PE Week Wire: Tuesday, October 7, 2008

Talk to any big buyout fundraiser over the past two years, and you’ve heard the following refrain: “If the economy goes south and traditional fund capital sources – U.S. pensions, endowments private foundations, etc. – cut back on new commitments, we’ll be okay because of the sovereign wealth funds.”

This line was not in reference to the handful of SWFs who have long invested in PE (Canada, Netherlands, Singapore), but rather to the flood of new money from places like China and Dubai. These groups were viewed as a sort of safety valve for private equity. Dumb money when the smart money runs for the hills.

I’m just thinking aloud here, but I’m not so sure these folks are really going to be there in big buyout’s time of need. An SWF manager that began investing in PE two years ago is currently staring at an all-red portfolio, without the benefit of legacy black. He understands that this is a long-term asset class, but that intellectual argument might get drowned by the visceral vomiting. If so, is there yet another alternative avenue available? And no, the public markets don’t currently count.

*** Allan Thygesen has left The Carlyle Group, in order to help launch a new early-stage VC firm. The stealth firm has enough partner capital to do select angel deals, and will begin pre-marketing its debut fund late this year. Formal fund-raising is expected to commence in early 2009.

“When we set this in motion late last year, we hadn’t quite foreseen the global economic meltdown,” Thygesen explains. “So we’ll wait a bit longer than we had expected, and probably target a bit less money.” He declined to identify his two partners, except to say one was a longtime VC with prior operating experience, and that the other was a pure operator.

Thygesen originally joined Carlyle in 2001, as a San Francisco-based managing director of what was then called Carlyle Venture Partners. The group has since evolved into Carlyle Growth Partners, which focuses more on late-stage deals. Thygesen believes that the next iteration may be small-cap buyouts. “It makes total sense for Carlyle, because they can’t really afford to do buyouts with less than $200 million or $250 million in equity out of their big buyout fund,” he says. “But I’m a venture capitalist.”

Thygesen’s deals with Carlyle included Air2Web, Archetype Solutions, Canesta, Indigo Systems (acquired by FLIR Systems), Rhythm NewMedia, SMaL Camera (acquired by Cypress Semiconductor), TradeBeam, Viator and Zafu.

He previously ran sales and biz dev for interactive TV company Wink Communications, and before that served in a variety of roles with Gold Disk Inc., a VC-backed publisher of personal and corporate productivity software.

*** Each of Lehman Brothers’ direct alternatives groups — Merchant Banking Partners, VC Partners and Real Estate — will try to spin out independently. Don’t be stunned if they don’t all succeed.

*** Erin recently attended a conference, and found two things: (1) Over 90% of the people she spoke to knew about and/or received PE Week Wire. (2) About 30% of those people were unaware we had a website (peHUB) that gets updated throughout the day.

I’m not quite sure how that’s possible — pretty sure I promote the site incessently — but in case you are in the 30 of the 90: Take a gander at

*** Quiz Time: Can you name the venture capital firm that earlier this year invested around $20 million into a company that was involved in a $10b+ buyout. Hint: It’s all fun and games, until someone marks down their investment.

Top Three

Teachers’ Private Capital has agreed to acquire Aquilex Holdings LLC from Harvest Partners. No financial terms were disclosed for the deal, which is expected to close in December. Aquilex is a Norcross, Ga.-based energy service provider specializing in refining, nuclear and fossil power generation and waste to energy. It was acquired by Harvest Partners in 2007 from First Reserve Corp. Harris Williams & Co. advised Aquilex both on the 2007 transaction and is advising it on the current transaction.

Alien Technology, a Moran Hill, Calif.-based RFID company, has raised $38 million in Series I funding. Return backers include Advanced Equities, New Enterprise Associates (NEA), Rho Ventures and Sunbridge Partners.

e-Rewards Inc., a Dallas-based provider of “by-invitation-only” online market research panels, has raised $60 million from TA Associates, in exchange for a minority ownership position.

VC Deals

Nexeon MedSystems Inc., a Charleston, West Va.-based developer of coronary stent systems, has raised $24 million in Series A funding. Backers include SurModics, Guidant Corp. and undisclosed private investors.

Industrial Origami Inc., a San Francisco-based developer of a new method for designing and manufacturing with sheet materials, has raised $17 million in new funding, according to VentureWire. Environmental Technologies Fund (UK) led the round. Past backers have included Wellington Partners and AdInvest AG.

Spectrum K12 School Solutions Inc., a Towson, Md.-based provider of special education and IEP management software, has raised $7.4 million in Series C funding. Backers include Novak Biddle Venture Partners, Capital Trust Ventures, Comerica Bank and MMV Financial Inc. The company had previously raised around $42 million from Novak Biddle, Updata Partners and Warburg Pincus.

Giga Omni Media, an online publishing company behind the GigaOm blog network, has raised $4.5 million in new VC funding. Alloy Ventures led the round, and was joined by return backers True Ventures, Rakesh Mathur, Venky Harinarayan and Anand Rajarama.

Appssavvy, a New York-based direct sales team for social media applications, has raised $3.1 million in Series A funding. True Ventures led the round, and was joined by founder Scott Kurnit.

CollegeWikis, a New York-based group messaging platform for students, has raised $2 million in Series A funding. HighBAR Ventures led the round, and was joined by Richmond Management, eCoast Angel Network and Boston Harbor Angels.

GangaGen Inc., a Palo Alto, Calif.-based developer of products for the treatment of bacterial infections, has raised $1.8 million in VC funding from ATEL Ventures.

MindFuse, a Berkeley, Calif.-based developer of online virtual worlds and massively multiplayer online games, has raised $1 million in convertible note funding from Keiretsu Forum.

Newgen Software Technologies Ltd., a New Delhi-based provider of enterprise content management and business process management software, has raised an undisclosed amount of VC funding from SAP Ventures.

Buyout Deals

Amherst Holdings LLC, a holding company for businesses focused on the mortgage sector, has raised $225 million in private equity and debt funding from an investor consortium led by Stone Point Capital.

Audax Group has acquired Andrews Holdings Inc. from DFW Capital Partners, Meridian Venture Partners and Theo Capital Partners. No pricing terms were disclosed. AbleCo Finance provded senior note financing, while Greyrock Capital Group provided mezzanine financing. Andrews is a Valencia, Calif.-based provider of private security and risk mitigation services.

Cartesian Capital Group has expressed an interest in acquiring Creston, a publicly-traded UK marketing agency in which Cartesian has already acquired a 10% stake. Creston’s current market cap is £26.6 million, and already has received a buyout offer from an alternate, and undisclosed, U.S. private equity firm.

Circle Peak Capital has invested in Mrs. John L. Strong, a maker and retailer of branded luxury stationary and home goods. No financial terms were disclosed.

Emerging Capital Partners has acquired a minority stake in Financial BC SA, a regional commercial bank based in the African nation of Togo, in exchange for $28 million.

J.H. Whitney appears poised to buy Igloo Products Corp., a Katy, Texas-based maker of ice chests, beverage coolers and thermoelectric coolers.

MSD Capital and North Peak Capital have acquired Dental One Inc., a dental practice management company, from SSM Ventures and ABN Amro. No financial terms were disclosed.. Dental One has around 60 affiliated units in Texas, Arizona, Colorado and Utah.

PE-Backed M&A

RecoverCare LLC, a Radnor, Penn.-based provider of bariatric-related equipment to clinics & hospitals, has acquired T.H.E. Medical Inc. of Ontario, Canada. LLR Partners provided RecoverCare with equity capital to help finance the deal, although specific financial information was not disclosed.

Rowmark, a maker of laminated and co-extruded plastic sheet products for engraving applications, has acquired 100% ownership of Tromark SAS, an Ouzoir, France-based marketing joint venture between Rowmark and Trodat GmbH (Austria). No financial terms were disclosed. Rowmark is a portfolio company of Clearview Capital.

PE Exits

Convergys Corp. (NYSE: CVG) has acquired Ceon Corp., a Redwood City, Calif.-based provider of product lifecycle management and fulfillment software for communications service providers. No financial terms were disclosed. Ceon had raised over $125 million in VC funding since 1998, including a 2003 recap. Selling shareholders included Accel Partners, Needham Asset Management and Sutter Hill Ventures.

Human Resources

Allan Allweiss has joined LBC Credit Partners as a managing director in charge of the firm’s new Chicago office. He previously was executive VP of CIT Commercial and Industrial.

Christopher Cooke is joining Greenhill & Co. as a managing director in the firm’s fund placement group. He previously was part of the fundraising and IR team of UK hedge fund CQS, and before that was a managing director in Lehman Brothers’ fund placement group.

John Dearborn and Cathy Belk have joined JumpStart, a venture development group in Northeast Ohio, as chief development officer and chief marketing officer, respectively. Dearborn previously was CEO of 3Guppies Inc., a Seattle-based mobile social networking company. Belk had served in a variety of roles with American Greetings.

Jon Edington has joined Sovereign Capital as an assistant director for the firm’s portfolio development team. He previously was with 3i Group.

Michael Jenkins has joined healthcare I-bank Leerink Swann as a senior managing director and head of Leerink Swann Strategic Advisors. He previously was a partner with Trinsum.

Irena Melnikova has joined TVM Capital as a Boston-based senior associate on the firm’s life sciences team. She previously was part of the biopharma I-banking team at Leerink Swann.

Joseph Saldutti Jr. has joined Gridiron Capital as a managing director. He previously was with TDA Capital Partners, where he managed private equity funds.

James Tanner has joined Investcorp as head of its placement and relationship management team. He will be based in Bahrain, and previously was with London-based Morley Fund Management (now Aviva Investors) as managing director of distribution and alternatives.