PE Week Wire: Thurs., April 10, 2008

Greetings from my third and final day in Orlando, as I’m heading back to Boston later this afternoon (thankfully not on American). A few notes before packing my bag:

*** My conference panel yesterday spent lots of time discussing the explosive growth of fundraising in the distressed and “corporate opportunities” sectors. I certainly understand the deal-flow causation, but here’s my question: Who is actually investing the money?

I’m not so much talking about the legacy distressed firms that are simply expanding fund sizes, but more the generalist firms that are now devoting billions to an asset class which, in the past, has at best been a minimal point of focus. Was there some sort of “Distressed Investing Academy” that held sessions last fall, and unleashed hundreds of newly-qualified professionals into the market? Or are certain firms trying to fit square pegs in round holes?

I asked that question of some distressed vets yesterday, who hedged before settling on the “holes” theory.

*** Two business ideas that some smart entrepreneur should run with:

(1) A trade group for “the rest” of private equity (i.e., everyone not represented by the Private Equity Council). The Association for Corporate Growth recently discussed the formation of a lobbying arm, but ultimately decided it would present too many of conflicts of interest within its membership. So the screaming void remains, as small, mid, and large-market private equity is far too large an industry to be unrepresented on Capitol Hill. It’s also a wealthy industry, so forming such an organization could prove quite lucrative.

(2) An online advertising network for financial publishers. Most B2B companies like Thomson have their own in-house ad teams, which do a great job of marketing to industry-specific service providers and the like. But what almost none of them have are strong inroads into the Madison Avenue market – which is why luxury retailers and airlines, for example, aren’t advertising on PE Week Wire or peHUB. Conversely, most B2C companies have the opposite problem, particularly online. It’s why most of the advertisers here don’t end up on the NY Times or WSJ blogs. So what if you could create an online ad network focused on financial media, and offer each side what they are unable – or unwilling – to do in-house? I think I would know more than a few clients…

*** SEIU today is protesting at a Goldman Sachs meeting about the Aramark dedal, but the union lost a big battle when California Assemblyman Alberto Torrico withdrew his bill that would have prevented CalPERS and CalSTRS from investing in PE funds partially owned by certain sovereign wealth funds.

*** You might remember that February’s VC in the Rockies Conference had the “best gift-bag ever.” Sadly, ACG Intergrowth may have the worst (for something of its size). I got two totebags, but the only swag was a water bottle, leather-bound notebook and a consultant-branded baseball cap no one will ever wear. Come on ACG, you can do better…

*** peHUB First Read, including Clear Channel, Yahoo and more…

*** Yesterday I asked what VC-backed CCTV Wireless was doing with TerreStar. Now we have an answer.

*** David Tom is a secondaries investor, who last year won our March Madneess Extravaganza. This year he didn’t do quite so well. So he’s made a peHUB post titled: Everything I learned last year about college basketball and private equity is wrong. Read it here.

Top Three

Bain Capital and Advantage Partners are among the bidders for Japanese audio equipment maker D&M Holdings, according to Reuters. D&M is currently owned by Ripplewood and Philips Electronics, and has a value of approximately $277 million. Other likely bidders include Merrill Lynch Global Private Equity and a non-Japanese electronics maker.

Link A Media Devices Corp., a Santa Clara, Calif.-based provider of data recovery and transport technologies for storage devices, has raised $22 million in Series B funding. AIG SunAmerica Ventures led the round, and was joined by KeyNote Ventures, NEC Electronics, Micron Technology and Seagate Technology.

The New York State Common Retirement Fund is committing $500 million to “green” investments over the next three years. The Fund currently has $40 million invested in private equity funds focused on clean tech and renewable energies, and another $440 million in commitments to funds that include cleantech as part of their investment strategies.

VC Deals

Storwize, a San Jose, Calif.-based provider of storage data compression solutions, has raised $19 million in Series C funding. Bessemer Venture Partners and Lehman Brothers Venture Partners were joined by return backer Sequoia Capital.

Stemline Therapeutics Inc., a New York-based developer of oncology compounds directed to cancer stem cell targets, has raised $12.5 million round in Series A funding. Pequot Capital Management led the round.

UStream.TV, a Los Altos, Calif.-based provider of an interactive video broadcast platform, has raised $11.1 million in Series A funding, according to VentureWire. DCM Capital led the round, and was joined by seed backer Band of Angels.

Gridstone Research, a San Mateo, Calif.-based provider of an online research platform for buy-side investment managers, has raised $10 million in Series B funding. Helion Venture Partners led the round, and was joined by return backers Charles River Ventures and Maverick Capital.

SpringCRM, a San Mateo, Calif.-based provider of on-demand document management and workflow solutions, has raised $10 million in Series B funding. North Bridge Venture Partners led the round, and was joined by Series A lead Foundation Capital. SpringCRM also has secured a $4 million credit facility from Comerica Bank.

NeoTract Inc., a Mountain View, Calif.-based medical device company focused on urological and gynecological disorders, has raised $7.4 million in additional Series A funding from existing backer New Enterprise Associates. It had previously raised $14 million.

Jaxtr Inc., a Palo Alto, Calif.-based provider of VoIP services for social networks and blogs, has raised around $6.4 million in Series B funding led by Lehman Brothers Venture Partners, according to a regulatory filing. The company had previously raised $10 million from August Capital, Draper Richards, Mayfield, Founders Fund, Ron Conway and Reid Hoffman.

iBloks, a San Francisco-based rich media ad developer, has raised $2.05 million in Series C funding led by return backer Maveron, according to a regulatory filing.

Buyout Deals

Apax Partners has abandoned plans to acquire a stake in German fashion house Escada. A statement on Escada’s website confirmed that the group had been in talks with Apax for several months, but that the firm had informed the board in early April that “they were not pursuing their plans for an equity investment in Escada any further and will therefore not continue negotiating.”

The Blackstone Group and CVC Capital Partners have bid to acquire a 29.9% stake in UK pub group Mitchells & Butlers, according to The Times of London. No financial terms were reported. The Blackstone and CVC offer follows a bid from Permira, while Bain Capital is said to be considering its own approach.

Elysian Capital has acquired The Landscape Group Ltd., a UK-based landscaping and horticultural specialist known as English Landscapes. No financial terms were disclosed for the deal, except that Lloyds TSB Corporate Markets provided the debt financing. Landscape Group has over 600 employees, and annual revenue of around £40 million.

Gryphon Investors has formed a new foodservices company via the acquisitions of Aladdin Food Management Services, AmeriServe Food Management Services and Fitz, Vogt & Associates. The combined company will be known as TrustHouse Services Group, with former Compass Group PLC chief executive Michael Bailey serving as CEO. No financial terms were disclosed. Gryphon was advised by McColl Partners.

H.I.G. Capital has sponsored a recapitalization of Linden Lumber Company Ltd., a Linden, Ala.-based manufacturer of southern hardwoods like red oak and ash. No financial terms were disclosed.

Liz Claiborne Inc. (NYSE: LIZ) has completed its sale of Ellen Tracy brand to an investment group that includes Radius Partners, William Sweedler (Windsong Brands), Barry Sternlicht and Marvin Traub. The deal included a $27.3 million upfront cash payment, and up to $15 million in cash earn-outs.


Vignette (Nasdaq: VIGN) has agreed to acquire Vidavee, a New York-based provider of online video management software. The deal is valued at $6.6 million in cash. Vidavee had raised just over $2 million in VC funding from Trident Capital.

PE-Backed M&A

Manoir Industries SA, a French maker of metal components and assemblies, has acquired Hi–Tech Fabrication Ltd., a UK-based maker of welded assemblies in heat resistant and corrosion resistant steels and alloys for the petrochemical, oil and gas, and power industries. No financial terms were disclosed. Manoir Industries is a portfolio company of Sun European Partners, the European affiliate of Sun Capital Partners.

Firms & Funds

Atlantic Street Capital has held a first close on its debut fund, with a commitment from Morgan Stanley Alternative Investment Partners. No size of the first close was disclosed, although the total fund target is $70 million. The Stamford, Conn.-based firm focuses on lower middle-market special situation opportunities.

Angelo Gordon & Co. is targeting $1.5 billion for its sixth distressed vehicle, according to LBO Wire. The firm closed its fifth fund in 2006 with $650 million.

The CalCEF Angel Fund has held a first close on its debut fund, which will focus on seed-stage and early-stage cleantech opportunities. Read more…

Human Resources

Michael Satzberg has joined Sun Capital Partners as a managing director of its hedge fund affiliate Sun Capital Securities Fund. He previously was with Jefferies & Co. as a senior vice president, with responsibilities for trading and principal debt investments in several industry sectors.