I just received a copy of the proposed SEIU bill that would affect private equity investments made by the Washington State Investment Board, and have posted it here. My initial reaction is that it’s way too hyperbolic, in terms of listing the alleged offenses of private equity. In fact, the attacks detract from what should be the legislative goal of greater transparency and pension attention to corporate responsibility.
Leaving that aside, I’m generally predisposed toward both of the aforementioned goals — but this particular bill goes too far. Specifically, it requests that WSIB-backed private equity firms release both their own financial data and that of its portfolio companies. This would include: “Revenues, expenses, earnings, taxes paid, government revenues received, executive compensation, employment and compensation of non-managerial employees and debt levels, including debt-to-equity ratios.”
WSIB already discloses fund-specific performance, which ultimately is the most valuable tool in learning if a private equity fund is serving in its beneficiaries’ best interests. It also publishes board agendas and minutes to its website, but could certainly do a better job in terms of both timeliness and detail. And I’m actually okay with expanding transparency to include some additional PE firm financials, including fees and partner compensation. Fair price of feeding at the public trough.
But the rest should not only be opposed by the WSIB and the private equity industry, but also by fair-minded folks at SEIU (of which there are many). Public disclose of private portfolio company financials would violate trade secrets, and could put said companies at a competitive disadvantage (particularly when such obliqueness is one of the main benefits of being private in the first place). It is not in a beneficiary’s best interest to either: (A) Not get to indirectly invest in a good deal, or (B) Invest in said deal, but then have the company needlessly damaged.
Remember, WSIB already receives portfolio company-level financials, but it’s kept confidential by fiduciaries. If SEIU wants to ensure that the fiduciaries receive certain types of information, then write that bill and WSIB can use it when negotiating LPAs. But the overall bill reaches too far, and may not be practically possible even if PE firms acceded to it.
California already split this baby years ago, and it’s growing up just fine.
*** You don’t often see general partners become limited partners, but that’s exactly what’s happened in the case of Lane MacDonald. You might remember me writing about Lane this past spring, when he decided to leave Boston-based private equity firm Alta Communications over strategic differences. The departure came just before Alta launched a new fundraising drive, and seemed to revolve around the firm’s insistence on sticking to the lower end of the middle markets. My assumption was that MacDonald – and fellow departing partner Bob Emmert – would just hook up with a slightly larger firm after finishing up some transition work.
“I was really looking for a great platform when I decided to leave Alta,” MacDonald says. “I assumed I’d stay on the GP side, but wanted to explore a variety of things.”
That exploration landed him an interview at Harvard Management Co., which was looking for a new private equity portfolio manager to replace Kevin Tunick (who left to run private equity for UNC at Chapel Hill). MacDonald didn’t have any direct LP experience, having worked at worked at a couple of PE firms and years ago as an I-banker with Robbie Stephens. But Harvard was willing to take a chance outside the box, and MacDonald started work there last week.
It’s way too early to say whether or not the move will work, but my gut says that Harvard will benefit from a particularly fresh set of eyes. That doesn’t mean there won’t be some awkward moments – yesterday we were peers, and today I’m effectively judging you – but that will pass quickly. Plus, Harvard has kind of done this before, as MacDonald’s new colleague John Shue was once briefly on the GP side with Audax Group. There’s also the example of Sallie Shuping Russell, who moved from LP (Duke University’s endowment) to GP (Intersouth Partners) back to LP (Quellos Group, now part of BlackRock)…
*** My favorite suggestions so far for Ofer Nemirovsky’s mansion are HarbourNest and The Can. Keep ’em coming.
*** Last week, Apollo Management announced that it had hired Garry Stein as director of investor relations. It was a new position for Apollo, so I called Stein to ask for more detail. He referred me back to an S-1 that Apollo filed in April. Glean from that what you will…
Top Three
SpiceJet Ltd., India’s second-largest domestic budget airline, has received up to $100 million in private equity funding commitments. WL Ross is leading the tranched-out transaction, with Istithmar World Capital and SpiceJet director Ajay Singh also participating.
Snow Phipps Group has acquired ArrMaz Custom Chemicals Inc., a Mulberry, Fla.-based maker of process chemicals, from GSO Capital Partners. No financial terms were disclosed.
UBS announced that it will split off its investment banking business, and also named a new CFO and new board members.
VC Deals
ThermaSource, a Santa Rosa, Calif.-based provider of drilling, engineering and consulting services to the geothermal energy sector, has raised $41.5 million in new private equity funding. Rustic Canyon Partners was joined by return backers Riverstone Holdings and US Renewables Group. ThermaSource has now raised $93 million in private equity and debt.
Clarabridge, a Reston, Va.-based maker of text-mining software, has raised $12 million in Series C funding. Grotech Ventures led the round, and was joined by Harbert Venture Partners and return backers Boulder Ventures and Intersouth Partners.
Red Mango, a Los Angeles-based operator of frozen yogurt shops, has raised $12 million in Series A funding. CIC Partners was joined on the deal by John Antioco, former CEO of Blockbuster, Taco Bell and Circle K. Antioco will serve as Red Mango’s chairman.
Follica Inc., a Boston-based developer of therapies for androgenetic alopecia and other hair follicle disorders, has raised $11 million in Series B funding. Polaris Venture Partners led the round, and was joined by return backers InterWest Partners and PureTech Ventures. The company had raised a $5.5 million Series A round in early 2007.
RF Nano Corp., a Newport Beach, Calif.-based developer of carbon nanotube analog electronics, has raised $8 million in Series B funding. Oxantium Ventures led the round, and was joined by return backer Okapi Ventures.
Marketo, a San Mateo, Caif.-based provider of lead management software, has raised $8 million in Series B funding. Storm Ventures led the round, and was joined by return backer InterWest Partners.
Lijit Networks Inc., a Louisville, Colo.-based provider of search tools and statistics for online publishers, has raised $7.1 million in Series C funding. Foundry Group led the round, and was joined by fellow return backers Boulder Ventures and High Country Venture. It had previously raised over $3.3 million.
Serentis Inc., a Cambridge, UK dermatology drug startup formed by former Arakis Ltd. executives, has raised £5.3 million in additional Series A funding. It had held a £10 million first close last year. Backers include MVM Life Science Partners, Apposite Capital, East Hill and Novo AS.
ScanCafe, a San Francisco-based provider of photo scanning and restoration services, has raised $4 million in Series B funding led by Sigma Partners.
1Cast, a Kirkland, Wash.-based online video news aggregator, has raised an undisclosed amount of first-round funding led by Eagle River Holdings LLC
Aquus Energy Inc., a provider of solar energy systems to commercial and residential customers in the Mid-Atlantic and Northeast, has raised an undisclosed amount of “Series 1” funding led by Oppenheimer & Co.
Buyout Deals
Lightyear Capital has sponsored a leveraged recapitalization of Higher One Holdings Inc., a New Haven, Conn.–based provider of financial services for the higher education market. No financial terms were disclosed.
Monomoy Capital Partners has agreed to buy the Molded Plastics Products business of Atlantis Plastics Inc. (OTC: ATPL), which on Sunday filed for Chapter 11 bankruptcy protection. The deal is valued at $20.7 million, subject to certain adjustments.
NBGI Private Equity has acquired certain assets of Food & Drink Group, a UK bar and restaurant operator that recently went into administration after breaking its banking covenants. Barclays provided leveraged financing.
The Riverside Company has acquired Wiz Korea, operator of a preschool education franchise in Korea. No financial terms were disclosed for the deal, which is Riverside’s first in Korea.
Wind Point Partners has acquired Ryt-Way Industries, a Lakeville, Minn.-based contract manufacturer and packager serving the food industry. No financial terms were disclosed. Leveraged financing was provided by CIT, GE Capital, ING Capital and Norwest Mezzanine Partners.
PE-Backed IPOs
Jiangsu Shunda Group, a Chinese maker of silicon wafers for use in solar power cells, plans to raise $1 billion in an IPO next year in New York. Company shareholders include Actis Capital.
PE Exits
Ethicon Endo-Surgery, a unit of Johnson & Johnson, has agreed to acquire SurgRx Inc., a Redwood City, Calif.-based developer of laparoscopic vessel fusion tools for surgical hemostasis. No financial terms were disclosed. SurgRx has raised around $83 million in total VC funding since 2003, from firms like Alta Partners, New Enterprise Associates, California Technology Ventures, Magnetar Capital Return, Prospect Venture Partners and Trellis Health Ventures.
Hewlett-Packard has agreed to acquire Colubris Networks Inc., a Waltham, Mass.-based provider of wireless networks for enterprises and service providers. No financial terms were disclosed. Colubris has raised over $52 million in VC funding since 2001, from firms like PrismVentureWorks, Business Development Bank of Canada, GrandBanks Capital, DCM-Doll Capital Management, TDF and the Mid-Atlantic Venture Funds.
PE-Backed M&A
2e2, a UK-based IT services company owned by Duke Street Capital, has agreed to acquire Netstore, a listed IT networking group. The deal is valued at approximately £58.1 million, or 32 pence per share.
Return Path Inc., a New York-based provider of email management and deliverability solutions for commercial customers, has acquired Mountain View, Calif.-based competitor Habeas Inc. No financial terms were disclosed. Return Path has raised over $41 million in VC funding since 2000, from firms like Mobius Venture Capital, JPMorgan Partners, Sutter Hill Ventures, Western Technology Investment and GC&H Partners. Habeas has raised $15.6 million since 2004, from Canaan Partners, Diamondhead Ventures and Skymoon Ventures.
Ross Education LLC, a St. Clair, Mich.-based portfolio company of Huron Capital Partners, has acquired The Institute of Medical and Dental Technology, a Cincinnati-based provider of post-secondary career education in allied health fields. No financial terms were disclosed.
Firms & Funds
Primus Capital Partners has closed its sixth fund with $275 million in capital commitments. The Cleveland-based firm focuses on the healthcare, business services and education industry sectors. Read more…
Advans SA SICAR, a Luxembourg-based VC firm that focuses on greenfield microfinance institutions in Africa and Asia, has raised €7 million in capital commitments from CDC Group.
Cinven reportedly has acquired a 50% stake in Indicus Advisors, a debt advisory and management business with offices in New York and London.
Human Resources
Dana Stalder has joined Matrix Partners as a general partner based in the firm’s Menlo Park, Calif. office. He previously was a senior vice president with PayPal.
Leslie Bider has been named CEO of PinnacleCare, a private health advisory firm. He previously was chief strategist at ITU Ventures and, before that, was chairman and CEO of Time Warner’s music publishing arm.
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