PE Week Wire: Thursday, December 4, 2008

Yesterday I wrote that “at least two U.S.-based mega-buyout firms are holding internal discussions about firm-wide cuts.” One of those firms was The Carlyle Group, which later confirmed a WSJ report that it will cut 10% of its global workforce and close its Menlo Park, Calif. office.

“In response to extraordinary market conditions, Carlyle has taken measured steps to balance its cost structure with the current investment climate,” said Carlyle spokesman Chris Ullman. “The firm is well positioned to take good care of our investment portfolio and has the resources to create and respond to compelling investment opportunities.”

The decision will result in approximately 100 layoffs, which come on top of Carlyle’s moves last month to close both its Warsaw office (10 staffers) and its Asia leveraged finance team (7 staffers). Most cuts are occurring in the U.S. and affect back-office employees, but dozens of investment professionals are also included. All laid-off employees will receive severance packages.

Carlyle opened its Menlo Park office just this past January, for two reasons. First was to give its tech buyout team a Silicon Valley presence, and second was to expand Carlyle’s venture and growth capital activities. Carlyle managing director Todd Neunam was in charge of the first part, but ultimately returned to DC to lead the firm’s industrials group. Carlyle subsequently initiated a search to hire his replacement, but those plans have obviously been shelved.

As part of the growth and venture capital expansion, Carlyle hired managing directors Nick Sturiale (formerly with Seven Rosen Funds) and Greg Rossmann (Pequot Capital), plus principal Jeb Miller (ComVentures). Since then, however, just two of that practice’s 15 deals have been for West Coast companies — an imbalance that helped precipitate the office closure. It also didn’t help that Menlo Park was one of Carlyle’s newest offices, and that most of its staffers had been hired after the group closed its third growth/venture fund in Q3 2007 with $605 million (40% invested to date).

Sturiale, Rossmann and Miller have all been laid off, as have two other growth equity team members in Menlo Park. The office’s U.S. leveraged buyout staff will be relocated. Carlyle plans to maintain its small San Francisco office, but likely will relocate it to even more modest digs.

*** Additional layoff notes:

• 3i Group today confirmed that it will cut 15% of its global staff, or 100 positions.

• We have confirmed that the American Capital office closures are for Palo Alto and Boston, while Chicago is losing most of its buyout professionals (sponsored finance will remain).

• We’ve been hearing rumors — or perhaps rumours — about Apax Partners, but the firm says that it is not making any cuts based on market conditions. Instead, Apax is going through an annual employee assessment program that typically results in around 10% of its staff being dismissed – although the 2008 figure for investment professionals is actually expected to be a bit lower. Apax’s current headcount is around 300, including 66 in New York. It also plans to add up to seven senior associates split between New York and Europe.

• Many of you submitted anonymous tips yesterday about other firms, and we’re working hard to track them down. Keep them coming…

*** Am I the only one who thinks that private equity layoffs are the logical precursor to private equity fund size reductions? After all, if you needed a 1.5% or 2% management fee because you had 1,000 employees, do you really need to same amount of money if you only have 900 employees? Maybe it wouldn’t matter in normal times, but limited partners are desperate to decrease existing private equity commitments, and might start making some demands.

No one likes to go first but, if someone does, it might open the floodgates. Remember, there weren’t any PE firm layoffs as of this time last month…

*** Lots of ink is being spilled about plummeting pension fund and endowment returns. What many of the general biz reporters don’t realize is that those Q3 reports only include private equity performance data through the end of Q2. The revised numbers will be even worse.

*** We have over 45 firms now participating in our Internship Rodeo, which begins tomorrow. And email with instructions will be sent to al members of the peHUB MBA Forum tomorrow morning.

*** Finally, reason #165 why I love you, dear readers: More than 80 of you wrote in to help me with my iPod problem. So much thanks…

Top Three

Bain Capital and Hellman & Friedman have lost their bid to acquire Lehman Brothers’ Neuberger Berman asset management unit. The two firms had originally bid $2.15 billion, but were outbid by a group of Neuberger Berman employees. No financial terms of the winning bid were disclosed.

GoFish Corp. (OTC BB: GOFH), a digital media company focused on “brand immersion” experiences, has raised $22.5 million in PIPE funding co-led by Panorama Capital, Rustic Canyon Partners and Rembrandt Venture Partners. The firms also have the option to invest an additional $2.5 million over the next few weeks.

Credit Suisse announced that it will lay off approximately 5,300 employees, or 11% of its global workforce.

VC Deals

Catalyst Biosciences Inc., a South San Francisco-based developer of engineered proteases, has raised $40.4 million in Series C funding. Essex Woodlands Health Ventures led the round, and was joined by return backers Burrill & Co., HealthCare Ventures, Johnson & Johnson Development Corp., Morgenthaler Ventures, Novartis BioVentures and Sofinnova Ventures. The company had previously raised around $42 million.

Symwave Inc., a Laguna Nigel, Calif.-based chipmaker focused on “sync-and-go” applications, has raised $10.18 million in additional Series C funding, at a pre-money valuation of around $27.6 million. Participants included CMEA Ventures and Kodiak Venture Partners. The company has now raised around $25 million in total VC funding.

ThePort Network Inc., an Atlanta-based provider of SaaS social media solutions, has raised $4.1 million in Series B funding. American City Business Journals led the round, and was joined by Lee Enterprises, Imlay Investments, Robert Jetmundsen and ThePort CEO Bob Cramer.

Koofers Inc., a Reston, Va.-based operator of an online community for data that can help students keep up with their classes, has secured $500,000 of a $2 million Series A round, according to a regulatory filing. Backers include Altos Ventures and New Atlantic Ventures.

Sambazon, a San Clemente, Calif.-based provider of acai beverages, has raised an undisclosed amount of VC funding led by Belgium-based Verlinvest.

Silverpop, an Atlanta-based email service provider, announced that the European Founders Fund had purchased an undisclosed amount of common stock from existing company shareholders. No additional details were provided. Silverpop had previously raised over $67 million from firms like D.E. Shaw, Draper Fisher Jurvetson, ePlanet Partners, NeoCarta Ventures and Total Technology Ventures.

Buyout Deals

Apax Partners is considering an investment in the Bank of Ireland, although discussions are in their infancy.

Electronic Data Processing, a UK-listed provider of business process outsourcing services, says that it has ended buyout talks with an undisclosed private equity firm.

PE Exits

HSW International Inc. (Nasdaq: HSWI) has acquired DailyStrength, a Santa Cruz, Calif.-based social network that connects users through their medical conditions. No financial terms were disclosed. DailyStrength had raised over $4 million in VC funding from Redpoint Ventures.

Thomson Reuters has agreed to acquire Paisley, a Plymouth, Minn.-based provider of governance, risk and compliance software. No financial terms were disclosed. Paisley raised $10 million from Insight Venture Partners in 2004.

PE-Backed M&A

AAMP of America Inc., a portfolio company of Audax Group, has acquired Select Products, a provider of mobile installation products, fabrication products and installer training programs. No financial terms were disclosed.

AssetNation Inc., a Houston-based provider of online industrial auctions, has acquired AssetAuctions LLC, a provider of asset recovery, appraisal and inventory online auction services for the industrial, commercial and government markets. No financial terms were disclosed. AssetNation is a portfolio company of Spire Capital Partners.

Boundless Network Inc., an Austin, Texas-based promotional merchandising company, has acquired local rival Custom Solutions for an undisclosed amount. Boundless has raised around $8.5 million in VC funding from firms like Austin Ventures and Silverton Partners.

FirstOnSite, a Canadian disaster recovery company owned by TorQuest Partners, has acquired Spring Fresh Cleaning & Restoration Canada Inc. of Grande Prairie, Alberta and Airkem Damage Restoration Services of Sault Ste. Marie, Ontario. No financial terms were disclosed.

Firms & Funds

Ares Management has postponed the final closing of its third corporate opportunities fund into 2009, according to LBO Wire. The Los Angeles-based firm already has secured more than $3 billion for the fund, which has a $4 billion target.

D.E. Shaw & Co. and Farallon Capital Management have limited client withdrawals from certain of their funds, according to Bloomberg.

JPMorgan Chase & Co. has seized tens of millions of dollars of collateral from a commercial property debt fund run by Guggenheim Partners, according to the Wall Street Journal.

Pequot Capital has closed its third special opportunities fund with $453 million in capital commitments, according to LBO Wire. The firm’s second special opportunities fund had closed four years ago with $200 million.

Human Resources

Citigroup has named managing director Christopher Gammons as its head of private equity banking in Asia. He had joined the firm last year from Deutsche Bank, where he had run a Hong Kong-based debt products group. Gammons replaces Christopher Laskowski, who will relocate to Citi’s Chicago office and remain a private equity banker.

Welsh, Carson, Anderson & Stowe has hired Scott Bontempo, Jeffrey Gallant and Daniel Pelak as senior operating executives. Bontempo previously was a lead human resources executive with Cerberus Capital Management. Gallant was vice president of procurement with Bell Canada. Pelak was CEO of InnerPule and, before that, CEO of Closure Medical Corp.

3i Group announced that it will lay off approximately 15% of its global staff, or around 100 positions.