PE Week Wire: Thursday, July 31, 2008

I came out to Silicon Valley in order to participate in yesterday’s VC/PE CFO Conference, which had well over 300 attendees. My role was to moderate a panel on portfolio company valuations, but there were two problems: (A) There’s no way I know more about this subject than the average attendee; and (B) Somehow I only had one panelist. So what to do?

My makeshift solution was to turn our session into a mock trial of FAS 157, the new fair-value accounting rule that has set GP tongues a’ grumbling. Specifically, we put it on trial for being unfair to venture capital firms. I asked one table to play prosecution and one to play defenders. We also had witnesses: Two VC CFOs, two limited partners and FAS 157 in the flesh (played by my panelist from PwC). I played judge, and everyone else was a juror, and was encouraged to submit questions to the “attorneys.”

Before beginning, I asked for a show of hands: How many people believe FAS 157 is fair. We had two of! these sessions, which equals the number of total hands that went up. In other words, the prosecution should have had a cakewalk.

But here’s the thing: It’s not terribly easy to make a cogent argument against FAS 157. First, PE and VC firms have always been expected to follow fair-value accounting standards. Second, almost all other asset classes follow these standards, which makes such consistency preferable to limited partners. Sure you can argue that FAS 157 doesn’t lead to better valuations, but it’s hard to assert that they’re worse than prior practice (save for the false sense of security they may give inexperienced LPs). Some worry about increased volatility, but most LPs already experience that elsewhere in their portfolio, and are able to account for it.

As a result, FAS 157 was actually found not-guilty in our first session — by a jury biased against the rule. FAS 157 lost in the second session, but by a closer margin than it had won by in the first! – and larger – session. In other words, a split decision.

I pl an to write more about all this on the plane-ride home today, and will post it at peHUB in the morning. Included will be some information about magic beans that create renewable energy, and which reproduce themselves wirelesssly (yeah, you read that right).

*** Hopefully some of that made sense. Kind of beat from last night’s mini-shindig at The Dutch Goose. Once again, thanks to Dorsey & Whitney for sponsoring, and to all of you who came out. Felt like we had even more people there than last year…


In Memoriam: Keith Benjamin

Venture capitalist Keith Benjamin has passed away, four days after suffering a major brain hemorrhage while at the gym. He was 49 years-old.

Keith had been a managing partner with San Francisco-based Levensohn Venture Partners since 2002, where he focused on software and digital media investments. He previously had been a general partner with Highland Capital Partners and, before that, was a sell-side analyst at Robertson Stephens.

Like many of his Silicon Valley peers, Keith also was a blogger — discussing both the personal and professional at SF Venture. In the past, he has graciously permitted us to reprint certain pieces at peHUB.

He leaves behind his wife Nancy, and two young children.

In a statement, Levensohn Venture Partners said: “We mourn the passing of our friend and partner, Keith Benjamin. He was a kind and loving person who adored his family, loved his work and wa! s passionate about everything he did. We will miss him very much.”

Details to follow on a memorial service, when they become available. I also encourage you to leave memories of Keith here, and we will pass them on to his family.

Top Three

Bain Capital Partners and Thomas H. Lee Partners have completed their $17.9 billion buyout of Clear Channel Communications Inc.

Kickfire, a Santa Clara, Calif.-based developer of a data warehousing appliance for the MySQL database, has raised $20 million in Series B funding. Pinnacle Ventures led the round, and was joined by return backers Accel Partners, Greylock Partners and Mayfield Fund.

Google is considering the formation of an in-house venture capital unit, according to The Wall Street Journal.

VC Deals

Sierra Neuropharmaceuticals, an Aurora, Col.-based developer of “direct-to-the-brain” treatments, has raised $21.5 million in Series A funding. HealthCare Ventures, Morgenthaler Ventures and Sequel Ventures co-led the round, with High Country Ventures and GC&H Investments also participating.

Cyrium Technologies, a developer of multi-junction solar cells for concentrator photovoltaic systems, has rai! sed $15 million in Series B funding. The Quercus Trust led the round, and was joined by return backers BDC Venture Capital, Chrysalix Energy Venture Capital, and Pangaea Ventures. Cyrium has offices in Canada and Silicon Valley.

H2Scan Corp., a Valencia, Calif.-based maker of hydrogen-specific sensor systems, has raised $4 million in Series D funding. TGB Partners was joined by return backers Chrysalix Energy Venture Capital, H5 Capital, Tri-Strip Associates, Ravinia Venture Fund, Tech Coast and Pasadena Angels.

I Love Rewards Inc., a provider of Web-based corporate rewards and recognition, has raised C$4.7 million in Series A funding. JLA Ventures led the round, and was joined by Laurance Capital! , individual angels and company management.

Buyout News

Arcapita has agreed to sponsor a new transportation acquisition platform named MRH Holdings. The effort will be able to make between $1 billion and $1.5 billion in acquisitions, with Arcapita providing approximately $400 million. It will be run by Mark Holden, who previously was CEO of American Commercial Lines.

The Alberto-Culver Co. (NYSE: ACV) has completed the sale of its Cederroth International business to CapMan. Cederroth is a Stockholm, Sweden-based maker of personal healthcare products in the Nordic region and parts of Europe. No financial terms were disclosed.

Friedman Fleischer & Lowe has abandoned its efforts to acquire fund services firm Loring Ward International (TSX: LO), after losing a bidding war with Loring Ward shareholder Werba Reinhard Inc. FFL originally agreed to buy Loring Ward for US$16.50 per share, and later raised its offer to $17.35 per share. Werba kept countering, including its most recent — and ultimately winning — bid of $18 per share (approx. $140m). FFL will receive a breakup fee and other transaction-related expense reimbursement.

Hertie, a German department store chain owned by UK private equity firm Dawnay Day, has filed for insolvency. The company has more than 4,000 employees.

Provident Energy Trust (NYSE: PVX) has agreed to sell its 96% interest in BreitBurn Energy Co. to Metalmark Capital Partners, Greenhill Capital Partners and a listed energy partnership. The deal is valued at $305 million. BEC is a Provident subsidiary whose primary assets are non-producing crude reserves in California.

Sofinnova Partners has agreed to acquire a majority stake in Sagem Mobiles, the loss-making mobile handset business of France-based Safran (which will retain a 10% position). No financial terms were disclosed.

PE Exits

Vistec Semiconductor Systems, a portfolio company of Golden Gate Capital, has agreed to sell its Microelectronic Inspection Equipment business to KLA -Tencor (Nasdaq: KLAC). No financial terms were disclosed.

Firms & Funds

Nokia Growth Partners has received a new $150 million capital infusion from parent company Nokia, which swells its funds under management to $250 million. The new capital will be used, in part, to help to group launch ground operations in China and India.

Ampersand Ventures has begun marketing its new fund with a $400 million target, according to LBO Wire. The Wellesley, Mass.-based firm focuses on middle-market private equity opportunities in the healthcare and industrial sectors. It’s current fund raised raised in 2006 with $212

Human Resources

Nicole Arnaboldi has been named chairwoman of DLJ Merchant Banking Partners, which will come in addition to her existing responsibilities as co-head of the group’s illiquid alternatives group. The move comes after chairman Steven Rattner announced his retirement.

Kate Goodall has joined the investor relations team of SVG Capital. She previously was a vice president with Capital Dynamics and, last year, founded the Private Equity Investor Relations Association.

Mike O’Neill has joined Hudson Clean Energy Partners to help launch Element Power, a new portfolio company that will focus on utility-scale win and solar power generation. O’Neill is the former commercial director of Renewable Energy Systems Group.