PE Week Wire, Jan. 9, 2007

Last month, I asked you to participate in the Bi-Annual ACG/Thomson DealMakers Survey. The official results come out tomorrow, but since PE Week Wire readers were so generous with their time…

Ninety-three percent of respondents (1,230 in all) believe that the current M&A environment is good or excellent. Moreover, 49% expect significant or moderate M&A activity growth over the next sixth months, with another 41% expecting stability. Count ACG chief Dan Varroney in with the 49%, with a personal prediction that “2007 will be another record year, with us breaking the threshold of $4 trillion in announced global transactions.” He adds that the increase over 2006 will be led by Western Europe, due to factors like anticipated GDP growth in the Euro zone, a surplus of available capital and recent German tax changes that make it more advantageous for families to sell their businesses.

To me, however, the most interesting survey result is the following: When asked if it currently is a Buyers or Sellers market, 75% of respondents sided with the Sellers. This is compared to just 10% with the Buyers, and another 15% that weren’t sure. I don’t say this is interesting because it’s necessarily surprising – particularly given the endless rise in purchase price multiples – but rather because it shows a tremendous lack of discipline among private equity investors. If LBO firms are at a current disadvantage, why increase the amount of deal activity? The only logical explanation – and logical does not equal justifiable – is momentum spurred on by limited partner largesse.

Or, perhaps, it’s just a case of acute denial (“Yeah the overall market is bad, but I’ll be fine because I’m smarter than the overall market.”). After all, 62% of respondents believe that the average EBITDA multiples over the next six months will be in excess of 7x, including 22% who expect them to be in excess of 9x. But 58% respondents nonetheless insist that the lowest IRR they’ll accept is 21 percent. Talk about a win-win… Somewhere, a busted bubble-era VC is smiling…

*** I am aware that the Personalized News section has not appeared over the past week, and promise that it will be back up tomorrow. Appreciation for your patience.

New at

Jeff Bistrong of Harris Williams & Co. with a Lesson for 2007.

Pete Tenereillo on why MySpace and YouTube Are Tools, Not Gold

Denise Palmieri begins her Career Boot Camp, in our Careers Section (plus, new listings)

Some comments on yesterday’s East Coast vs. West Coast column

Phil Angelides is launching his own VC firm

Terry Garnett changes his mind.

And much more, including regularly updated news throughout the day…

Top Three

Macquarie Bank has offered to acquire listed Australian energy transmission leader Alinta for approximately Au6.3 billion.

Sequoia Pharmaceuticals Inc., a Gaithersburg, Md.-based drug developer focused on the treatment of drug-resistant HIV infections, has raised $35 million in Series C funding. The Wellcome Trust led the deal, and was joined by fellow existing shareholders Healthcare Venture, Sofinnova Partners and Aberdare Ventures. New backer MedImmune Ventures also participated.

Excellere Partners, a Denver-based private equity firm that is targeting $200 million for its inaugural fund, has received a $25 million commitment from LACERA. The firm is run by former KRG Capital Partners partners David Kessenich and Robert Martin.

VC Deals

Fluidigm Corp., a South San Francisco-based provider of integrated fluidic circuits for the life sciences market, has raised $37 million in Series E funding. Wasatch Advisors, Cross Creek Capital and an undisclosed public funds manager were joined by return backers like Versant Ventures, Alloy Ventures, Bio*One Capital, Lilly Ventures, EuclidSR Partners and InterWest Partners.

Stroz Friedberg Inc., a New York–based digital forensics and electronic discovery firm, has raised $30 million in growth capital from Greenhill Capital Partners.

Truphone, a London-based mobile VoIP startup, has raised Gbp12.5 million ($24.5m) in Series A funding. Wellington Partners led the deal, and was joined by Independent News & Media, Burda Digital Ventures and return backer Eden Ventures.

Discretix Technologies Ltd., an Israel-based provider of embedded security solutions for mobile devices and flash memory, has raised $20 million in third-round funding. Sequoia Capital led the deal, and was joined by return backers Accel Partners, Eurocom Group, Genesis Partners, Jerusalem Global Ventures, Shrem-Fudim-Kelner, Pitango Venture Capital and Poalim Capital Markets.

Heavy Inc., a New York-based broadband entertainment company, has raised $20 million in Series E funding from Polaris Venture Partners. This space previously reported on a $12.8 million first close, based on a regulatory filing.

GMP Companies Inc., a Ft. Lauderdale, Fla.-based developer of a wireless electrocardiogram data communication system, has raised $17.2 million in Series A-1 recap funding. Backers include Janus, MPM Capital, BBT Fund and Louisiana Ventures.

Camero Inc., an Israel-based developer of micro-power radars that use UWB technology to generate 3D image of objects concealed by solid barriers like walls, has raised $14 million in Series B funding. Greylock Partners was joined by return backers Alta Berkley Venture Partners, Jerusalem Global Ventures, Motorola Ventures and Walden Israel.

Ketera Technologies Inc., a Santa Clara, Calif.-based provider of on-demand spend management solutions, has raised $14 million in fifth-round funding. DAG Ventures led the deal, and was joined by Teachers’ Private Capital and return backers Concentric Equity Partners, Emergence Capital, Integral Capital, Foundation Capital Partners and Kleiner, Perkins Caulfield and Byers. Ketera has raised around $93 million in total VC funding.

OpenCloud Ltd., a Cambridge, UK-based provider of application servers to the telecom market, has raised $10.25 million in first-round funding from Advent Venture Partners, No 8 Ventures and Motorola Ventures.

MuriGen Therapeutics, a Melbourne, Australia-based drug development spinout from the Walter and Eliza Hall Institute of Medical Research, has raised Au$5 million in first-round funding from Starfish Ventures.

Altos Design Automation Inc., a San Jose, Calif.-based EDA startup, has raised $1.5 million in Series A funding led by Vista Ventures.

Buyout Deals

The Gap Inc. (NYSE: GPS) reportedly has retained Goldman Sachs to explore strategic options. A buyout of the clothing retailer likely would be in excess of $18 billion, based on a current market value of around $16.4 billion.

ACON Investments has acquired Peter Piper Inc., a Phoenix, Ariz.-based dine-in pizza and entertainment restaurant chain, from Madison Dearborn Partners. No financial terms were disclosed.

The Riverside Company has acquired Advanced Information Systems Group, a provider of technology solutions to the provider for the automotive, aerospace and steel industries. No financial terms were disclosed.

American Securities Capital Partners has agreed to acquire a majority stake in NEP Broadcasting from Apax Partners and Spectrum Equity Investors. No financial terms were disclosed. NEP is a Pittsburgh–based provider of outsourced teleproduction services for the delivery of live sports and entertainment events. Bear Stearns acted as financial advisor to NEP in the transaction.

Blue Wolf Capital Management has completed its acquisition of Pittsburgh-based landfill gas developer Montauk Energy Capital LLC from DQE Financial Corp., a subsidiary of Duquesne Light Holdings Inc. The deal is valued was approximately $110 million, with GoldenTtree Asset Management providing senior financing.

Wachovia Capital Partners has agreed to acquire Crosman Corp. from Compass Group for approximately $143 million. Crosman is an East Bloomfield, N.Y.-based manufacturer of recreational airguns and related products.

Veronis Suhler Stevenson has acquired digital satellite broadcaster The Chart Show Group for an undisclosed amount.

PE-Backed M&A

Panorama AS, a Norway-based jewelry retailer controlled by Norvestor Equity, has acquired Gullaren and Ivar T. Holth. No financial terms were disclosed. Gullaren is a jewelry retailer with 42 stores, while Ivar T. Holth is a wholesaler.

Activa Capital will merge portfolio companies Materne, a French fruit compote and jam business, with Mont Blanc, a French cream dessert business.

PE Exits

Brocade Communications Systems Inc. (Nasdaq: BRCD) has acquired Silverback Systems Inc., a Campbell, Calif.-based provider of network acceleration technologies. No financial terms were disclosed, except that Brocade said that the “cash purchase price is not material to Brocade.” Silverback has raised around $50 million in total VC funding since its 2000 inception, from firms like JPMorgan Partners, Pitango Venture Capital, China Development Industrial Bank, Gemini Capital, Intel Capital, Newbury Ventures, Network Appliance Corp. and US Trust Private Equity.

Firms & Funds

Equity International, the real estate private equity firm affiliated with Sam Zell’s Equity Group Investments, has closed its third fund with $300 million in capital commitments.

Kirkland & Ellis LLP has opened an office in Hong Kong. David Patrick Eich, a partner focused on private equity, has relocated from London to run the office.

The Los Angeles County Employees Retirement Association (LACERA) has issued an RFP for a non-discretionary private equity advisor. More information can be found at:

Human Resources

Mark Silverman has joined Catamount Ventures as a managing director. He previously was CEO of Catamount portfolio company Bocada Inc., a Bellevue, Wash.-based provider of data protection management software.

David Livingstone has been named head of European M&A with Credit Suisse. He previously had served as head of European I-banking with HSBC.

Mario Schmidt has agreed to join Willkie Farr & Gallagher as a partner in the firm’s Frankfurt office. He currently is a partner with Clifford Chance, and focuses on European private equity transactions.

Rod Boone has joined DW Healthcare Partners as an operating partner. He previously served as president and CEO of Royce Medical Holdings, a PE-backed orthopedics manufacturer (sold in August 2005 to Ossur for $216 million).

ICV Capital Partners has promoted Lloyd Metz to managing director. Metz joined the New York-based firm in 2002, before which he had been a vice president with Warburg Pincus.

Mark Lewis has joined Advantage Capital Partners as a principal. He previously was a partner with Two River Associates.