PE Week Wire — Friday, November 5

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Friday Feedback

Job growth is up, unemployment also is up and oil prices are down (for now). In other words, it’s time for some Friday Feedback. Almost all of this week’s email concerned my post-mortem on Tuesday’s election. The response was far too overwhelming for comprehensive coverage in this space (perhaps an online blog w/ a comment section is in our future), so I’m just going to print a handful of reader sentiments in their entirety. First up is Sam, who was particularly interested in my contention that folks should split their presidential and legislative votes along party lines, so as to avoid a power concentration that removes checks and balances on fiscal discipline:

“I think it’s a structural issue more than a voting issue. Individual voters make individual decisions about their state’s Congressional candidates (the only candidates they can vote for) at the state level, winner-take-all. It is impossible to ‘split the vote’ strategically on a national level when we are presented with only one or two Congressional candidates on our individual ballots.

I see a similar structural challenge in the VC industry.I had the chance a couple weeks ago to hear Mark Heesen (NVCA) and Promod Haque (Norwest Venture Partners) reflect on the state of the VC industry.Both believe at a macro level that there is still too much new money flowing into the industry relative to the number of companies that can appropriately absorb those dollars. They worry that at a macro level the industry will underperform, and will end up in an extended period where the private equity class goes out of favor with investors.But what can be done to prevent that possible future?Very little that I can see. The root challenge is that VC investment ‘votes’ don’t happen on the macro level. They happen with individual LPs making individual bets that the GPs they are funding will perform for them.Structurally, about the only thing you can do is add up the money, fund by fund, and there you have the national picture.”

Charlie adds: “I think your view that fiscal responsibility as a loser is a bit myopic.At 31 years old, I have lived through 3 short decades of both Democrats and Republicans hoping for better schools, health care, jobs, etc.Each has his methods for achieving the greater goals. However, neither party has been able to implement their systems for change because of bipartisanship. With Republicans in a commanding position, they might finally be able to implement some of the programs they have promoted over the years.If money is spent on high return investments like improved education and healthcare, then it is responsible.We should make any ethical investment where our return is higher than our cost of capital.If funds are spent elsewhere, then you are correct.I for one am excited to see some programs and strategies implemented, not just debated again in 4 years. If they don’t work, then everyone can vote for Hillary in 2008.”

Other folks took me to task for suggested that Erskine Bowles’ connections to Forstmann Little & Co. had any significant impact on his Senate loss. Brent writes: “As a North Carolinian, I can assure you that Erskine Bowles connection with the Forstmann Little litigation had zero impact on the election. Burr won the race on the coattails of Bush. If you look at all of the

recent Senatorial races in NC, the Republicans have always won in presidential years. The only times Democrats have won (Edwards and Sanford) have been during off years.” My father, a North Carolina resident (and voter) for just over a month adds: “No mention in any of the ads I saw in NC in Bowles v. Burr about venture capital or the Connecticut business — in fact I did not even know that Bowles had been part of Forstmann’s group. Issues here were the ‘values’ stuff, breast cancer research (a real red herring) and tax and spend rhetoric. There also were lots of negative ads linking Bowles with Clinton.”

Finally, three quick unrelated notes. First, VC and private equity firms in need on interns have until next Tuesday to let me know via email. We have 10 interested groups so far, but I’d really like to increase the number substantially. Second, a few of you have asked about linking to the PE Week Wire via personal websites/blogs. It can, indeed, be done. Just let me know that you’re interested, and I’ll show you how to do it. Finally, more info on Tom Fogarty’s split with Three Arch Partners is available here. Not an amenable departure.

– Dan Primack

Celanese Corp., a U.S. holding company for German chemicals maker Celanese AG, has filed to raise $750 million via an IPO of common stock on the NYSE. Celanese was acquired earlier this year for over Euro 3.2 billion by The Blackstone Group, which owns a 92.6% pre-IPO interest.

Transamerica Finance Corp., a subsidiary of Aegon NV (NYSE: AEG), has sold its maritime container leasing business for $1.2 billion to TAL International Group Inc., a newly-formed company controlled by private equity firm The Jordan Co. TAL International also counts UK-based Klesch & Co. Ltd. as an investor.

Forstmann Little & Co. has completed its acquisition of IMG, a New York-based sports talent and marketing agency. The selling party included trusts established by IMG founder Mark McCormack, and the family of IMG Vice Chairman Arthur Lafave. No financial terms were disclosed, except that senior IMG management will retain a small equity position. IMG was founded in the early 1960’s by McCormick, who passed away in 2003 at the age of 72. It now features around 2,200 employees and 60 offices in more than 25 countries, and clients such as Tiger Woods, Peyton Manning and Derek Jeter.

BioMimetic Pharmaceuticals Inc., a Franklin, Tenn.-based drug company focused on musculoskeletal disorders, has raised $25.7 million in Series C funding. InterWest Partners led the deal, and was joined by fellow new investors CMEA Ventures and MC Life Science Ventures. Return backers included Burrill & Co., Novo AS, Holden Capital and MB Venture Partners.

WMetromedia International Group Inc. (OTC BB: MTRM), a Charlotte, N.C.-based owner of communications businesses in Russia and the republic of Georgia, has entered exclusive negotiations to be sold for approximately $300 million. The acquiring group includes Emergent Telecom Ventures, First National holding, Capital International Private Equity Fund IV and Baring Vostok Capital Partners.

Sun Capital Partners has agreed to acquire the Performance Fibers business of Honeywell International Inc. (NYSE: HON). No financial terms were disclosed.

Medtronic Inc. (NYSE: MDT) has acquired Angiolink Corp., a Taunton, Mass.-based medical device company focused on wound closure for vascular procedures. No financial terms were disclosed. Angiolink has raised approximately $21 million in total VC funding since its 1999 inception, from investors like BioVentures Investors, JHK Investments and IDP Investments.

Symbiot Business Group, a Nicholasville, Ky.-based consolidator in the property services market, has agreed to merge with Snow Management Group, an Eire, Pa.-based provider of snow management services. The combined company has received an investment from Comerica Bank and vSpring Capital (an existing Symbiot investor).

MarketAxess Holdings Inc., a New York-based operator of an online securities exchange website, will begin trading on the Nasdaq under ticker symbol MKTX. The company priced five million common shares at $10 per share, for a total IPO take of approximately $55 million. It originally had filed to sell a total of nine million shares (three from the company, six from existing shareholders) at between $16 and $18 per share, but later reduced the offering to five million shares (all from the company) offered at between $8.50 and $10.50. MarketAxess has raised approximately $125 million in venture capital funding since its 2000 inception, with significant shareholders including Banc of America Technology Investments, BancBoston Capital, JPMorgan Partners, Credit Suisse First Boston and DB Capital.

TeamSystem SPA, an Italy-based provider of accounting, tax and payroll management software, has canceled plans to float an IPO on the Milan Stock Exchange. The company is controlled by UK-based private equity firm Palamon Capital Partners, which now may look for liquidity via the M&A markets.

Iowa Telecommunications Services Inc., a Newton, Iowa-based provider of wire-line communications services in rural Iowa, has set its IPO terms to approximately 15.79 million common shares being offered at between $18 and $20 per share. The company hopes to list on the NYSE, and trade under proposed ticker symbol IWA. Selling shareholders include ING, BancBoston Ventures and TIAA-CREF.

Compagnie Generale de Geophysique (NYSE: GGY), a France-based provider of land and marine seismic services, has received an $85 million investment from Onex Partners, in the form of convertible subordinated notes.

Todd Davis has joined Paul Capital Partners, where he will source healthcare investment opportunities for the Paul Royalty team. He previously served as a partner with Apax Partners, focused on biopharmaceutical deals on the East Coast.

James Still has been hired as a managing director with Boenning & Scattergood, a West Conshohocken, Pa.-based I-bank focused on the middle-markets. He previously was owner of middle-market advisory RDC Advisors LLC.

Rory Radding has joined Morrison & Foerster LLP as head of its New York-based intellectual property and patent group. He previously served as a senior partner with Pennie & Edmonds.

Ramana Jampala has been hired as a partner with SAS Investors, a New York-based venture capital firm. He most recently served as a strategy lead with now-defunct Viant Corp.

    Thursday, November 4

Let’s Make A Match

Looking for a summer intern? If so, the PE Week Wire is here to help (again). For the third straight year, I’m setting up a system that will connect private equity firms with the best and brightest from b-schools throughout the nation. It’s actually more of a targeted resume drive than a placement process (since I don’t screen the applicants, or get paid), but best and brightest still applies since the applicants will be Wire readers. The way this works is as follows:

1. If you are a private equity firm looking for a current b-school student to intern/work with you this summer, please send me an email that includes your firm name, firm type (i.e. VC, buyout, turnaround, etc.) and internship location (Boston, San Fran, London, etc.). I will then contact you with further information. Your firm name will not be released via the Wire or to prospective student employees. Instead, I will set up an anonymous email account for you, to which interested b-schoolers will be directed. You are under no obligation to hire, or even to contact, interested students.

2. Next week, I will publish a list of summer internship opportunities. Please note again that I will not publish firm names (those stay confidential). Instead, I will write things like: “Healthcare-focused VC – New York.” Each listing also will have an anonymous contact email address, to which current b-schoolers can send their CVs.

3. B-schoolers: Please do not send any resumes or CVs to me. I will delete them, for I have too many emails already (so says my system administrator). You may, however, forward this email around. In doing so, please remind your friends that they should really subscribe to this nifty free service known as the PE Week Wire.

So please get in touch with me soon if you’re looking for some summer help. Thanks.

– Dan Primack

Linux NetworX Inc., a Bluffdale, Utah-based provider of Linux cluster systems, has raised $40 million in Series B funding. Oak Investment Partners led the deal, and was joined by fellow new investor Tudor Ventures. Ed Glassmeyer, founding general partner of Oak, will join the Linux NetworkX board of directors.

Thomas Fogarty has left Three Arch Partners, the Portola Valley, Calif.-based VC firm he co-founded in 1993. Mark Wan, also a Three Arch co-founder, confirmed the departure, but declined further comment.

GNC Corp., a Pittsburgh-based provider of nutritional supplements, has withdrawn plans to raise $345 million via an IPO on the NYSE. The company cited “current market conditions” in its withdrawal filing with the SEC. GNC was acquired in 2003 for approximately $750 million by Apollo Management.

ReliOn Inc., a Spokane, Wash.-based provider of fuel cell solutions for backup power applications, has raised $25 million in Series B funding. Oak Investment Partners led the deal, and was joined by Enterprise Partners Venture Capital, Wall Street Technology Partners, Chrysalix Energy, Buerk Dale Victor and former parent company Avista Corp. (NYSE: AVA).

Symphogen AS, a Copenhagen, Denmark-based biotech company, has raised $25 million in Series C funding round. Return backers include Essex Woodlands Health Ventures, Scandinavian Life Science Venture, Novo AS, LD Pensions and Vaekstfonden. Symphogen CFO Thomas Feldthus says that the company is still speaking to investors, and could re-open the round for an additional $5 million to $10 million.

Whitehill Technologies Inc., a British Columbia, Canada-based provider of document composition and data transformation software, has raised Cdn$4.1 million in Series B funding from the GrowthWorks Canadian Fund.

Chimerix Inc., a San Diego-based developer of orally-administered antiviral therapeutics, has raised $11 million in Series C funding. Frazier Healthcare Ventures led the deal, and was joined by return backers Sanderling Ventures and Asset Management Company. Among the diseases targeted by Chimerix are smallpox, cytomegalovirus, drug-resistant HIV and viral hepatitis.

Metreos Corp., an Austin, Texas-based provider of enterprise software applications for IP communications, has raised $3.8 million in Series A funding. Hunt Ventures and Gefinor Ventures co-led the deal, and was joined by seed-stage backer STARTech Early Ventures.

Wellspring Capital Management has completed its previously-announced acquisition of International Mill Service Inc., a Horsham, Pa.-based provider of slag processing, metal recovery, materials handling, scrap management and surface conditioning services to the North American steel industry. The selling shareholder group was led by GSC Partners, which initially invested in IMS in 1999, and became majority shareholder in 2001. Financial terms of the transaction were not disclosed.

Tailwind Capital Partners has agreed to acquire Aircast Inc., a Summit, N.J.-based provider of orthopedic devices and vascular systems. No pricing details were disclosed for the deal, which will include debt financing from Credit Suisse First Boston and Wachovia Securities.

Oak Hill Capital Partners part of a consortium that is close to buying General Electric‘s off-shoring operations in India (a.k.a. GE Capital Services), according to the Business Standard. GE Capital Services is seven-years-old, and currently employs over 12,000 people throughout India.

Sonus Pharmaceuticals Inc. (Nasdaq: SNUS) has agreed to acquire Synt:em, a Nimes, France-based drug development company. The deal could be worth up to $30 million in Sonus common stock, including an initial $10 million payment, and an additional pair of $10 million payments based on certain clinical milestones. Synt:em has raised nearly $30 million in total VC funding since its 1995 inception, from firms like Apax Partners, 3i Group, Banexi Venture Partners, BankInvest and Lombard Odier.

Baker Tanks Inc., a Seal Beach, Calif.-based portfolio company of Code Hennessey & Simmons, has acquired Cameron Environmental Inc., a Torrance, Calif.-based provider of water and air filtration services. No financial terms were disclosed.

Portec Rail Products Inc. (Nasdaq: PRPX) has agreed to acquire Kelsan Technologies Corp. for Cdn$20 million in cash. Kelsan is a British Columbia, Canada-based developer of friction control solutions at the wheel/rail interface. It has received venture capital from Discovery Capital, The Future Fund, GrowthWorks and the National Bank of Canada.

Ninetowns Digital World Trade Holdings Ltd., a Beijing-based provider of software that enables the streamlining of the import/export process in China, has filed to raise approximately $168.62 million via an IPO of American depository shares (ADS) on the Nasdaq under proposed ticker symbol NINE. Shareholders include AIG Asian Opportunity Fund, CFM Greater China Fund, China Equity Associates, Huitung Investments, UOB Venture Ltd. and Titan Venture Capital.

Greenfield Online Inc. (Nasdaq: SRVY), a Wilton, Conn.-based provider of online survey solutions to the global marketing industry, will offer six million common shares in a secondary offering. Existing shareholders like Insight Venture Partners, UBS Capital and MSD Ventures will sell 1.5 million shares, while the company itself will offer the remaining 4.5 million shares.

Sullivan & Cromwell LLP announced that Richard Morrissey, currently head of the firm’s European private equity practice, has also been named head of its European mergers and acquisitions practice. In other firm news, Dominique Bompoint has joined as a Paris-based partner. He previously was a senior partner in Clifford Chance’s M&A practice.

Fernand Kaufmann has joined the board of Diversa Corp. (Nasdaq: DVSA), a San Diego-based genomics company. He previously served in a variety of executive positions with The Dow Chemical Co. – including as head of its VC investment and biotech development efforts – until his retirement in April 2001.

   Wednesday, November 3

The Morning After

Not much private equity news this morning, since no one would really be paying attention anyway. Instead, all (buck)eyes remain locked on Ohio, where Kerry supporters are hoping against hope for a jumpstart from those 140,000+ provisional ballots, overseas ballots and military ballots. Stranger things certainly have happened – and I do agree with the principal of counting every vote before declaring victory or defeat – but all smart bets have to be on President Bush sticking around Pennsylvania Ave. for another four years. While we wait for the definitive word, however, a few electoral observations of relevance to this space:

Winner: The National Venture Capital Association, which made over $842,000 campaign contributions via its political action committee (VenturePAC). Of this total, approximately $542,000 went to GOP candidates or causes. In the Senate, VenturePAC-supported candidates won 23 of 26 races, although its largest contribution went to loser Tom Daschele of South Dakota. On the House side, VenturePAC picked correctly in 140 of 146 races, although the group did also back a small handful of folks who never made it out of the party primaries. The largest VenturePAC House contribution went to winner Richard Baker of Louisiana, but the bigger surprise were a pair of late checks to Tom DeLay of Texas and Barney Frank of Massachusetts. The NVCA traditionally avoids particularly polarizing candidates, but apparently didn’t mind so much this time around. More in depth analysis of the VenturePAC results in the next print edition of PE Week.

Loser: PE Week Wire readers, who supported John Kerry in this race by a 52%-46% margin. Some Bush supporters already have written in to (a) Gloat and (b) Suggest that our unscientific poll was intentionally rigged by yours truly. I don’t mind the former, but the latter is unfounded and absurd. Most U.S.-based PE Week Wire readers are based on either the East Coast or West Coast, which were both stayed blue yesterday. More specifically, they are concentrated in pro-Kerry cities like New York, Boston and San Francisco, plus some inliers like Chicago. Temper that with the “investor class” and rich folk tendency to vote Republican, and you get our results. I never said they were perfect, but they certainly were not manipulated.

Loser: Fiscal responsibility on the federal level. Any time one party controls the executive and legislative branch, there is a tendency to spend without reflection (see the past four years). It is not coincidental that the Democratic White House and Republican Congress of the mid-to-late 1990s oversaw a booming economy. I really do wish that more folks would split their vote.

Toss-Up #1: Forstmann Little & Co., the New York-based buyout firm that seems to slowly be winding to a close. Firm honcho Ted Forstmann certainly must be pleased that his preferred Republican Party did so well nationally, but we must wonder if the Erskine Bowles loss stung at all. It is far too early to tell why Bowles, a former partner with Forstmann Little, lost his Senate race in North Carolina, but the bad press related to Forstmann’s breach of contract with Connecticut could not have helped.

Toss-Up #2: Embryonic stem cell research, which won an important battle in California, but may have lost the national war with President Bush’s apparent reelection. Golden State residents passed Prop 71 by about a 59%-41% margin, which means that up to $3 billion in state bonds could be issued to fund embryonic stem cell research in California labs. There still are questions about the legitimacy of that $3 billion figure, but there is little question that California will become the national leader in this extremely-promising area of medical research. It also means that the funding gap between labs and VC is partially filled, which is one reason that VCs pumped so much money into the “Yes on 71” campaign. Nationally, however, President Bush says that he plans to maintain his current limitations on federal funding for ES cell research, which are tantamount to a ban (even though Bushies hate that word). So head West young researchers, for that is where the riches lie (apologies to the Harvard Med School, but even your stem cell center can’t compete with $3 billion).

Too Important, Too Late: Supreme Court. Had Rehnquist gotten sick a few weeks earlier, this would have become the dominant campaign issue, even overshadowing Iraq.

That’s it for now, but please feel encouraged to write in with reactions, Wednesday morning quarterbacking and how you feel the results (particularly from a private equity perspective). We should know more tomorrow.

– Dan Primack

Bain Capital and Thomas H. Lee Partners have joined the investor consortium that has agreed to acquire UK drug company Warner Chilcott PLC (Nasdaq: WCRX) for $2.9 billion. The Boston-based buyout firms will join the Warren Acquisition Ltd. bid, which first was put forth by JPMorgan Partners and DLJ Merchant Banking. As of now, Goldman Sachs is still on the outside looking in.

U.S. Venture Partners yesterday closed out its ninth fund with $600 million. It declined to accept any limited partner that it felt was subject to FOIA requests.

Acopia Networks Inc., a Lowell, Mass.-based provider of adaptive resource networking products, has raised $25 million in Series C funding. Goldman Sachs led the deal, and was joined by return backers Charles River Ventures, Accel Partners, STAR Ventures and Vesbridge Partners. The company now has raised around $65.5 million in total VC funding since its 2002 inception.

Catalytic Solutions Inc., an Oxnard, Calif.-based maker of catalytic coating solutions, has raised $10 million in private equity funding from The SAM Group and Presidio Venture Partners. The company now has raised approximately $72 million in private funding since its 1996 inception.

Dansk Bredband AS, a Denmark-based broadband services provider, has raised approximately $13.5 million in third-round VC funding, according to The Deal. New investors Nef Fonden OG and Energi Fyn Holding AS were joined by return backers ATP Private Equity Partners, Dansk Kapitalanlaeg AS and InnFond PS.

Odyssey Investment Partners has agreed to acquire Pro Mach Inc., an Atlanta-based provider of packaging machinery. The seller is an investor group led by Frontenac Company. No financial terms were disclosed.

Thompson Street Capital Partners has acquired Montana Silversmiths Inc., a Columbus, Mont.-based provider of jewelry and accessories for the Western lifestyle industry. Harris Williams & Co. advised Montana on the deal. No financial terms were disclosed.

CrossCom National LLC, a Buffalo Grove, Ill.-based provider of retail communications services, has completed a financial recapitalization. Financial terms were not disclosed for the deal, which sees private equity firm Goense Bounds & Partners take a controlling ownership interest in CrossCom.

Evolving Systems Inc. (Nasdaq: EVOL) has acquired Tertio Telecoms Ltd., a UK-based provider of operations support systems software solutions to communications carriers in Europe, the Middle East, Africa and Asia. The deal is valued at $40.7 million, including $11 million in cash, $16 million in seller-financed notes and approximately $13.7 million in convertible preferred stock. Tertio-Telecoms had received venture capital funding from Advent International and Apax Partners. Peter Skinner, a partner with Apax, has joined the Evolving Systems board of directors in conjunction with the acquisition.

Everypath Inc., a Santa Clara, Calif.-based provider of mobile task automation software, has acquired NoInk Communications Ltd., an Indianapolis-based provider of handheld and Web-based software for the medical device and medical equipment markets. No financial terms were disclosed. Everypath has raised approximately $110 million in total VC funding since its 1998 inception, from investors like Sevin Rosen Funds, U.S. Venture Partners, Bay Partners, Amerindo Investment Advisors, Accenture Technology Ventures, Focus Ventures, Raza Venture Fund, Sun Microsystems, Texas Pacific Group, Trident Capital and Wasserstein Ventures.

Monolithic Power Systems Inc., a Los Gatos, Calif.-based analog and mixed-signal semiconductor company, has set its IPO terms to 5.5 million common shares being offered at between $7 and $9 per share. Investors include InveStar Capital, BA Venture Partners and Acer Technology Ventures.

Jean-Louis Gassee, a general partner with Allegis Capital, has been named chairman of the board of directors at PalmSource Inc. He originally joined the PalmSource board in May 2002.

    Tuesday, November 2

Finishing That Thought…

Election Day greetings from a frigid Massachusetts, where today’s plan is to close my swimming pool, go vote and then watch endless television coverage of Floridians standing in line (will confused tourists think that Space Mountain is just unexpectedly popular today?). All of this has been made possible by the inventors of laptops and cell phones, since it is their ingenuity that regularly frees me from desktop stasis. So while we wait to learn just how poorly our nation runs its federal elections (paging Jimmy Carter, your critics apologize), a few quick follow-ups to yesterday’s column:

* Yesterday’s discussion of Q3 VC fund-raising data unintentionally omitted the comments of Mark Heesen, president of the National Venture Capital Association. Truth be told, I didn’t actually read his talking points until after the Wire was published, so your forgiveness is requested. You might remember that this space recently Mark to task for the following statement on Q3 VC disbursements: “The lower level of activity in the third quarter is not concerning. To be frank, a 25% increase in venture investment would be more alarming.” I believed the comment to be disingenuous, and that a 25% increase actually would have been met by boisterous NVCA applause and back-slapping. Such dubiousness was based on 12 straight quarters of interpreting quarterly press releases from the NVCA.

But perhaps I was a bit too harsh on Mark, or perhaps my comments prompted a bit more candor on his part. Either way (more likely the former, but my ego will assume the latter), Mark said the following in regards to yesterday’s VC fund-raising data, which showed a 78% increase: “We are now seeing an extremely strong level of interest in the venture capital asset class from institutional investors, and rightly so. However, it is critical at this time that venture firms exercise discipline and stay within the parameters of the fund-raising targets so that those returns can continue. If the industry begins to take more money than can be invested successfully, performance will suffer.”

He’s right, and the comment has gotten high-profile play in major newspapers throughout the country today. I do wish he had gone a bit further, and told some VC firms with lousy historical returns to quit fundraising all together, and also that some current fund targets themselves are a bit too high, but beggars can’t be choosers. Kudos Mark, it was an important thing to say.

* John wrote in yesterday to ask what I thought about non-IPO liquidity options for VCs who invest in the online advertising space (companies like, Poindexter Systems, etc.). I think there are a lot of opportunities John, both from players like Google and AOL, and more traditional Madison Avenue-type advertising firms. Two days ago, I would have added DoubleClick Inc. (NasdaQ: DCLK) to the list, but the company just hired Lazard Freres to explore various options, including a possible sale of the company.

* As first reported here on Sept. 15: Bain Capital has raised $250 million for a new venture capital fund. Some of our competitors are just reporting it now, so redundancy seemed to be in order.

Happy voting.

– Dan Primack

  AFC Enterprises Inc. (Nasdaq: AFCE) has agreed to sell its Church’s Chicken brand to affiliates of Crescent Capital Investments. The deal is valued at $390 million, including $383 million in cash and a $7 million subordinated note. It is expected to close by year-end.

Peregrine Semiconductor Corp., a San Diego-based provider of RF CMOS and mixed-signal communications ICs, has raised $17.6 million in Series C funding. Ridgewood Capital and Palisades Ventures co-led the deal, and were joined by return backers Morgenthaler Ventures, Technology Venture Partners, Australasian Media & Communications Fund, NewLight Ventures and Wasserstein Ventures. The company now has raised over $120 million in total VC funding since its 1990 inception, including an original $12 million Series C deal seven years ago.

Kohlberg Kravis Roberts & Co. (KKR) has named Joahnnes Huth as head of its London office, effective once current head Ned Gilhuly returns to KKR’s Silicon Valley office early next year. Huth originally joined KKR in 1999, and will work closely with Todd Fisher, who had been considered a finalist for the top job in London. Both Huth and Fisher will serve on KKR’s investment and portfolio management committees.

Voyence Inc., a Richardson, Texas-based provider of network configuration management solutions, has raised nearly $12 million in new venture capital funding. Canaan Partners led the deal, and was joined by return backers InterWest Partners, Sevin Rosen Funds, CenterPoint Ventures, HO2 Partners, STARTech Early Ventures and BancBoston Capital. The company now has raised around $42 million in total VC funding since its 2000 inception.

NimbleGen Systems Inc., a Madison, Wis.-based provider of microarray products and services for genomics research, has raised $12.75 million in Series F funding. Return backers Baird Venture Partners and Venture Investors LLC co-led the deal, and were joined by new investors Cargill Ventures and Topspin Partners. The company has raised approximately $45 million in total VC funding since its 2000 inception.

Groxis Inc., a San Francisco-based provider of online search software, has raised $12 million in a venture capital funding round led by DFJ ePlanet Ventures.

MCA Solutions Inc., a Philadelphia-based provider of supply chain software solutions, has raised $6 million in Series B funding. Return backers included Longworth Venture Partners and Battery Ventures.

Aprio Technologies Inc., a Santa Clara, Calif.-based provider of design-for-manufacturing (DFM) tools, has raised over $10 million in second-round VC funding. Investors included Mobius Venture Capital, El Dorado Ventures and Goldman Sachs.

Dana Corp. (NYSE: DCN) announced that the sale of its automotive aftermarket business to The Cypress Group has been amended. The deal originally was valued at $1.1 billion in cash, but now will consist of $950 million in cash and a $74.5 million seller’s note. It still is expected to close later this month.

Riverlake Partners and Thetford Partners have partnered to acquire a pair of Arizona-based legal services companies: E-Z Messenger Attorney Service Inc. of Tuscan and Hawkins & Campbell Inc. of Phoenix. No financial terms were disclosed. The combined companies will be known as Hawkins and E-Z Messenger Legal-Support Providers LLC (HELP).

Redux Communications Ltd., an Israel-based provider of multi-service-over-packet pseudo-wire solutions, has merged with Lycium Networks Ltd., an Israel-based provider of high density PDH/SDH pseudo-wire technology. No financial terms of the merger were disclosed, except that the combined company received a venture capital investment from existing Redux investors like Genesis Partners, Giza Venture Capital, Partech International and Delta Ventures, and from existing Lycium investors Accel Partners and Benchmark Capital. Redux previously had raised over $11 million in VC funding since its 1999 inception, while Lycium had raised around $10 million since its 2001 inception.

Ascend Media LLC, a Shawnee Mission, Kan.-based media acquisition platform, has completed its acquisition of SynerMed Communications and subsidiary IMED Communications. No financial terms were disclosed. As part of the deal, Veronis Suhler Stevenson has upped its investment in Ascend, making it a co-investor with JPMorgan Partners, rather than a minority investor.

ScanSoft Inc. (Nasdaq: SSFT) is in talks to acquire Advanced Recognition Technologies Inc. (ART), according to an Israeli newspaper. The deal reportedly is part of a claim settlement related to patent infringement. ART has raised over $11 million in total VC funding since its 1990 inception, with investors including JPMorgan Partners, Bessember Venture Partners, Eurofund, Pictet and Adler & Co.

Chris Rust has been named a general partner with U.S. Venture Partners, where he will focus on early-stage investments in semiconductor, software, systems and subsystems companies that target consumer and networking applications. Rust most recently served as president, CEO and co-founder of Mahi Networks Inc. Before that, he was a partner with Sequoia Capital.

Albert Hanson has been named chairman and acting CEO of Questcor Pharmaceuticals Inc. (AMEX: QSC). Hanson has been a Questcor director since May 2004, and currently serves as a managing director of private equity investments with Sanders Morris Harris.

Simon Ball will join 3i Group as its new finance director early next year. He currently serves as director general of finance for the British Government’s Department for Constitutional Affairs.

Timothy Dattels and John Olds have joined Newbridge Capital as a managing director and senior advisor, respectively. Dattels previously has served as with Goldman Sachs, where he ran I-banking for all Asian countries (not including Japan). He also has served as an advisor to Newbridge since 2003. Olds most recently served as CEO and vice chairman of the Development Bank of Singapore.

Michael Feuer, founder of OfficeMax and current head of Max-Ventures, has been named an independent director with Active Decisions Inc., a San Mateo, Calif.-based provider of CRM decision-support applications.

Huron Capital is in the midst of raising its second private equity fund, and already has closed on over $90 million in limited partner commitments. The Detroit-based firm is aiming at a total fund capitalization of $150 million, with a final close to be held in early 2005.

Longroad Asset Management has raised $183.2 million for a new special situations fund focused on distressed obligations of middle-market companies. The firm has offices in Stamford, Conn. and Austin, Texas.

Parthenon Capital, a Boston-based buyout firm, is in the midst of raising a third fund with a target capitalization of $1 billion, according to Buyouts.

    Monday, November 1


Fund-Raising, FastClick and Federal Elections

Lots of time spent on news this morning, so just a few quick items:

(1) VC fund-raising was up sharply in the third quarter, according to data released today by Thomson Venture Economics (publisher of the PE Week Wire) and the National Venture Capital Association (publisher of other things). Forty-six domestic firms raised just over $5.5 billion in Q3 2004, which is a 78% increase over the $3.1 billion raised in Q2 2004. In fact, VC firms had raised more through Sept. 30 of this year than they had in all of 2002 ($11.25 billion compared to $10.5 billion). Ditto for the buyout fundraising market, which has seen $32.49 billion raised over the first three quarters of 2004, compared to just $29.62 billion in 2003.

You can read the full story here, but the salient point is that no one seems to expect any significant slowdown in either Q4 2004 or in early 2005. Ignition just closed its $300 million fund last week, U.S. Venture Partners is perhaps just hours away from closing a $600 million fund, Accel Partners is in market with a $400 million fund and Austin Ventures is preparing to launch a $500 million effort. On the buyout side you’ve got the proposed $8 billion offering from Warburg Pincus, the $5 billion fund from Carlyle Group and the $2 billion fund from Elevation Partners. Those are just some examples off the top of my head, but certainly are not close to being comprehensive. Every LP I talked to last week said that their pipeline is packed, and that competition is extremely fierce. Most of them also expressed some concern about unworthy vehicles getting funded, which also is something to keep watching out for.

(2) The largest deal of the day came from, although it technically closed last quarter (and was included in the Q3 data released last week). This is a $75 million Series A play for a five-year-old Internet marketing company, with former Lycos CEO Bob Davis (now a general partner with Highland Capital Partners) serving on the board of directors. Anybody else feeling a little 1999 deja vu? Well, you should get used to it, because online advertising/search/marketing companies are back in vogue with venture capitalists, as I mentioned in September when Poindexter Systems secured new funding. That column included a quote from someone who said that the hype of 2000 is being realized today. It’s worth noting, however, that Bob Davis disagrees. He told me in an interview last Friday that the hype of 2000 was realized in 2000, and that what we have today is a whole new animal. Hopefully for folks like Davis, the key part of that newness will be sustained profitability.

(3) Finally, Election Day is tomorrow. Some of you have asked if I plan to endorse a candidate, and the answer is no. You’re all smart people who can make up your own minds. What I will say, however, is that each major presidential candidate offers some disinct positions on where he would help lead the economy and, in turn, the private equity markets. Issues such as tax policy, job off-shoring, federal funding for R&D (including embryonic stem cells), drug imports and SEC regulation are all up in the air until we have a final winner (perhaps tomorrow night, perhaps next month). And this doesn’t even begin to get into matters of war and peace. Please consider each issue carefully, and choose wisely. Once we have a winner, this space will try to sort out its consequence.

– Dan Primack Inc., a Santa Barbara, Calif.-based provider of online direct response marketing services, has raised $75 million in Series A funding. Highland Capital Partners and Oak Investment Partners co-led the deal, and were joined by Steamboat Ventures, the venture investment arm of The Walt Disney Co. Perseus Group served as placement agent on the deal.

Hicks, Muse, Tate & Furst has agreed to acquire Regency Gas Services LLC, a Dallas-based midstream gas gathering, processing and transmission company, for approximately $405 million. Regency was formed in May 2003 by Charlesbank Capital Partners, which paid $120 million for certain assets of El Paso Corp. Charlesbank later incorporated additional assets from companies like Duke Energy Field Services ($62 million deal) and Cardinal Gas Services ($3.4 million).

Forty-six domestic venture capital funds raised $5.5 billion in committed capital last quarter, according to Thomson Venture Economics and the National Venture Capital Association.

PRCDirect, a China-based media research and telemarketing company, has received $4 million in a Series B funding round led by Allegis Capital. The deal is expected to be announced sometime this week.

Zenasis Technologies Inc., a Campbell, Calif.-based provider of electronic design automation (EDA) solutions, has raised $7 million in third-round venture capital funding. New investor Newbury Ventures was joined by return backers Sigma Partners, Selby Venture Partners and VentureTech Alliance. The company now has raised over $16 million in total VC funding since its 2000 inception.

StreetBroadcast Ltd., a UK-based provider of outdoor advertising media solutions, has raised GBP 3 million in new VC funding from Apax Partners and Consensus Business Group.

Nitro Data Systems, a Portsmouth, N.H.-based provider of security technology for computer networks, has raised $2.5 million in venture capital funding. The investor group was led by Ken Levine, a former principal of Cabletron Systems.

Onex Partners, the private equity arm of Onex Corp. (TSX: OCX.SV), has agreed to acquire Minneapolis-based Center for Diagnostic Imaging Inc. for approximately $225 million. The deal includes a $93 million private equity investment for an 84% ownership position, with the remainder being retained by company management, its founder and certain physician shareholders.

First Reserve Corp., an energy-focused private equity firm, has completed its $1.2 billion acquisition of Dresser-Rand Co. for Ingersoll-Rand Company Ltd. (NYSE: IR). Dresser-Rand is an Olean-N.Y.-based provider of energy conversion technologies.

Heritage Partners has acquired the package logistics business of R.R. Donnelley & Sons Co. (NYSE: RRD) for an undisclosed amount. R.R. Donnelley will retain its print logistics, fulfillment and distribution businesses, plus will continue to provide third-party logistics management services.

LaSalle Capital Group has acquired Violet Packing Co., a Williamstown, N.J.-based processor of fresh-packed tomato products like pizza and spaghetti sauces. No financial terms were disclosed. As part of the deal, LaSalle has partnered with Robert Ragusa, former vice president of sales and marketing with Can Corp. of America. Ragusa will become Violet’s new CEO.

The Carlyle Group has invested $9.4 million to acquire a majority ownership position in Outfield Knowledgeworks Private Ltd., the holding company for Chennai, India-based e-publishing services provider Newgen Imaging Systems Private Ltd.

The Carlyle Group has agreed to sell its 37.1% stake in German automotive supplier Beru AG to BorgWarner Inc. for approximately Euro 218 million.

Kohlberg Kravis Roberts & Co. reportedly is in exclusive negotiations to acquire a 75% stake in German packaging recycler Duales Systems Deutschland AG.

HealthEssentials Solutions Inc., a Louisville, Ky.-based provider of residential healthcare services, has withdrawn registration papers for its proposed $57.5 million IPO. The company is majority-owned by private equity firm Bruckmann, Rosser, Sherrill & Co.

Merisant Worldwide Inc., a Chicago-based provider of food sweeteners using aspartame, has withdrawn registration papers on its proposed $700 million IPO, citing current market conditions.. The company was acquired in March 2000 by an investor group led by Pegasus Capital Advisors.

Lockheed Martin Corp. (NYSE: LMT) has agreed to acquire Sippican Holdings Inc. from The Carlyle Group and company management. No financial terms were disclosed. Sippican is a Marion, Mass.-based supplier of naval electronics systems, and was acquired and taken private in 2002 by Carlyle. The deal is expected to close later this quarter.

New Vision Group LLC, a portfolio company of Arlington Capital Partners, has agreed to sell television station KSBY to Evening Post Publishing Co. for $67.75 million. KSBY is an NBC affiliate serving Santa Barbara, Calif.

Johnson Electric Holdings reportedly has agreed to acquire a 51% ownership position in Israel-based Nanomotion Ltd. The remaining stake will be held by existing shareholders Clal Electronics Industries, Polaris Venture Partners, Marathon Venture Partners, Yozma and the Israel Infinity Fund.

Intelsat Ltd., a Bermuda-based satellite company, has acquired COMSAT General Corp. from Lockheed Martin Corp. (NYSE: LMT) for approximately $90 million in cash. Intelsat soon will be acquired by Partners, Apollo Management, Madison Dearborn Partners and Permira (collectively known as Zeus Holdings Ltd.) for approximately $5 billion. COMSAT General provides satellite-based telecom services and equipment. 

Gregory Breetz Jr., an executive-in-residence with Dolphin Equity Partners, has been named as an independent director with YAK Communications Inc. (Nasdaq: YAKC).

Huron Capital is in the midst of raising its second private equity fund, and already has closed on over $90 million in limited partner commitments. The Detroit-based firm is aiming at a total fund capitalization of $150 million, with a final close to be held in early 2005.

Longroad Asset Management has raised $183.2 million for a new special situations fund focused on distressed obligations of middle-market companies. The firm has offices in Stamford, Conn. and Austin, Texas.

Parthenon Capital, a Boston-based buyout firm, is in the midst of raising a third fund with a target capitalization of $1 billion, according to Buyouts.

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