Reminder: I (Erin Griffith) am filling in for Dan during his vacation, so send your press releases and news tidbits to me at erin.griffith@thomsonreuters.com.
This Saturday marks the official midpoint of the summer, and for those in finance, that heralds the onset of a major slowdown. In an already slow market, what’s a firm to do? For many, the summer signals survey and study time. I’ve got the heads-up on several of the best PE-focused studies. Today I’m looking at the Ernst & Young Annual Private Equity Study. Look out next week for one from PE Week Wire’s sugar daddy, Thomson Reuters.
The E&Y study focuses solely on value-creation, and for three years has proclaimed that private equity firms create greater value than public company benchmarks. In 2007, PE exits grew EBITDA 27% faster than that of public companies. Same goes for enterprise value—PE exits grew enterprise value twice as much as public companies did.
That’s good news for private equity’s uphill public relations battle. But one thing the survey doesn’t address is the performance of companies after the PE firm exits, which I think is just as important. Is the value creation permanent and sustainable? Did the company wilt without the PE firm’s pressure, best practices, and drive for improvement? Was the company overburdened with leftover LBO debt? The answers to these questions are important in addressing the general public’s negative image of private equity. Without taking a long term look, it’s like a High School that says, “100% of our graduates go to Harvard,” but doesn’t say whether any of those students made it out of Cambridge with diplomas.
That said, changing PE’s image isn’t the goal of Ernst & Young’s study.
E&Y principals John Vester and John O’Neill offered some interesting analysis on the findings. For example, O’Neill agreed that part of the reason PE creates more value is because they can make long-term changes that may have a short-term negative effect; public companies, by comparison, may avoid those changes because of quarterly earnings pressure.
The best performing investments, size-wise, were companies ranging between $500 million and $1 billion. O’Neill said it’s because those deals are “single entity-type businesses” that can focus all their resources on one goal and achieve scale, as opposed to jumbo companies with their hands in several verticals.
The study found that Germany is the most successful geography for PE investments, and that tech and telecom showed the highest growth in enterprise values. That’s notable since the study did not cover venture capital investors.
But LBO returns are going to drop, Vester said, and 2008-2009 exits won’t outperform their public counterparts as deftly as they did in recent years. Part of the growth, even though GPs rarely cop to it, comes from leverage. So with less leverage and longer hold periods, that 27% EBITDA growth over public benchmarks will come down a touch.
Top Three
TPG-Axon Capital Management has raised about $4.2 billion for TPG-Axon Partners LP. The hedge fund has a $10 billion target, according to a regulatory filing. The New York firm is managed by a former top Goldman Sachs trader Dinakar Singh.
First Reserve Corp has extended the deadline to complete its buyout of CHC Helicopter, an offshore oil and gas helicopter service provider. The deal was struck in February for C$1.5 billion ($1.48 billion) and is now slated to close July 31.
TA Associates may lose its $320 million investment in Steve & Barry’s, the Port Washington, N.Y.-based discount clothing retailer that’s expected to file for bankruptcy, according to news reports. The business was flagged as a restructuring candidate several weeks ago and has failed to find rescue financing. In addition to TA, General Electric Co. invested $200 million in the company in March.
VC Deals
Portola Pharmaceuticals Inc. raised $60 million in Series C financing led by D.E. Shaw. Further investors include Abingworth Management, Advanced Technology Ventures, AllianceBernstein, Alta Partners, Brookside Capital, CIDC Consulting, Frazier Healthcare Ventures, Goldman Sachs, IBT Management Corp., MPM Capital, Prospect Venture Partners, Sutter Hill Ventures, Teachers’ Private Capital and T. Rowe Price, and new investors, Adage Capital Management, Apothecary Capital, Janus Capital and PAC-Link BioVentures. Portolo, based in San Francisco, is developing two cardiovascular drugs which may be ready for Phase III trials in 2010.
iPipeline, an Exton, Penn.-based sales software business, raised $18 million in Series A financing in a round led by NewSpring Capital and Fidelity Ventures. The company’s management participated as well. iPipeline serves the insurance and financial services markets.
Mevio secured $15 million in Series C funding led by Crosslink Capital. Further investors include Kleiner Perkins Caufield & Byers, Sequoia Capital, Sherpalo Ventures and DAG Ventures. The company offers an online advertising platform for branded companies.
DriverSide, a service Web site for automobile owners or lessees, received its first round of funding from Catamount Ventures. The company was launches in June 2008. San Francisco-based Catamount Ventures makes seed stage investments.
VideoIQ Incsecured $10 million in Series B funding from Lehman Brothers, Matrix Partners and Atlas Venture. The Bedford, Mass.-based company developsvideo surveillance and analytics products.
Macquarie Group Ltd and Seek Ltd have invested approximately $110 million in Zhaopin, an online recruitment business based in Beijing. Macquarie Group’s $60 million is worth a 30% stake. Australia-based Seek acquired a 25% stake for $20 million in 2006.
Xeround Inc secured $16 million in a Series B round of funding. The round was led by Ignition Partners and Trilogy Equity Partners and saw participation from existing investors Benchmark Capital and Giza Venture Capital. Xeround, based in Bellevue, Wash., makes software for communications service providers.
IWatt Inc raised $12.4 million in Series E funding led by an undisclosed investor. The power conversation and management system developer received funding from Horizon Ventures, Sigma Partners and VantagePoint Venture Partners.
Xtract Ltdsecured $11.7 million in Series B funding from Creandum, ETF III and InnovationsKapital. Xtract is based in Helsinki and provides social advertising services to consumer products companies.
Spire Company Associatessecured $9 million in Series A funding led by Hearst Corp and including commitments from Trident Capital, TL Ventures and individuals. The business runs a Web site that recommends high end products and services to consumers and recently purchased Suzanne’s Files LLC and its product and service content.
DriverSide Motors secured an undisclosed amount of Series A funding from Catamount Ventures. The business runs a Web site with information on car buying and maintaince as well as a social networking aspect.
Welton Street Holdings secured $14.4 million in growth capital from FTVentures. Denver-based Welton Street Holdings’s subsidiaries provides financial advisory services to consumers.
Flow Cytometer secured $13 million in Series C financing from fundraising leaders and new investors Fidelity Biosciences and Flagship Ventures, as well as investors Arboretum Ventures and Baird Venture Partners. The life sciences business is based in Ann Arbor, Mich.
TopSpin Media Inc. raised a Series B round of financing led by Foundry Group. Existing investor Redpoint Ventures participated in the round. Santa-Monica-based TopSpin provides marketing tools for musicians.
Ariana Pharmaceuticals SA secured €1.5 million ($2.3 million) from Vizille Capital Innovation in its first round of funding. Vizille Capital is a part of Credit Mutuel-CIC bank and will take on a minority stake. Paris-based Ariana develops drug discovery technology.
DimDim Inc secured $6 million in Series B financing from existing investors Index Ventures, Nexus India Capital and Draper Richards. The business offers browser-based open-source Web software and raised $2.4 million in its last round.
Mobixell Networks secured $6 million from Apax Partners, Intel Capital, and SMAC Partners. The mobile device content provider is based in Wellesley, Mass.
Alyotech SAS secured €4 million ($6.3 million) from Aurel NextStage, Galiléo, ACE Management, Iris Capital and CDC Entreprises. The Paris-based business provides tech consulting services in Europe, Canada and the Netherlands.
Buyout Deals
JMI Equityinvested an undisclosed amount in Halogen Software Inc, an online employee performance management software based in Ottawa, Canada. Baltimore-based JMI invests in business services and software companies of all sizes.
Kohlberg & Co., a Mount Kisco, New York-based LBO firm, purchased the automotive glass and services business of PPG Industries for $330 million in cash and a 40% stake in the new entity. The carve-out was originally slated to go to Platinum Equity for $500 million, but the firm backed out on the grounds that PPG had misrepresented the business.
Sciens Capital Management agreed to purchase the institutional investment management business of Atlas Capital Associates Limited, a London-based specialist investment manager. Deal terms were not disclosed. Sciens Capital Management is based in New York and invests in private equity, venture capital, real estate, aviation assets and funds of hedge funds.
Spire Capital Partners acquired a majority interest in Ashburn, Va.-based Carpathia Hosting Inc, an IT hosting services business. The buyout includes commitments from the company’s original investors.
First Reserve Corp has extended the deadline to complete its buyout of CHC Helicopter, an offshore oil and gas helicopter service provider. The deal was struck in February for C$1.5 billion ($1.48 billion) and is now slated to close July 31.
21 Investmenti, a growth-oriented buyout firm focused on the Italian and French middle market, agreed to purchase the Italian ball valve division of Velan Group, a Canadian steel valve maker. The carve-out has revenues greater than €60 million ($94 million) will be named Valbart S.r.L.
Century Park Capital Partners acquired Moss Inc., a manufacturer of fabric-based signs serving the event, exhibit and retail industries. Under Los Angeles-based Century Park, the business will expand organically and through acquisitions. No deal terms were disclosed.
PE Exits
Blue Point Capital Partners sold BP Metals LLC to PE firm Protostar Partners for an undisclosed price. BP Metals, was created in 2006 to hold four operating companies which produce transportation, aerospace and energy components.
Goldner Hawn Johnson & Morrison-backed Wilsons The Leather Experts sold 116 of its outlet stores to G-III Apparel for $22.4 million.
Sterling Partners-backed Prospect Mortgage Co. acquired 60 retail branches of IndyMax Bancorp for an undisclosed price. Sterling Partners created Prospect in 2006 as a part of a contrarian role-up strategy.
PE-Backed M&A
CI Capital Partners-backed Valley National Gases made its sixth add-on of the fiscal year with a purchase of Beaver Valley Welding Supply, Inc. The target, based in Aliquippa, Penn., sells gases to the medical, industrial industries. CI Capital acquired Cleveland, Ohio-based Valley National in February 2007.
TA Associates may lose its $320 million investment in Steve & Barry’s, the Port Washington, N.Y.-based clothing retailer that’s expected to file for bankruptcy, according to news reports. The business was flagged as a restructuring candidate several weeks ago and has failed to find rescue financing. In addition to TA, General Electric Co. invested $200 million in the company in March.
Thoma Bravo portfolio company Hyland Software purchased Liberty Information Management Systems for an undisclosed price. Liberty Information, based in Cleveland, Ohio, does creates document management software systems .
Apollo Management’s bankrupt portfolio company, Linens ‘N Things, will shutter another 87 stores. The company closed 120 stores earlier this year.
The Jordan Company-backed Worldwide Clinical Trials acquired MediQuest, a contract research organization based in Eastern Europe. MediQuest is Worldwide Clinical Trials’s fifth add-on. Deal details were not disclosed.
Firms & Funds
TPG-Axon Capital Management has raised about $4.2 billion for TPG-Axon Partners LP. The hedge fund has a $10 billion target, according to a regulatory filing. The New York firm is managed by a former top Goldman Sachs trader Dinakar Singh.
Edwards Angell Palmer & Dodge has opened an office in Gainesville, Fla. to deepen its practice serving the life sciences, biotechnology and venture capital industries.
Legend Capital has raised $400 million for a private equity fund focused on technology, media and telecom in China. Legend Capital is part of Legend Group, based in Hangzhou, China. The new fund’s parent company has invested $160 million in the fund. Consumer products will comprise 20% to 30% of the fund’s investments.
The city of Hangzhou plans to create a tech and Internet-focused venture fund worth 5 billion yuan ($730 million). The fund may include partnerships with private equity firms.
21 Investmenti, a France and Italy-focused growth investor, will close its second buyout fund in the coming weeks with commitments in excess of €250 million ($392 million).
Emerald Stage2 Ventures held a first close on $10.2 million, with an additional $3 million in commitments, for its first fund. The Philadelphia-based firm is seeking $20 million to invest in early stage regional businesses, according to Venture Wire.
San Bernadino County Employee’s Retirement Association will commit $10 million to secondary fund Industry Ventures Fund V LP and $10 million to secondary fund Lexington Middle Market Investors II LP, according to VentureWire. The fund will increase its allocation to alternative investments from 35% in 2008, up from 32%.
Los Angeles County Employees’ Retirement Association invested $75 million to Madison Dearborn Capital Partners’s latest fund. The pension is close to maximizing its approximate $2.87 billion private equity allocation for 2008. Chicago-base d PE firm Madison Dearborn has a $10 billion target for its sixth fund.
Human Resources
Valhalla Partners, a Virginia-based venture capital firm, hired Saj Cherian as a principal and Leon Zilber as a research analyst. Cherian was previously director of new data services at Virgin Mobile USA and Cherian was a senior analyst at Alliance Bernstein.
Stephens Inc., a Dallas-based investment bank, has hired seven investment professionals from neighboring investment bank Bluffview Capital. Jennifer Bishop and Phyllis Riggins will serve as managing directors of the media group, Kerry North will serve as a managing director of the M&A group specializing in restructuring, and Michael Stuart will serve as managing director in a newly formed real estate investment banking practice. Further, Ryan Murphy, Jason Timothy and Greg Gar! buz have been appointed vice president, associate and analyst, respectively.
Grey Mountain Partners promoted Senior Associate Ben Ault to vice president. Ben has been responsible for the Boulder, Colo.-based firm’s deal sourcing activities since 2004.
Stephen Brodsky will join Vernon & Park Capital, a private equity firm focused on the financial market and exchange sector. Brodsky will leave his position as the president of CHX Holdings, the parent company of the Chicago Stock Exchange, where he also served as the CFO and head of strategic planning for the exchange.
Hazem Shawki, Kashif Siddiqui and Walid Zein have left Goldman Sachs to join the private equity arm of EGF-Hermes, an Egyptian investment bank.
Jay Powell has joined Global Environment Fund as a managing partner. Powell, a former Carlyle Group partner, will focus on clean technology. Powell had left Carlyle Group to co-found a private investment firm focused on industrial companies called Severn Capital Partners.
If you do not receive this within five minutes, please try and sign in again. If the problem persists, please
email: