PE Week Wire: Wednesday, July 2, 2008

Q2 is officially in the books, and might eventually be optioned out for the next Wes Craven flick. Just a freaking mess, according to a 40-page M&A autopsy produced by Thomson Reuters (get it here).

Private equity was hit particularly hard, with just $152.4 billion in global volume. That’s down nearly fourfold from the $601 billion in the first half of 2007, with the only silver lining being that Q2 was a bit better than Q1 ($774.b vs. $75b).

Private equity also lost a ton of M&A market share. In the second quarter, for example, just one of the 15 largest global M&A deals had a private equity sponsor — $12.8b Pennsylvania Turnpike privatization — and that only came in at number 14. Overall, PE-sponsored deals accounted for just 9% of global M&A in the first half of 2008, compared to 25% in the first half of 2007.

It was even worse when limited to the Americas, where $26 billion in first-half PE deals represented nearly a 92% drop-off from 2007 levels. In Q2, PE deals represented just 3% of total M&A, which was its lowest quarterly percentage in five years.

Q2 venture capital data won’t be finalized for a couple more weeks, but the preliminary figures look sluggish. Unless the MoneyTree number-crunchers are sitting on some big deals, it’s safe to expect a slower deal-making quarter than either Q1 or any quarter in 2007. Looks like a return to 2005 levels. VC fund-raising, on the other hand, will outpace Q1.

*** A few of you have emailed about the fact that three VC-backed companies filed for IPOs yesterday. Guess you considered it kind of ironic, considering how much media attention was given to the VC-backed IPO shutout. Worth cautioning that there is a big difference between filing for an IPO and pricing one. The former requires ambition and an attorney. The latter requires actual investor interest.

*** Heard someone mention yesterday that Chrysler carries headline risk for the overall private equity market, where a failure could cause a ripple effect. Not a theory I buy. Chrysler has always seemed like a private equity outlier – a rescue deal that was given 50/50 odds (at best) of succeeding. Had Cerberus bought Toyota and messed it up, I might agree. But it bought Chrysler, which everyone agrees was already nearing the point of no return.

*** So if CNBC can kill Bear Stearns, what else can it kill? Or perhaps the better question is what can it resuscitate? The VC-backed IPO market? What if Faber and Gasparino come on air today to talk about the massive mutual fund interest in Alimera Sciences or Zonare Medical? Will that make them hits? Sure it would be bad journalism, but no worse than blaming the messenger for recognizing Bear’s collapse before Bear did.

Top Three

Informa PLC (LSE: INF), a UK-based event organizer and publisher, has received a $4.3 billion take-private offer from The Carlyle Group, Hellman & Friedman and Providence Equity Partners.

Stone Point Capital has agreed to acquire a 51% in the insurance business of Fiserv Inc. (Nasdaq: FISV). The deal includes $205 million in equity and $335 million in debt.

Nimbuzz, a Rotterdam-based mobile VoIP and IM provider, has raised $15 million in Series B funding. Naspers/MIH led the round, and was joined by return backer Mangrove Capital Partners. Read the peHUB interview with Nimbuzz CEO EJ Lugt.

VC Deals

PacketFront, a Swedish provider of broadband solutions to urban and Greenfield carriers in Europe and the Middle East, has raised €26 million in new funding. Return backers include European Equity Partners, Amadeus Capital Partners and TLcom Capital.

MedAvante Inc., a Hamilton, N.J.-based provider of centralized psychiatric patient evaluation, has raised $20 million in new funding from Goldman Sachs and Trevi Health Ventures. Walter Greenblatt & Associates served as placement agent.

AlloCure, a cell therapy company focused on acute kidney injury, has raised $14.5 million in Series A funding. SV Life Sciences led the round, and was joined by Novo AS. AlloCure has offices in both Germany and Salt Lake City.

ForeScout Technologies Inc., a Cupertino, Calif.-based provider of network access control solutions, has raised $8 million in Series E funding. Return backers include Accel Partners, Amadeus Capital Partners, Meritech Capital Partners and Pintango Venture Capital. The company has now raised $44 million.

Steek SA, a French provider of online storage platforms to telecom operators, has raised €5 million in second-round funding. AGF Private Equity led the deal, and was joined by return backer Innovacom.

Daxco Inc., a Birmingham, Ala.-based provider of on-demand software to nonprofits, has raised $7.75 million new VC funding from Frontier Capital.

TopTenReviews, an Ogden, Utah-based provider of expert tech and entertainment reviews, has raised $6 million in Series A funding. Backers include Highway 12 Ventures and Village Ventures.

Buyout Deals

AIG Vantage Capital, part of AIG Investments, has agreed to acquire the Personal Communications division of UTStarcom Inc. (Nasdaq: UTSI). The deal is valued at approximately $240 million, plus up to $50 million in additional earn-outs over the next three years. The division distributes handsets and related accessories in North America.

Boston Ventures has acquired Oakstone Publishing from Haights Cross Communications for an undisclosed amount. Wells Fargo provided debt financing.Oakstone is a Birmingham, Ala.-based provider of continuing education content for the medical and wellness markets.

StarVest Partners has led an acquisition of IRON Solutions LLC, a Fenton, Mo.-based data provider for the farm and construction equipment industry. The total deal is valued at $15 million for a 90% ownership stake, with StarVest joined by Dublin Capital Partners, Spring Mountain Capital and GVIC Communications Corp. Company management will retain the other 10 percent.

Thompson Street Capital Partners has acquired Universal Air Filter Co. from The Riverside Co. for an undisclosed amount. Harris Williams & Co. managed the sale. Universal Air is a Sauget, Ill.-based manufacturer of customized air filter solutions.

PE-Backed IPOs

LiquidNet Inc., a New York–based electronic global marketplace for block trading, has filed for a $500 million IPO of Class A common stock. Goldman Sachs and Credit Suisse are serving as co-lead underwriters. Company shareholders include T.H. Lee Putnam Ventures (12.29% pre-IPO stake) Technology Crossover Ventures (7.42%) and Summit Partners(7.42%).

Zonare Medical Systems Inc., a Mountain View, Calif.-based developer of ultrasound systems for diagnostic imaging, has filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker symbol ZONE, with Citi and Piper Jaffray serving as co-lead underwriters. The company has raised around $171 million in total VC funding since 1999, from firms like Frazier Healthcare Ventures (25.2% pre-IPO stake), 3i Group (18.4%), Earlybird Venture Capital (13.9%), Draper Fisher Jurvetson (13.2%), Mosaix Ventures (9.9%) and CB Healthcare Ventures (7.1%).

Alimera Sciences Inc., an Atlanta-based ophthalmic pharmaceutical company, has filed for a $75 million IPO. It plans to trade on the Nasdaq under ticker symbol ALIM, with Credit Suisse and Citi serving as co-lead underwriters. The company has raised just over $71 million in VC funding since 2004, from firms like Scale Venture Partners (18.27% pre-IPO stake), Domain Associates (18.27%), Intersouth Partners (18.27%), Polaris Venture Partners (18.27%) and Venrock Associates (14.8%). It also received a total of $16.7 million from the sale of two OTC allergy products and a lubricating eye from to Bausch & Lomb.

PE Exits

Espial Group (TSX: ESP) has agreed to acquire Kasenna Inc., a Mountain View, Calif.-based provider of video-on-demand solutions. The deal is valued at approximately $6.5 million in Espial stock. Kasenna has raised over $90 million over six rounds of VC funding, including a Series E round in late 2005 at a post-money valuation of approximately $56 million. Backers include Alloy Ventures, Intel Capital, U.S. Venture Partners, Cypress Ventures and Silicon Graphics.

Francisco Partners has completed its sale of Metrologic Holdings Corp. to Honeywell International for $720 million in cash. Francisco had led a $346 million take-private buyout of Metrologic in December 2006, alongside hedge fund Elliott Associates and Metrologic chairman and then-interim CEO Harry Knowles. Metrologic makes data capture and collection hardware and software.

Microsoft confirmed that it has agreed to acquire Powerset Inc., a San Francisco-based developer of a natural language search engine. The news was originally reported last week by VentureBeat, which places the sale-price at around $100 million. Powerset raised $12.5 million in Series A funding in late 2006, at a post-money valuation of $42.5 million. It has since raised another $4 million in convertible note financing. Backers included Foundation Capital, The Founders Fund and individual angels like Esther Dyson.

New England Capital Partners has sold Brigham’s Ice Cream Inc. in a pair of separate transactions. The company’s brand name, products and IP was sent to dairy HP Hood, while its 28 restaurants were sold to Deal Metrics LLC of Baltimore.

PE-Backed M&A

Applus, a Barcelona-based testing and certification company, has acquired JanX Integrity Group, a Parma, Mich.–based provider of non-destructive testing and inspection. No financial terms were disclosed. The Carlyle Group acquired Applus last November.

Boot Barn, a western footwear retailer owned by Marwit Capital, has acquired nine retail stores in California and Nevada from BTWW Retail LP. No financial terms were disclosed.

Coverity Inc., a San Francisco-based provider of software quality and security improvement solutions, has acquired Solidware Technologies Inc., a Boulder, Colo.-based provider of software readiness management solutions. No financial terms were disclosed. Coverity last year raised $22 million in its first round of institutional funding, co-led by Foundation Capital and Benchmark Capital. Solidware has raised $1.5 million from Illinois Ventures and Ceres Venture Fund.

Xandros Inc., an Ottawa-based provider of OEM Linux solutions and Linux desktop and server products, has acquired Linspire, a provider of CNR software distribution solutions. No financial terms were disclosed. Xandros has raised around $10 million in VC funding from Linux Global Partners.

Firms & Funds

Almaz Capital has held a $60 million first close for its debut fund, which will focus on early-stage tech opportunities in Russia and CIS. The fund’s anchor investor is Cisco.

AXA Private Equity, the PE unit of French insurer AXA, has opened an office in Zurich.

Topspin Partners LBO has closed its first buyout fund with $132 million in capital commitments. It will focus on lower middle-market opportunities.

Human Resources

Mark Sarvary has been named president and CEO of Tempur-Pedic International Inc. (NYSE: TPX), effective August 4. He currently is an industrial partner with CVC Capital Partners, and previously was president of Campbell Soup Co.’s North American division.

Matt Schultz has joined Cowen Group as a managing director of technology I-banking. He will be based in San Francisco, and previously was with Merrill Lynch as a managing director and head of Internet and digital media I-banking.

Grace Cheng has joined GoldenTree InSite Partners, a private equity real estate firm, as chief financial officer. She previously was with Morgan Stanley as an executive director in its private equity real estate unit.