While moderating a panel at Buyouts Symposium East earlier this year, I asked about the surprising lack of buyout-backed IPOs in 2007. Each panelist looked at me quizzically, and responded that it was just a statistical anomaly, and that it would soon correct itself (save for the panelist who said my numbers must be wrong).
That was April 17, at which point only six buyout-backed offerings had priced on U.S. exchanges. There have been nine more in the proceeding eight weeks, but it still qualifies as a prolonged slowdown. Check out these quarterly numbers, courtesy of Thomson Financial:
Q1 04 13
Q2 04 8
Q3 04 17
Q4 04 20
Q1 05 15
Q2 05 19
Q3 05 23
Q4 05 10
Q1 06 17
Q2 06 17
Q3 06 10
Q4 06 22
Q1 07 6
Q2 07 9
Of equal import is that no one seems able to explain what’s happening (yours truly included). There are plenty of buyout-backed companies of age to be acquired, the public markets are robust (save for a recent hiccup) and aftermarket performance has been generally strong for those companies that do manage to price. Moreover, venture capital-backed companies just had their most voluminous month since October 2004 (according to new data released by NVCA and Thomson).
My panelists might be right that this an anomaly that will “soon” be corrected – but I don’t see how conditions could get much better. Of course, I also can’t identify what is hindering offerings today…
*** LPs love to gossip, and the hot dish involves Sequoia Capital’s most recent annual meeting. During a presentation on VC market trends, Mike Moritz discussed how appreciative he and Sequoia are of company founders who build and stay with their companies. Nothing unusual. But then he also made brief mention of a few entrepreneurs who he felt did not match that description. Among them was at least one individual – some sources say more — who is now a partner with The Founders Fund, a VC firm run by former PayPal execs. The historical animosity is well-documented (see here or here), but LPs were nonetheless surprised to here a fellow VC called out – particularly when that VC’s firm is currently in the process of raising its second fund (important note: Mor! itz never mentioned Founders Fund itself).
I personally don’t think it’s that big a deal, particularly since LPs constantly rag on specific general partners. But it apparently violated some sort of unspoken annual meeting rule, which is why everyone I talked to in attendance seemed to remember it. And why those weren’t in attendance have all heard about it too.
For his part, Moritz also thinks the issue is an overblown nonissue (and will likely think I am over-overblowing it via this column). In an email, he wrote the following: “We expressed our ever increasing admiration and appreciation for the founders of companies who elect to build great, enduring enterprises (either as standalone entities or as part of larger companies), rather than the fast-money crowd who place their personal interests above those of their co-founders, employees and other stakeholders — including all of Sequoia Capital’s limited partners. We’ve always felt like this — it’s nothing new.”
*** A reader wrote in earlier this week to ask the fate of FA Technology Ventures, given that the FA (First Albany) just agreed to sell a majority stake to private equity firm MatlinPatterson. The answer is that FATV is likely to be just fine, with plans to begin raising its second fund later this year. The firm does receive some LP capital from First Albany, but the branding was more due to some of its founders’ past affiliation with the bank, rather than because of any sort of GP ownership issues. In fact, First Albany isn’t even the largest LP on FATV’s debut $100 million fund. That honor goes to the New York Common Retirement Fund.
The only outstanding question is whether FATV will keep its name. First Albany itself is in search of a new moniker, so FATV would make even less sense than it does now. On the other hand, existing VC brands have value separate from their namesakes. For example, most of us are familiar with TA Associates. Few of us, however, know that the TA originally stood for Tucker Anthony…
Top Three
Brysam Global Partners, a New York-based private equity firm focused on consumer financial services, has invested approximately $230 million for a 28% stake in Ixe Grupo Financiero of Mexico. www.ixe.com.mx
Altair Semiconductor, a Hod Hasharon, Israel-based developer of mobile WiMAX processors for handsets and other handheld devices, has raised $18 million in Series B funding. Bessemer Venture Partners led the deal, and was joined by return backers BRM Capital, Giza Venture Capital and Jerusal! em Venture Partners. Altair had raised an $8 million Series A round in late 2005. www.altair-semi.com
Athersys Inc., a Cleveland-based regenerative medicine company, has completed a reverse merger with BTCH VI Inc. (OTC BB: BVIC), in which BTCH will change its name to Athersys. As part of the merger, BTCH has raised $65 million via a private placement. Radius Ventures led the deal, and was joined by OrbiMed Advisors, RA Capital Management, Accipiter Capital Management, H&Q Capital Management, MPM BioEquities and Pappas Ventures. Cowen and Co. and National Securities Corp. served as co-placement agents for! the private placement. Athersys raised over $90 million in VC funding between 1996 and 2002. www.athersys.com
VC Deals
Roxro Pharma Inc., a Menlo Park, Calif.-based drug company focused on pain alleviation, has closed its Series B funding round with $42.7 million. Prospect Venture Partners and Sutter Hill Ventures co-led the deal, and was joined by Thomas ! Weisel Healthcare Venture Partners. www.roxropharma.com
Aquinox Pharmaceuticals Inc., a Vancouver-based small-molecule drug company focused on cancer and inflammatory disease, has raised US$14.5 million in Series A funding. Ventures West led the deal, and was joined by Johnson & Johnson Development Corp., Baker Brothers Investments and seed backer BC Advantage Funds (managed by Lions Capital Corp.). Aquinox was formed in 2004 as a spinout from the University of British Columbia and the BC Cancer Agency. www.aqxpharma.com
EveryZing (f.k.a. PodZinger), a Cambridge, Mass.-based multimedia search and advertising platform, has raised $10 million in Series B funding. Fairhaven Capital led the deal, and was joined by return backers Accel Partners and General Catalyst Partners. www.everyzing.com
PayPerPost, an Orlando, Fla.-based content marketplace linking bloggers and advertisers, has raised $7 million in Series B funding. Draper Fisher Jurvetson led the deal, and was joined by fellow return backers Inflexion Partners, Village Ventures and new investor DFJ Gotham. The company previously raised a $3 million Series A round led by Inflexion. www.payperpost.com
Phytomedics Inc., a Jamesburg, N.J.-based developer of botanical therapeutics, has raised $9 million in Series B funding. Return backers include Inventages Venture Capital and Burrill & Company. www.phytomedics.com
Telltale Inc., a San Rafael, Calif.-based interactive entertainment company focused on episodic game publishing and development, has raised $6 million in Series B funding. Granite Ventures led the deal, and was joined by IDG Ventures SF. It had previously been seeded by Keretsu Forum. www.telltalegames.com
GigaCrete Inc., a Las Vegas–based green building materials company, has raised $5 million in first-round funding from Craton Equity Partners (f.k.a. Paladin Private Equity). www.gigacrete.com
DVC Labs, a San Jose, Calif.-based company focused on enhancing the Web browsing experience on mobile devices, has raised $4.8 million in Series A funding. Trinity Ventures and Matrix Partners co-led the deal. www.dvclabs.com
Oversi Ltd., a Petach Tikva, Israel-based provider of P2P content delivery solutions, has raised $2 million in additional Series B funding. The round is now closed at a total of $8 million. Carmel Ventures led the extension, and was joined by fellow return backers StageOne Ventures and TempoPark Fund. Cisco Systems also participated. www.oversi.com
Bizzuka Inc., a Lafayette, La.-based provider of website design and online content management solutions for SMEs, has raised $1.7 million in first-round funding from Advantage Capital Partners, the Louisiana Technology Fund and several individual angels. www.bizzuka.com
Team and Concepts Ltd., a Hong Kong-based maker of the EditGrid online spreadsheet product, has raised $1.25 million in Series A funding from WI Harper Group. www.editgrid.com
Kyte.tv, a San Francisco-based provider of interactive television technology, said that it has raised an undisclosed amount of funding from Nokia Growth Partners. It previously had announced an undisclosed amount of Series B funding co-led by Swisscom and Holtzbrinck Ventures. www.kyte.tv
Buyout Deals
3i Group has agreed to acquire Eltel Networks from Industri Kapital, TeliaSonera and Eltel management. No financial terms were disclosed. Eltel is a Finland-based outsourcing business for electricity and telecom network services in the Nordic region. www.3i.com www.eltelnetworks.com
Back Yard Burgers Inc. (Nasdaq: BYBI) has accepted a $6.50 per share buyout offer from an group that includes Pharos Capital Group, Cherokee Advisors and former Sonic and Shoney’s CEO C. Stephen Lynn. The total deal is valued at approximately $38 million, including repayment of outstanding debt, and was the consortium’s fourth buyout attempt. Its three prior offers were rejected. Morgan Keegan & Co. advised Back Yard Burgers on the deal. www.backyardburgers.com
Blue Point Capital Partners has acquired Dispatch Transportation Inc., a Fontana, Calif.-based transportation and logistics company for the Southern California construction market. Comerica Bank provided leveraged financing, but no further deal terms were disclosed. www.bluepointcapital.com www.dispatchtrans.com
Diamond Bank PLC, a listed Nigerian bank, has raised $134 million in a private placement led by UK-based private equity firm Actis. The deal gives Actis a 19.1% ownership position. www.act.is
D.E. Shaw & Co. has agreed to acquire Chapel Hill, N.C.-based insurance company James River Group (Nasdaq: JRVR), via a Bermuda-based holding company. The total deal is valued at $575 million in cash, with James River stockholders to receive $34.50 per share in cash. www.james-river-group.com
Hellman & Friedman has closed its $1.8 billion take-private buyout Kronos Inc. (Nasdaq: KRON). www.kronos.com
PE-Backed IPOs
Biofuel Energy Corp., a Denver-based ethanol producer, has reduced its IPO pricing range from $16-$18 per share, t $13-$14 per share. It still plans to offer 9.5 million common shares. This is the second downward amendment for Biofuel Energy, which originally filed to raise $300 million, then revised its target to $196.65 million. The current figure stands at around $144 million. Biofuel Energy plans to trade on the Nasdaq under ticker symbol BIOF with JPMorgan, Citigroup and A.G. Edwards serving as co-lead underwriters. Shareholders include Greenlight Capital, Third Point Partners and Cargill Inc. www.bfenergy.com
Comscore Inc., a Reston, Va.-based provider of online consumer behavior analysis, has set its proposed IPO terms to five million common shares at between $14 and $16 per share. If it prices at the top of its range, it would be valued at approximately $438 million. Comscore plans to trade on the Nasdaq under ticker symbol SCOR, with Credit Suisse and Deutsche Bank Securities serving as co-lead underwriters. It has raised over $92 million in total VC funding since its 1999 inception, from firms like Accel Partners (26.1% pre-IPO stake), JPMorgan Partners (11.1%), Institutional Venture Partners (9.7%), Lehman Brothers (7.7%), Adams Street Partners (7.5%), Topspin Partners (5.2%), Flatiron Partners, vSpring Capital, Devine InterVentures and Rembrandt Venture Partners. www.comscore.com
PE Exits
First Data Corp. (NYSE: FDC) has completed its previously-announced acquisition of FundsXpress, an Austin, Texas-based provider of online banking and bill payment services for consumers and small businesses. No financial terms were disclosed. FundsXpress was advised by Lane Berry & Co., and had raised $80 million in total VC funding from firms like Warburg Pincus, Beacon Partners, Cendant Corp. and Texas Growth Fund. KKR recently agreed to acquire First Data for $29 billion. www.firstdata.com www.fxfn.com
Mentor Graphics Corp. (Nasdaq: MENT) has acquired Sierra Design Automation Inc., a Santa Clara, Calif.-based provider of place and route software. The deal was valued at $90 million, with half in cash and the other half in Mentor Graphics common stock. Sierra Design had raised around $22 million in VC funding since 2004, from Artiman Ventures, Evercore Partners and TeleSoft Partners. www.mentor.com www.sierra-da.com
Wabtec Corp. (NYSE: WAB) has acquired Ricon Corp., a Panorama City, Calif.–based provider of wheelchair lifts and ramps for buses and other passenger transit vehicles, from Cravey Green & Wahlen. The deal was valued at $73.5 million, including debt repayment. www.wabtec.com www.riconcorp.com
PE-Backed M&A
Aquilex Holdings LLC, a platform portfolio company of Harvest Partners, has completed its acquisition of industrial cleaning company HydroChem Industrial Services Inc. from Oaktree Capital Management. No financial terms were disclosed, except that RBS Securities and Credit Suisse provided leveraged financing to Aquilex. www.harvpart.com
BNY ConvergEx Group Inc., a New York–based provider of global agency brokerage and investment technology solutions, has agreed to acquire LiquidPoint LLC, a Chicago–based equity options execution and trading technology firm. No financial terms were disclosed. BNY was formed in 2006 by GTCR Golder-Rauner, Bank of New York and Eze Castle software. www.bnyconvergex.com www.liquidpoint.com
MCG Capital has sold Superior Publishing Corp. to American Consolidated Media, a newspaper operating company owned by Macquarie Media Group, for approximately $65 million. SPC publishes 19 local papers in northern Minnesota and Wisconsin.
Origin Digital Inc., a Weehawken, N.J.-based video applications service provider, has acquired video software applications company InterData Software Inc., according to VentureWire. No financial terms were disclosed. Origin recently raised $5.5 million in Series A funding from Constellation Ventures. www.origindigital.com
Summit Business Media LLC, a portfolio company of Wind Point Partners, has agreed to acquire Wicks Business Information from Wicks Group. No financial terms were disclosed for the deal, which is expected to close later this month. SBM publishes National Underwriter magazine and the NU Online News Service, while WBI publishes Investment Advisor, Credit Union Times, Inside Counsel and Treasury & Risk magazines. www.wbi.com
Firms & Funds
The Carlyle Group has formed a Financial Institutions Group, which will invest in the global financial services sector, including banking and insurance. It will be co-led by Ned Kelly III, former chairman and CEO of Mercantile Bankshares Corp., and David Zwiener, former president and COO of The Hartford Financial Services Group’s property and casualty operations. A Carlyle spokeswoman declined to comment on whether or not the new group will raise a stand-alone fund, or invest out of existing Carlyle funds. www.carlyle.com
Lehman Brothers has closed its fourth Merchant Banking Partners fund with $3.3 billion in capital commitments (including $500 million from Lehman). The fund seeks to acquire control and significant majority stakes in small-to-mid-cap companies. Approximately $1.2 billion of its capital is earmarked for Europe. www.lehman.com
Standard Life Investments has closed its latest European private equity fund-of-funds with €900 million in capital commitments. It also has raised another $300 million for North American Strategic Partners, its first U.S. private equity fund-of-funds. www.standardlifeinvestments.com
Thomas DiNapoli, trustee of the $150 billion New York State Common Retirement Fund, has proposed to use the state pension fund to increase pressure on the Sudanese government to end the genocide in Darfur. The first phase calls for research to determine which companies the fund may be investing in are using objectionable practices in Sudan. The second phase will be to work with those companies to get them to either withdraw from Sudan or begin taking action aimed at providing aid to the Sudanese people, said DiNapoli. After reviewing any changes the companies make, DiNapoli said he will consider divesting from companies that fail to take substantial action. www.osc.state.ny.us/retire
Human Resources
KRG Capital Partners has named three new managing directors: Blair Tikker, Ted Nark and Stewart Fisher. Tikker joined the firm in 2006 as a part-time consultant, focused on deal-sourcing and organizational development at KRG’s portfolio companies. Nark previously was chairman and CEO of White Cap Construction Supply Inc., a former KRG portfolio company sold to Home Depot in 2004. Fisher previously was CFO and executive VP for administration at Accellent Inc., a former KRG portfolio company sold to KKR in 2005. www.krgcapital.com
Jayanta Banerjee has joined Lehman Brothers has managing director and head of private equity and growth capital in India (excluding real estate). He previously was a director with ICICI Ventures. www.lehman.com
Elizabeth Obershaw has joined Horsley Bridge Partners as a managing director. She had spent the past 16 years as CIO of the Hewlett-Packard retirement plans.
David Libowitz has joined Tri-Artisan Partners as a managing director. He previously was a partner with Warburg Pincus. www.tri-artisanpartners.com
Henry McVey has agreed to join Fortress Investment Group as a managing director focused on “peed-value” public equity investing. He previously was a managing director and chief U.S. investment strategist at Morgan Stanley. www.fortress.com
Richard Prestegaard has joined High Road Capital Partners as director of business development. He previously worked at such firms as Barclays Capital, Citigroup and Advest. www.highroadcap.com
Enterprise Partners has promoted Erik Nierenberg to the position of venture partner. He joined the firm in 2004 as an associate, and was promoted to principal in February 2006. www.epvc.com
Rakesh Kaul has joined The Carlyle Group as a senior advisor to the firm’s consumer and retail team. He also will join the board of Carlyle portfolio company Oriental Trading Co. Kaul’s past jobs have included CEO of catalog marketing company Hanover Direct. www.carlyle.com
If you do not receive this within five minutes, please try and sign in again. If the problem persists, please
email: