PE Week Wire: Tues., Jan. 22, 2008

When I arrived at the CNBC studios this morning at 6am, the Dow futures were down over 500 points. Not good. Big Ben has since stepped in to help avert disaster, but not even a 75bp rate cut can obscure the doldrums that are coming for our pockets. So let’s briefly look at some pros and cons about to befall private equity, vis-à-vis macro economic hardship:

Pro: Companies will cost less to acquire. This will be an across-the-board sort of thing, much like price inflation affected all sectors in 2006 and early 2007. Expect private equity to return to its pre-boom knitting of zeroing in on underperforming sectors, like financials and consumer. In fact, it’s already happening. A panelist at the Wharton conference mentioned that PE firms tried getting involved in many of those bulge-bracket bailout deals that ultimately went to sovereign wealth funds.

Con: Existing portfolio companies will be harder to exit. Not just to the public markets, but also to strategic acquirers. We’ve heard lots of talk about how corporate America is sitting on piles of cash, but major market sell-offs have a way of lowering those levels. Sponsor-to-sponsor deals are still an option, but then you run back up against the issue of reduced purchase prices.

Pro: Motivated spin-off sellers. Big companies always like to refocus on “core businesses” in the tough times, even if the sale prices can be a bit tough to stomach.

Con: A bear market could drive down private equity fundraising. One reason for the record tallies of 2005-2007 was that institutional investor caches kept rising, thus boosting the real dollars associated with a 5% or 7% alternative allocation. Well, it also works the other way, which could mean fewer real dollars available.

*** Got thoughts about what happened last Fricday at Wharton? Post them here.

*** We will most certainly do our March Madness contest again this spring, but we also are now holding an event to kick off the NCAA tourney. It’s called Buyouts Madness, and is taking place on March 20 at Thomson Hall on 195 Broadway in New York.

The program is designed for younger private equity pros, with a heavy focus on sourcing deals and managing your career (I’ll be doing most of the moderating). Most of the speakers will be under 40, with a few more experienced panelists and keynote sprinkled in. That part’s all in the morning. The afternoon is for watching first-day games, and we’ll have plenty of TVs and grub.

If you want to come, just go here to register.

*** Finally, lots of you have been asking about wagers related to the pending Super Bowl, given that a sizable number of Wire readers are from either Boston or New York. So let’s do some blind wagering. Let me know what you’re willing to put up in support of your squad, and I’ll try matching you with another Wire reader who’s putting up something of similar value. No idea if this will work, but why not try new things? Be creative…

Top Three

Index Ventures has raised €400 million for its first growth capital fund. The firm’s growth team includes Index co-founder Giuseppe Zocco, former Yahoo Europe CEO Dominique Vidal and Guido Magni, global head of medical science in the pharma division of F. Hoffman-La Roche Ltd. The fund expects to make investments of between €20 million and €50 million in European companies.

LifeLock, a Tempe, Ariz.–based provider of identity theft prevention solutions, has raised $25 million in Series C funding. Goldman Sachs led the round, and was joined by return backers Bessemer Venture Partners and Kleiner Perkins Caufield & Byers. CEO Todd Davis said that the round’s post-money valuation was just under $230 million.

CVC Capital Partners has begun talks with Dutch retail group Ahold, about an acquisition of Ahold’s majority position in Dutch supermarket group Schuitema. No financial terms have been reported for the deal, which would include both cash and Schuitema’s transfer of more than 50 stores to Ahold.

VC Deals

Slide Inc., a San Francisco-based maker of widgets for social networks like Facebook, reportedly has raised $50 million in new VC funding at a post-money valuation of between $500 million and $550 million. Fidelity Investments and T. Rowe Price co-led the deal. Past backers include Mayfield, Khosla Ventures, BlueRun Ventures and Founders Fund.

Greenplum, a San Mateo, Calif.–based provider of database software for business intelligence, has raised $27 million in Series C funding. Meritech Capital Partners led the round, and was joined by Sun Microsystems, SAP Ventures and return backers EDF Ventures, Hudson Venture Partners, Sierra Ventures, Dawntreader Fund and Mission Ventures.

Ascension Orthopedics Inc., an Austin, Texas-based maker of joint replacement, trauma and tissue regeneration surgical implants for use in upper and lower extremities, has raised $21 million in Series D funding led by Frazier Healthcare Ventures. The company also named a new CEO: Andrew Miclot, former global senior VP of marketing orthopedics for Orthofix.

Quantcast, a San Francisco–based provider of “open” Internet ratings services, has raised $20 million in Series B funding from Founders Fund and Polaris Venture Partners.

Covario Inc., a San Diego-based provider of interactive marketing analytics, has raised $16 million in Series B funding. FTVentures led the round, and was joined by return backers Dubilier & Co. and Voyager Capital. Covario recently changed its name from SEMDirector Inc.

Impinj Inc., a Seattle-based provider of semiconductor and RFID technology, has raised $14 million in sixth-round funding from strategic backers like Inventec Appliances Corp., LS Industrial Systems Co., Samsung Ventures America and YFY Group. The company previously had raised over $105 million from firms like AllianceBernstein, backers ARCH Venture Partners, GF Private Equity Group, Madrona Venture Group, Mobius Venture Capital, Polaris Venture Partners, Unilever Technology Ventures, UPS Strategic Enterprise Fund, VentureTech Alliance and the Viterbi Group.

Nanochip Inc., a Fremont, Calif.-based maker of MEMS storage chips for consumer electronic applications, has raised $14 million in Series C funding. Shareholders include Intel Capital, JK&B Capital, New Enterprise Associates and AKN Technology of Malaysia.

Zenoss Inc., an Annapolis, Md.-based provider of commercial open source network and systems management software, has raised $11 million in Series B funding. Grotech Capital led the round, and was joined by return backers Intersouth Partners, Boulder Ventures and the Maryland Department of Business and Economic Development.

Adaptive Planning Inc., a Mountain View, Calif.-based provider of collaborative business performance management software, has raised $10 million in fourth-round funding. RBC Venture Partners was joined by return backers Cardinal Venture Capital, Monitor Ventures and Onset Ventures.

Momail, a Stockholm, Sweden-based mobile email startup, has raised SEK 35 million ($5.4m) in first-round funding. Participants included the Swedish 6th Pension Fund, Bonnier Invest and several individual angels.

Smaato, a San Mateo, Calif.-based provider of mobile advertising platform technology, has raised $3.5 million in Series A funding. Participants included Aeris Capital.

ActiveRain, a Bellevue, Wash.-based social network for real estate pros, has raised $2.75 million in first-round funding from HouseValues (Nasdaq: SOLD).

RiverGlass Inc., a Champaign, Ill.-based Web monitoring and analytics company, has raised $2.4 million in new VC funding. Return backers include RPM Ventures, IllinoisVentures and Country Insurance & Financial Services.

EDNets, a Wakefield, Mass.-based provider of communications management systems and fundraising programs for K-12 school districts, has raised over $1 million in Series A funding co-led by CommonAngels and the Massachusetts Technology Development Corp

Riemser Arzneimittel AG, a German pharmaceuticals company, has raised an undisclosed amount of funding from TVM Capital, in exchange for a 10% ownership stake.

North American Scientific (Nasdaq: NASI) has raised $15.5 million in a private placement of common stock and warrants. Three Arch Partners bought $10 million of the securities, and was joined by CHL Medical Ventures ($3m) and SF Capital Partners ($2.5m). Oppenheimer & Co. served as placement agent.

Buyout Deals

3i Group has acquired a minority stake in Futaste Pharmaceutical Co. Ltd., a Chinese maker of a natural sweetener called Xylitol. No financial terms were disclosed.

Huron Capital Partners has sponsored a recapitalization of Michigan Orthopedic Services LLC, a Livonia, Mich.-based operator of orthopedic patient care facilities. No financial terms were disclosed. RSM EquiCo Capital Markets represented MOS on the deal.

PE-Backed IPOs

ArcSight Inc., a Cupertino, Calif.-based provider of security and compliance management solutions for enterprise and government clients, has set its IPO terms to around 6.86 million common shares being offered at between $9 and $11 per share. The company would have a market cap of approximately $340 million, were it to price at the high end of its offering range. ArcSight plans to trade on the Nasdaq under ticker symbol ARST, with Morgan Stanley and Lehman Brothers serving as co-led underwriters. ArcSighthas raised around $15 million in VC funding since 2002, from firms like Kleiner Perkins Caufield & Byers (23.5% pre-IPO stake), Institutional Venture Partners (11.8%), Integral Capital Partners (6.3%) and New Enterprise Associates (5.4%).

PE Exits

IBM has agreed to acquire Net Integration Technologies Inc., a Toronto-based provider of business server software for small businesses. No financial terms were disclosed. NIT has raised over $7 million in VC funding since 2001, from firms like Coller Capital, BDC Venture Capital, Investissement Desjardins and Vimac Ventures.

Microsoft Corp. has acquired Calista Technologies, a San Jose, Calif.–based provider of graphics technologies for desktop and presentation virtualization solutions. No financial terms were disclosed. Calista had raised around $5 million in VC funding since 2006 from Greylock and Lightspeed Venture Partners.

PE-Backed M&A

Bausch & Lomb has agreed to acquire Eyeonics Inc., an Aliso Viejo, Calif.-based maker of ophthalmic medical devices like intraocular lens implants. No financial terms were disclosed for the deal, which is expected to close later this quarter. Bausch & Lomb was recently acquired by Warburg Pincus. Eyeonics had raised $43.5 million in VC funding since 1998, including a Series E round in late 2005 at a post-money valuation of approximately $84.2 million. Backers include ABS Ventures, Brentwood Venture Capital, Pequot Capital and Versant Ventures.

N.E.W. Customer Service Companies Inc., a provider of extended service plans and buyer protection programs for consumer products, has acquired ServiceBench, a Fairfax, Va.-based provider of technology-based service management solutions for U.S. retailers and manufacturers. No financial terms were disclosed. N.E.W. is a portfolio company of Berkshire Partners, while ServiceBench has raised around $16 million in VC funding since 2000 from firms like JMI Equity, NextGen Capital, WomenAngels, Schoffstall Ventures, New Vantage Group, Valhalla Partners and WWC Capital Group.

Firms & Funds

Huron Capital Partners has closed its third fund with $350 million in capital commitments. The Detroit-based firm targets small-to-mid-sized private equity opportunities.

Ventizz Capital Partners, a private equity firm focused on small and mid-market opportunities in German-speaking Europe, has closed its fourth fund with €455 million in capital commitments. Credit Suisse served as placement agent.

Human Resources

Paul Catalano and David Hassman have joined I-banking boutique Livingstone as a managing director and vice president, respectively, in the firm’s technology and media practice. Catalano has held positions with both HP and Texas Instruments, while Hassman previously was with RCBG.