PE Week Wire: Wed., Aug. 22, 2007

UK private equity pros have had their reputations dragged through the mud in 2007, with average Londoners to be forgiven for thinking that the whole lot is made up of greedy raiders who revel in stepping on the working man. What is really needed is a study of private equity ethics, to see if the mud deserves to stick. Too bad it hasn’t happened yet.

Instead, what we get is an utterly worthless report by Grant Thornton, whichdecided to get to the truth of the matter by surveying… Private equity pros. Not by doing a qualitative review of actual private equity transactions, which would include interviews with equity sponsors, portfolio company management and portfolio company employees. But instead by just asking that PE pros if they feel “ethical.”

Big shock: Most private equity pros say that their industry has “high” ethical standards. Why not also ask if they think they’re good parents (but don’t ask the kids)?

The Grant Thornton consultants working on this would have been equally productive by scoring a symphony of piano-playing cats on YouTube. It reminds me of that scene from Dave, when Charles Grodin learns that the government is spending money to make American car buyers feel better about cars they had already bought. Just mind-numbing.

I do believe that most private equity pros are ethical, but have little interest in taking their word for it.

*** A few follow-ups to yesterday’s column on Form D filings, and the SEC proposal to bring them into the digital age.

— To reiterate, I support the change. That said, it is not correct to suggest that I and/or Thomson Financial currently enjoy a monopoly on access to the filings (as argued here). They already are publicly available in paper form to anyone who walks into the SEC reference room. We just happen to take the time to go through them. It isn’t rocket science. Before Thomson began scanning them into a database (due to contractual obligation w/ SEC) – back when I ran PE Week and lived in New York – I had an old high school friend go through them once a week, in order to make some extra spending cash. Next up were a series of Georgetown undergrads. A blogger could get someone to do the same for about $150 a week. Again, they should be made more easily accessible, but this is hardly a monopoly.

— I mentioned that some startups have tried obfuscating what they actually do, in the Form D section titled: “Brief description of business.” My favorite was some issuer that just said: “Business is aimed at making money.”

More recent is SpeedEdate Inc., which apparently raised around $2.8 million in a Series A round led by Menlo Ventures. Its Form D describes its business as: “Design and manufacture of semiconductor components.” Funny, everyone else seems to think it’s a stealth-mode online speed dating startup…

— Emailer Bill has a counterargument: “You noted that the SEC suggests that the change would reduce filing fees, promote transparency, promote federal/state regulatory coordination, and improve data collection. But, as currently envisioned, it would also mean that these heretofore private securities transactions would be available for scrutiny by the public. Why? The securities involved in these transactions are not being offered to the public. These are private transactions. Certainly, the investors need to be informed about their investments, and the regulators need to monitor what is going on, including compliance with Regulation D. But, (no offense) nosey reporters, competitors, self-appointed keepers of the public welfare, ne’r do wells, etc., should not have access to such information.” Answer him here.

Top Three

First Reserve has agreed to sell Ohmstede Ltd. to Emcor Group Inc. (NYSE: EME) for approximately $455 million in cash. Ohmstede is a Beaumont, Texas-based provider of aftermarket maintenance and repair services, replacement parts and fabrication services for heat exchangers used by the refinery and petrochemical industries.

Travelport Ltd., a owner of travel services company Galileo and, has completed its $1.4 billion acquisition of travel-booking service Worldspan. Blackstone Group and Technology Crossover Ventures bought Travelport from Cendant earlier this year for $4.3 billion. Court Square Capital and Teachers’ Private Capital bought Worldspan in 2004 for around $900 million from Delta Airlines, Northwest Airlines and American Airlines.

Telegent Systems Inc., a Sunnyvale, Calif.–based provider of mobile TV solutions, has raised $20 million in third-round funding. Northern Light Venture Capital led the deal, and was joined by return backers New Enterprise Associates, Walden International and Index Ventures. Telegent has now raised around $50 million in total VC funding since 2004.

VC Deals

Neuromed Pharmaceuticals Ltd., a Vancouver-based developer of pain drugs, said that it has raised US$53.3 million in Series E funding. Return backers include MPM Capital, James Richardson & Sons, Neuro Discovery, GrowthWorks Capital, BDC Venture Capital, CMDF and the Royal Bank of Canada. An earlier report had put the round total at $36 million, with the capital to be used to finance Phase III clinical trials of a new product recently licensed from J&J. Neuromed also recently signed a research collaboration and license agreement with Merck, which included an immediate cash payment of $25 million and up to $450 million in progressive milestone payments.

Clearwell Systems Inc., a Santa Clara, Calif.-based provider of corporate email intelligence solutions, has raised $17 million in third-round funding. DAG Ventures was joined by return backers Redpoint Ventures and Sequoia Capital. Clearwell has now raised $33 million in total VC funding.

Mirabilis Medica Inc., a Seattle-based developer of technology that allows physician to destroy pathological tissue deep inside the body without damaging the intervening tissue, has raised $10.5 million in additional Series A funding. The round had held a $4 million first close last year from Charter Life Sciences and vSpring Capital. The extension was led by Arboretum Ventures, and also included Split Rock Partners, Dow Venture Capital and an individual

Alpex Pharma, a Swiss pharmaceutical and nutraceutical tablet manufacturing company, has raised CHF 10.9 million ($9m) in Series B funding. BB Biotech Ventures led the round, and was joined by return backer Signet Healthcare Partners.

Conduit Labs, a Cambridge, Mass.-based social gaming startup, has raised $5.5 million in Series A funding. Charles River Ventures and Prism VentureWorks co-led the round, with Susan Wu of CRV and Will Kohleer of Prism taking board seats. Conduit founder Nabeel Hyatt began the company while an entrepreneur-in-residence with Prism.

SelectMinds Inc.,a New York-based provider of corporate social networking solutions, has raised $5.5 million in Series A funding from Bessemer Venture Partners.

Cellcast Asia Holdings has raised $5.25 million in first-round funding from Canaan Partners. The startup was formed by Cellcast PLC (AIM: CLTV), as a new vehicle for pan-Asian regional distribution of its interactive products and services. Cellcast PLC has provided all of its shares in Cellcast India and its 50% holding in its Southeast Asia-based join venture with Malaysia’s mTouche. Cellcast PLC will hold 37.5%, while Canaan Partners will hold $38.9 percent. Inc., a Denver–based provider of an online directory of home improvement professionals, has secured $3.45 million of a $6 million Series B round, according to a regulatory filing. Greenhill SAVP said that it provided $2.5 million, while Veronis Suhler Stevenson also is listed as a shareholder.

Aito Technologies, a Helsinki, Finland-based developer of business management software for mobile operators and service producers, has raised an undisclosed amount of first-round funding from Conor Venture Partners.

Managed Objects, a McLean, Va.-based provider of IT system management software, has received a $7.5 million senior secured credit facility from ORIX Venture Finance. The deal consists of a $5 million senior secured term loan and a $2.5 million revolving loan. Managed Objects previously raised around $45 million in VC funding from firms like JMI Equity, Fidelity Ventures, Intel Capital, FT Ventures and Lazard Technology Partners.

Buyout Deals

Amadeus Capital Partners and Northzone Ventures have acquired a majority stake in EPiServer AB, a Stockholm, Sweden-based provider of Web content management solutions. The deal was valued at $23.5 million. Peter Larsson, who recently built and sold Protect Data to CheckPoint for over $600 million, also invested and will join EPiServer as CEO.

Creo Capital Partners has acquired Zero Debt Bottling Corp. (a.k.a. 505 Southwestern), an Albuquerque, N.M.–based seller of all-natural and organic green and red chile sauces, salsas and fajita marinades. No financial terms were disclosed.

Littlejohn & Co. has acquired Synchronous Aerospace Group from Hancock Park Associates for an undisclosed amount. Synchronous is a Santa Ana, Calif.-based manufacturer of precision-machined parts and integrated kits and assemblies to the commercial and defense aerospace and space markets.

PE-Backed IPOs

Adnexus Therapeutics Inc., a Waltham, Mass.-based developer of therapeutic proteins, has filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker symbol ADNX, with Lehman Brothers and UBS serving as co-lead underwriters. The company has raised $70 million in total VC funding since 2003, from Atlas Venture, Flagship Ventures, HBM BioVentures, Polaris Venture Partners and Venrock.

PE Exits

Yahoo reportedly has acquired German mobilemarketing company Actionality. Actionality has raised VC funding from Doughty Hanson Technology Ventures.

PE-Backed M&A

Advanced Communications Technologies Inc. (OTC BB: ADVC), a New York-based provider of reverse logistics for consumer electronics, has acquired Vance Baldwin Electronics, a Fort Lauderdale, Fla.-based OEM parts distributor. The deal was largely financed by a $30 million PIPE infusion from H.I.G. Capital and the issuance of senior and subordinated notes to a syndicate arranged by Sankaty Advisors.

AKQA Inc., a San Francisco-based interactive marketing company, has acquired search marketing company Searchrev for less than $10 million, according to The Wall Street Journal. General Atlantic bought AKQA earlier this year for between $200 million and $250 million from Francisco Partners.

Medio Systems Inc., a Seattle-based provider of mobile search and advertising solutions, has acquired mobile advertising firm Suhari LLC for an undisclosed amount. Medio Systems has raised nearly $40 million in VC funding since 2005, from Mohr, Davidow Ventures, Accel Partners, Frazier Technology Ventures, Venture Law Group, Dot Edu Ventures and Trilogy Equity Partners.

Ply Gem Industries Inc., a Kearney, Mo.-based maker of residential construction and renovation products, has agreed to acquire CertainTeed Corp.’s vinyl window and patio door business. The deal will be financed via a combination of cash on hand and borrowings against Ply Gem’s $75 million revolving credit facilities. It is expected to close later this quarter. Ply Gem is a portfolio company of Caxton-Iseman Capital.

SunGard has completed its acquisition of VeriCenter Inc., a Houston, Texas-based provider of managed services, application hosting and IT infrastructure outsourcing.No financial terms were disclosed.SunGard was acquired in 2005 by seven private equity firms, while VeriCenter had raised around $23.5 million in VC funding from BMC Software, Broadband Venture Partners, Intel Capital and Pharos Capital Group.

Firms & Funds

The New York State Teachers’ Retirement System (NYSTRS) has approved the following fund commitments: Up to $100 million for Kelso Investment Associates VIII, up to $75 million for KRG Capital Fund IV, up to €50 million for Industri Kapital 2007 and up to $75 million for Avenue Special Situations Fund V.

TPG Capital is nearing a final close of over $4 billion for its latest Asia fund, according to LBO Wire. The firm’s previous Asia fund was raised under the Newbridge brand, and closed on $1.5 billion in 2005. In other Asia fundraising news, Private Equity Insider reports that The Carlyle Group is coming to market later this year with a $3 billion Asia-focused vehicle.

Human Resources

Tom Dennedy has joined Artiman Ventures as chief financial officer. He previously served in the same role for TeleSoft Partners.

Jerry Johnson has joined RJL Equity Partners as a vice president focused on middle-market buyout and expansion equity opportunities. He previously was with American Capital.

Jagi Gill has joined Split Rock Partners as an entrepreneur-in-residence. He will focus on medical device opportunities, and previously served as CEO of Sage Medical. Before that, he held executive positions in both business development and marketing with Boston Scientific. Gill is currently chairman of PhysioStream Inc.

Lois Quam has joined Piper Jaffray as a managing director of alternative investments, in a newly-created position responsible for opportunities in the cleantech and healthcare sectors. She will be based in Minneapolis, and previously was in charge of UnitedHealth Group’s public and seniors businesses.

Jeffrey Eaton, Daniel Vene and Thomas Knechtel have joined placement agent C.P. Eaton Partners. Eaton will focus on private equity, and previously was a director in the natural gas structuring and commodities trading division of Constellation Energy Commodities Group. Vene will focus on real estate, and previously was a principal with Allegiance Capital Partners. Knetchtel will focus on hedge funds, and previously was a vice president at Channel Capital Group.

Pacific Growth Equities has promoted Chris Dodge to head of institutional sales. He joined the firm in 2002 from Robertson Stephens. John Coleman, who had run institutional sales for over a decade, has been named the firm’s vice chairman.

Ken LeDeit and Lafe Vittitoe have left Comerica to join the Silicon Valley office of Square 1 Bank. LeDeit will serve as senior vice president of venture banking, while Vittitoe will serve as vice president of venture banking.