emptoris Inc., a Burlington, Mass.-based provider of enterprise supply management solutions, has acquired Valuedge, a Lexington, Mass.-based provider of supplier assessment solutions. News reports put the deal value at less than $10 million. Emptoris has raised over $52 million in VC funding since its 1999 inception, from firms like ABS Capital Partners, HarbourVest Partners, Internet Capital Group, Menlo Ventures and Kaelin Management.

Terremark Worldwide Inc. (AMEX: TWW) has paid $40 million in equity and repaid $35 million in debt to acquire all of the equity interests it didn’t already own in Technology Center of the Americas. The deal was financed via a $49 million first mortgage loan from Citigroup Global Markets Realty Corp., the issuance of $30 million in senior secured notes and the sale of $2 million worthy of common stock to Falcon Investment Advisors and AlpInvest Partners.

Shelter Distribution Inc., a McKinney, Texas-based portfolio company of Brazos Private Equity Partners, has acquired Forest Siding Supply, a provider of vinyl siding and other building products. No financial terms were disclosed.

Kevin Burns, founder and managing director of Lazard Technology Partners, has been elected to a three-year term as president of The Mid-Atlantic Venture Association (MAVA). In other MAVA news, the trade group has added Bruce Robertson of Toucan Capital and Mike Lincoln of Cooley Godward LLP to its board of directors.

Cadwalader, Wickersham & Taft LLP has elected five new partners: Justin Bickle (London financial restructuring department), Jeffrey Lee (Charlotte real estate finance), Andrew Lucas (London corporate and M&A), Charles Roberts (London capital markets) and Robert Ughetta (Charlotte capital markets).

WestBridge Capital Partners has promoted Rishi Navani and Sandeep Singhal to the position of managing director, and also promoted SK Jain to venture director.

DLJ Merchant Banking Partners is being sued to the liquidating trustee for portfolio company Insilco Technologies Inc., according to The Deal. The suit alleges that DLJ violated its fiduciary duty to Insilco, which is had acquired in 1998 from Goldman Sachs. A March 17 hearing is scheduled in the Wilmington, Del.-based U.S. Bankruptcy Court.

   Monday, January 5

You’ve Got Data 

The New Year has arrived, which means that it is time to look back on 2004 in excruciating detail. A qualitative analysis will be coming shortly, but we’ll focus on the quantitative this morning, as we’ve got some year-end data on LBO deals, VC deals and private equity-backed IPOs. So, without further ado.

LBO Volume
Another record-breaking year for LBO firms, according to today’s edition of Buyouts (which will be online shortly). There was approximately $136.5 billion in disclosed buyout deals for U.S.-based companies in 2004, which is 45% higher than last year’s tally, and almost six times greater than what was spent in the doldrums of 2001. There are two important caveats to this data: (1) It was compiled prior to the final week of 2004, which means that it does not include the multitude of deals that close at year-end. For example, today’s Wire includes nearly $900 million in disclosed LBO disbursements. (2) A goodly number of these deals are secondary buyouts, which occur when one LBO firm buys a portfolio company from another LBO firm. Such events are problematic for number crunchers, because they can be legitimately categorized as both initial investments and exits.

VC Volume
Final venture disbursement data won’t be available for a few more weeks, but PricewaterhouseCoopers is estimating that the 2004 figure for U.S.-based companies will wind up at approximately $20 billion. This would top the 2003 tally of $18.7 billion, but also would mean that just around $4.4 billion was disbursed in Q4 2004. If accurate, VC investment levels dropped during both the third and fourth quarters, with $5.1 billion disbursed in Q2, $4.5 billion in Q3 and an estimated $4.4 billion in Q4. This stands in stark contrast to the Q4 2003 experience, in which VCs disbursed over $1 billion more in Q4 than in Q3. Moreover, it might put the lie to the argument that Q3 2004 numbers were artificially low due to summer vacations, warm weather, etc.

PE-Backed IPOs
Most of the press today is caught up in the VC-backed IPO numbers, but the real story was in LBO-backed figures. Over $10.65 billion was raised for 53 buyout-backed companies on U.S. exchanges, which represents more buyout-backed IPO action than was seen in 2001, 2002 and 2003 combined. Also some big volume on the VC-backed side, with approximately $9.88 billion raised by 91 companies. This includes non-U.S. companies that priced on U.S. exchanges (all from either China or Israel), including the monster $1.8 billion offering from Shanghai-based Semiconductor Manufacturing International Corp.

Unrelated #1: The Austin-American Statesman continues its campaign of thoughtlessness on the issue of private equity disclosure. (Free registration required).

Unrelated #2: I’ll be moderating a panel at the 11th Annual Wharton Private Equity Conference in Philly on January 21. Hope to see you there.


Neuro3d SA, a France-based drug company focused on psychiatric disorders, has raised 31.5 million euros (approx. $42.9 million) in third-round funding. Gilde Investment Management and Axa Private Equity co-led the round, and were joined by new investors Healthcare Private Equity and GIMV. Return backers included HealthCap, Techno Venture Management, Sofinnova Partners and Apax Partners.

General Atlantic Partners and Oak Hill Capital Partners have completed their previously-announced acquisition of a 60% stake in GE Capital International Services (Gecis), the global business processing operation of General Electric Co. (NYSE: GE). The two firms paid approximately $500 million in cash, with GE retaining a 40% ownership position.

Kaj-Erik Relander, a general partner with Accel Partners and former CEO of Sonera, will be charged with illegally monitoring employee phone calls while serving as president and CEO of Finnish telecom company Sonera Corp. He originally was arrested in late 2003, and will be formally arraigned next month in Helsinki district court.

BitBand Technologies Ltd., an Israel-based provider of video-on-demand solutions for broadband IP networks, has raised $4.75 million in third-round funding. Ascend Technology Ventures led the deal, and was joined by Portview Communications Partners and existing investors. The company has raised approximately $20 million in total VC funding since its 1999 inception.

Commil Ltd., an Israel-based provider of solutions for fixed-to-mobile convergence, has raised $4.7 million in new VC funding from return backers Tamir Fishman Ventures, Gemini Capital and Formula Ventures. The company has raised approximately $15 million in total VC funding since its 1999 inception.

EChalk LLC, a New York-based provider of online communications systems for K-12 schools, has raised $4 million in VC funding from Edison Venture Fund.

ProRhythm Inc., an East Setauket, N.Y.-based medical device company, has received a $12.5 million private equity investment from St. Jude Medical Inc. (NYSE: STJ). The deal also gives St. Jude the option to acquire ProRhythm for $125 million.

Impliant Inc., an Israel-based medical device company, has received $7.3 million from Elron Electronic Industries Ltd. (Nasdaq: ELRN), as part of a larger VC funding round.

Francisco Partners, Golden Gate Capital and Thoma Cressey Equity Partners have completed their previously-announced acquisition of WRQ Inc., a Seattle-based maker of software that accesses and integrates legacy applications. No financial terms were disclosed.

Crescent Capital Investments has completed its previously-announced acquisition of the Church’s Chicken brand from AFC Enterprises Inc. (Nasdaq: AFCE). The deal is valued at $390 million, including $383 million in cash and a $7 million subordinated note.

The Carlyle Group, Citigroup Venture Capital, BC Partners and Cinven all have submitted bids for Spain-based travel reservations company Amadeus Global Travel Distribution SA, according to various press reports. The company is currently owned by airlines Air france, Iberia Lineas Aereas de Espana SA and Deutsche Lufthansa SA.

Thoma Cressey Equity Partners has completed a recapitalization of Continuing Care Rx Inc., a pharmacy services subsidiary of Pennsylvania-based nonprofit PHI. No financial terms were disclosed. As a result of the deal, Thoma Cressey now has a controlling interest in CCRx, while PHI will retain a minority position.

RAG AG has confirmed earlier press reports that it has agreed to sell plastics unit HT Troplast AG to The Carlyle Group and Advent International. The deal is said to be worth approximately 300 million euros.

Kohlberg Kravis Roberts & Co. has sold two-thirds of its 31.56 million warrants in Dayton Power & Light Co. (NYSE: DPL) to Lehman Brothers for $81.4 million. KKR first acquired the position as part of a 2000 recap of Dayton Power.

Scottish Re Group Ltd. (NYSE: SCT) has completed its previously-announced acquisition of the individual life reinsurance business of ING Re. To help finance the deal, Scottish Re raised $180 million in new capital from The Cypress Group, and an additional $50 million in preferred trust securities from undisclosed investors.

Halder Holdings BV has sold its position in German cosmetics packaging company Geka Brush GmbH to Equita Management. No financial terms were disclosed.

Quadriga Capital has sold its position in Austrian cooling cabinet maker AHT Cooling Systems GmbH & Co KG to Equita Management. AHT management will continue to own a minority stake. No deal terms were disclosed.

ViaCell Inc., a Boston-based biotech company focused on cellular therapies for cancer, infertility and certain genetic and cardiac diseases, has set its IPO terms to 7.5 million shares to be offered at between $7 and $9 per share. The company has raised over $110 million in total VC funding since its 1994 inception, with significant shareholders including MPM Capital, Amgen, Tullis-Dickerson & Co., Zero Stage Capital, DWS Investment, Nomura International and TA Associates.

C-Cor Inc. (Nasdaq: CCBL) has completed its previously-announced acquisition of nCube Corp., a Beaverton, Ore.-based provider of on-demand media and digital advertising systems. The deal was valued at $89.9 million, including 4.5 million shares of C-Cube common stock, $20 million in cash, the assumption of certain liabilities and $35 million of senior unsecured convertible notes. NCube counted Oracle Corp. and Tako Ventures among its VC backers.

Dan Gilbert, a partner with Camelot Ventures and founder and chairman of Quicken Loans, is leading an investor group that has agreed to buy the Cleveland Cavaliers basketball franchise from current owner Gordon Gund. The deal is still pending approval from the National Basketball Association.

Peter Johnson, a managing director of Utah Venture Capital LLC, has joined the board of Seirios International Inc. (OTC: SRIN).

Samuel Flax has joined American Capital Strategies Ltd. as executive vice president and general counsel. He most recently served as a partner with Arnold & Porter LLP, and has been American Capital’s principal external counsel.

Douglas Carlisle, a managing director with Menlo Ventures, and David Dame, a managing director of Key Venture Partners, have stepped down from the board of Open Solutions Inc. (Nasdaq: OPEN). Carlisle had been on the Open Solutions board since 1994, while Dame had served since 2000.

The 9th U.S. Circuit Court of Appeals upheld most of a San Jose, Calif. judge’s $27 million restitution order against former Cisco Systems executive Robert Gordon, who currently is serving a 5.5 year sentence for bilking his company out of more than $50 million. Among his transgressions, Gordon admitted to setting up offshore bank accounts, stealing company stock and going so far as to create a bogus venture firm to divert money from Cisco. 

Gerard “Jerry” Finneran passed away last Wednesday at the age of 67, from complications of Alzheimer’s disease. He joined Drexel Burnham Lambert to establish a Latin American I-banking division in 1985, and stayed on after it was acquired five years later by Trust Company of the West. In 1991, he assumed responsibility for the co-management of a private equity effort called the Argentine Investment Co. Finneran is survived by his wife Judy, daughter Laurie, son Mark, brother William, sisters Judith and Susan and three grandchildren. A memorial service will be held tomorrow at 10am at St. Mary Church in Greenwich, Conn.

Click here for last week’s complete PE Week Wire.