PE Week Wire, Oct. 4, 2006

Pacific Corporate Group may soon lose one of its largest advisory clients, just weeks after four top managers left in a dispute over firm economics. The Oregon Investment Council will soon issue an RFP for a new private equity consultant, which is separate from an existing private equity RFT for the smaller Oregon Growth Accounts Board.

PCG gets to retain its non-discretionary role in the interim, but it doesn’t much matter since Oregon does not plan to make additional private equity fund commitments in 2006. PCG also has the right to submit a proposal of its own, but that’s like saying that I have the right to bid against Henry Kravis for a new townhouse in Manhattan. This is not a situation where “On any given Sunday…” is applicable.

None of this is surprising, of course, since PCG lost the main people that groups like Oregon agreed to do business with in the first place. I’d expect similar RFPs from other public advisory clients – if it hasn’t happened already – with the possible exception of New York City (which has much larger private equity problems to deal with).

The only silver lining for PCG is that it recently hired an experienced salvage artist in David Scopelliti, who previously rehabbed Connecticut’s scandal-ridden private equity program. But David was hired just weeks before the resignations, and I wonder if this reclamation project might be too large for even his capable hands.

*** Several months ago, this space endorsed several candidates for federal and state office. The only metric was whether or not the candidate had some connection to the private equity market (my politics were completely left out of it – even though some hard-headed readers insisted otherwise). We’ve only got two of six remaining:

Chris Gabrieli — Out

Lost the Democratic primary for governor of Massachusetts.

Marc Holtzman — Out

Did not qualify for the Republican primary for governor of Colorado.

William Weld — Out

Pulled out of the Republican primary for governor of New York.

Andrea Silbert — Out

Lost the Democratic primary for Lt. Governor of Massachusetts.

Ned Lamont

Still a viable candidate for U.S. Senate from Connecticut. Is a PE-backed entrepreneur whose wife is a partner with Oak Investment Partners.

Tim Mahoney

The vFinance co-founder is a newly-viable candidate for U.S. Congress in Florida. He was facing a steep uphill battle, until incumbent Mark Foley was busted for inappropriate communications with teenage pages.

*** Most VC firms make partner-level changes before they close a fund, but Bay Partners is going in a different direction.

The Cupertino, Calif.-based firm closed its $290 million eleventh fund last fall with five general partners: Neal Dempsey, Atul Kapadia, Chris Noble, Bob Williams and Dino Vendetti. Vendetti left soon after the fund close to join Formative Ventures, and now both Noble and Williams are seriously considering a transition to venture partner roles. I say “seriously considering,” because such a move would trigger keyman closes in Bay’s limited partner agreements. In order to prevent such a situation, Bay is asking LPs to amend the aforementioned agreements – with the promise that Noble and Williams will continue working with their existing portfolio companies.

As an outsider, I’d assume that this should be a difficult sell. After all, LPs commit to management teams more than brands, and this will be a very different team from the one they signed up for. An anonymous tipster, however, suggests that the response has actually been quite positive – which apparently is a feather in the cap of salespeople Dempsey and Kapadia. I spoke briefly with Dempsey this morning (he’s in Europe), who only would say that the firm continues to speak with LPs about “planning for the future.”

Top Three

Alsius Corp., an Irvine, Calif.-based developer of products to control patient temperature in hospital critical care settings, will go public via a reverse merger with blank check acquisition company Ithaka Acquisition Corp. (OTC BB: ITHK). Alsius CEO William Worthen will remain CEO, while Ithaka principals Paul Brooke (MPM Capital venture partner) and Eric Hecht (CEO of Potomac Pharma) will remain on the combined company’s board of directors. Alsius had been in registration for a $40.25 million IPO, and has raised nearly $100 million in total VC funding from firms like Mayfield, Canaan Partners, Channel Medical Partners, New Enterprise Associates, Sightline Partners and The Vertical Group.

JumpTap Inc., a Cambridge, Mass.-based provider of mobile search and advertising solutions, has raised $22 million in Series C funding. Valhalla Partners led the deal, and was joined by return backers General Catalyst Partners, BCE Capital and Redpoint Ventures.

OpenView Venture Partners, a spinout of Insight Venture Partners’ Boston office, has closed its inaugural fund with $100 million in capital commitments. The firm will focus on expansion-stage opportunities in the information technology sector.

VC Deals

Beceem Communications Inc., a Santa Clara, Calif.-based provider of chipsets for mobile WiMax technology, has secured $27.1 million of a $50 million Series D round, according to a regulatory filing. Return backers include Sequoia Capital, Walden International and Global Catalyst Partners.

Ruckus Wireless Inc., a Mountain View, Calif.-based provider of wireless equipment for home networking, has secured $15 million of a $21 million Series D round, according to a regulatory filing. Motorola was joined by return backers Sequoia Capital and WK Technology Fund.

Novare Surgical Systems Inc., a Cupertino, Calif.-based developer of minimally-invasive devices for use in cardiac surgery, has raised $16 million in Series D funding. Point Judith Capital and Tudor Investment Corp. co-led the deal, and were joined by Deerfield Partners and return backers Thomas Fogarty, Channel Medical Partners, Canaan Partners and Asset Management.

Tymphany Corp., a Cupertino, Calif.-based provider of audio transducers, has raised $13 million in convertible preferred equity from American Capital Strategies.

Lendia Inc., a Marlborough, Mass.-based provider of outsourced solutions to financial institutions that originate residential mortgages, has raised an undisclosed amount of private funding from 1848 Capital Partners.

Buyout Deals

Sara Lee Corp. (NYSE: SLE) may put itself on the private equity auction block, according to The Financial Times. The food company’s current market cap is approximately $12.3 billion.

Freescale Semiconductor Inc. (NYSE: FSL) considered a bid for rival Philips Semiconductor earlier this year, according to an SEC filing. Freescale dropped its interest once Philips Semi agreed to be acquired by KKR and Silver Lake Partners in August. Freescale has since agreed to be acquired for $17.6 billion by The Blackstone Group, The Carlyle Group, Permira Funds and Texas Pacific Group.

The Riverside Co. has acquired Crisis Prevention Institute Inc., a Brookfield, Wis.–based violence prevention firm. No financial terms were disclosed.

PE-Backed IPOs

Dayton Superior Corp., a Dayton, Ohio-based manufacturer of concrete construction accessories, has filed for a $150 million IPO. It plans to trade on the Nasdaq, with Robert W. Baird serving as lead underwriter. Odyssey Investment Partners acquired a controlling interest in June 2000.

Asthmatx Inc., a Mountain View, Calif.-based medical device company focused on outpatient procedures for asthma treatment, has set its proposed IPO terms to five million common shares being offered at between $11 and $13 per share. It plans to trade on the Nasdaq under ticker symbol AZMA, with Piper Jaffray and Bear Stearns serving as co-lead underwriters. The company raised over $42 million in VC funding from firms like Vanguard Ventures, HBM BioCapital, Polaris Venture Partners, MedVenture Associates and Montreaux Equity Partners.

ExlService Holdings Inc., a New York-based provider of business process outsourcing solutions, has set its proposed IPO terms to five million common shares being offered at between $10 and $12 per share. It plans to trade on the Nasdaq under proposed ticker symbol EXLS, with Citigroup and Goldman Sachs serving as co-lead underwriters. The company was acquired in 2002 from Conseco Inc., via a management buyout sponsored by Oak Hill Capital Partners and Financial Technology Ventures.

LeMaitre Vascular Inc., a Burlington, Mass.-based developer of medical devices for the treatment of peripheral vascular disease, has set its proposed IPO terms to six million common shares being offered at between $8 and 410 per share. It plans to trade on the Nasdaq under ticker symbol LMAT, with Goldman Sachs serving as lead underwriter. Housatonic Partners holds a 14.3% pre-IPO position.

PE-Backed M&A

Primus International Inc., a Bellevue, Wash.-based supplier of aircraft structures, has acquired Walden’s Machine Inc., a Tulsa, Okla.–based provider of components, kits and assemblies for the global aerospace industry. No financial terms were disclosed. Primus is a portfolio company of Oak Hill Capital Partners.

Captive Plastics Inc., a Piscataway, N.J.-based manufacturer of blow-molded plastic bottles and closures, has acquired Grafco Pet Packaging Technologies, a supplier of polyethylene terephthalate (PET) rigid containers. No financial terms were disclosed. Captive Plastics is a portfolio company of First Atlantic Capital.

PE Exits

Xerox Corp. (NYSE: XRX) has agreed to acquire XMPie Inc., a New York–based provider of variable information software. The deal is valued at $54 million in cash, and is expected to close within 30 days. XMPie has raised around $9 million in VC funding from JVP.

I-Flex Solutions (Bombay: IFLX.BO) has completed its previously-announced acquisition of Mantas, a Herndon, Va.-based anti-money laundering and compliance software, from Safeguard Scientifics. The deal was valued at $122.6 million, and was be partially financed via a new $125 million investment in I-Flex from Oracle.

Hephaestus Holdings Inc., a manufacturer of forged parts for the North American auto industry, has sold a minority equity interest to Mitsubishi Corp. for an undisclosed amount. Hephaestus remains a portfolio company of KPS Special Situations Funds.

QLogic Corp. (Nasdaq: QLGC) has agreed to acquire SilverStorm Technologies Inc., a King of Prussia, Pa.–based provider of provides end-to-end interconnect fabric solutions for cluster and grid computing networks. The deal is valued at approximately $60 million in cash. SilverStorm has raised around $62 million in VC funding from firms like Axiom Venture Partners, Bay Partners, Castile ventures and Core Capital Partners.

Openwave Systems Inc. (Nasdaq: OPWV) has acquired SoloMio Corp., an Austin, Texas–based provider of integrated subscriber call management services. No financial terms were disclosed. SoloMio had raised over $26 million in VC funding from firms like Austin Ventures, Koch Ventures, Partech International, Gemplus and Techxas Ventures.


Lumenis Ltd. (OTC BB: LUME), an Israel-based developer of laser- and light-based technologies for medical applications, has agreed to a $120 million PIPE infusion of common stock, from LM Partners and Ofer Hi-Tech Group. In related news, Lumenis has signed a deal with Bank Hapoalim to restructure the company’s $205 million of outstanding debt.

Firms & Funds

American Capital Strategies has raised $1 billion for a new private equity fund. HarbourVest Partners is the lead limited partner, with Lexington Partners and Partners Group also participating.

Doughty Hanson has abandoned plans to launch a 1 billion euros listed fund on the Euronext. Reports suggest that the problem was low investor interest, although Doughty Hanson said that it had “concerns over the trading performance of similar recent transactions,” and that it didn’t want buyers to be “exposed to any potential discount.”

Human Resources

General Atlantic has made the following promotions to managing director: Jonathan Korngold, head of healthcare; Anton Levy, head of consumer media and marketing services; Christopher Lanning, general counsel; Thomas Murphy, chief financial officer, Andrew Pearson, head of portfolio management; and David Rosenstein, general counsel. In addition, General Atlantic has promoted Sunish Sharma (Mumbai) and Sean Tong (Hong Kong) to principal.

John Norris has joined Silicon Valley Bank as managing director in the firm’s private equity unit. He will focus on life sciences, and previously was a founding member and senior vice president with Square 1 Bank.

Robert Cunningham has joined Gibson, Dunn & Crutcher LLP as a partner and co-chair of the firm’s global finance practice group. He previously was co-char of Jones Day’s global lending and structured finance practice.

Highland Capital Partners has hired a vice president and five associates. Dean Banks will serve as a vice president focused on healthcare, and previously worked in corporate development at Cytec Corp. The associates are: Jay DeCoons (The Mentor Network), Matt Nichols (Google), Dan Rosen (HarbourVest Partners), Patricia Santos (Club Monaco) and Gaurav Tewari (Microsoft).

Hector Cuellar has been named president of RSM EquiCo., a financial services subsidiary of H&R Block. He had been named president of I-banking unit RSM EquiCo Capital Markets two years ago.


Correction: Bardia Mesbah’s name was misspelled in Monday’s edition. He is a new principal with Brookstone Partners.