peHUB Wire: Friday, February 12, 2010

Stephen Schwarzman took to the WaPo op-ed page this morning, arguing that regulatory uncertainty is to blame for the contraction of bank lending to small and mid-sized businesses. This matters, he says, because a failure to reverse the trend would equate to a reversal of economic recovery:

“These uncertainties, taken together, have severely hampered the ability of banking executives to plan how to run their businesses or even know what their businesses may include. Predictably, bankers are reacting to this unprecedented uncertainty by becoming conservative and cautious. The result is that there is less lending and less credit available.”

Schwarzman reports that this message of uncertainty is coming from bank bigs themselves, many of whom he probably shared a banana or two during the recent World Economic Forum in Davos. And I don’t doubt that they said it, nor Schwarzman’s assertion that continued lending declines could reverse what he terms an “incipient revival of the global economy.”

But here’s what I don’t get: Why doesn’t that same uncertainty principle apply to large-market bank lending? Big buyout bosses — including Schwarzman colleague Tony James — have been saying for months that debt is available and that leverage ratios have returned to historical averages of between 4x and 5x EBITDA.

At around this time last year, I posed the following hypothetical to a buyout firm CFO: “Imagine you had a quality deal in hand — strong company, reasonably priced, management buy-in, etc. What are the chances of securing even 40% of the purchase price via bank fina! ncing?” His reply: “Less than 50/50.”

I put that same question to managing directors from CCMP Capital and Hellman & Friedman during a conference panel last week, and they both expressed confidence that the banks would play ball.

Need more tangible proof? Just take a look at this morning’s announcement that Advent, Bain and Berkshire are taking SkillSoft private for $1.1 billion. The deal includes around $660 million of leveraged financing, or more than 50% of the total purchase price.

What this means, of course, is that uncertainty isn’t causing banks to shut off the taps. Instead, it’s being used as an excuse for why they’re only serving certain types of customers. I could be wrong, but my best guess is that a removal of regulatory uncertainty would not cause most banks to significantly increase their lending to small and mid-sized businesses.

Maybe it’s really about needle-moving. Maybe it’s really about risk management. But the uncertainty argument just doesn’t wash — at least not so long as Blackstone and its peers can find debt to transact multi-billion dollar deals.

*** The London office of Accel Partners must be getting a bit lonely, as it appears that partners Simon Levene and Kaj-erik Relander have both stepped down. No word on what happened in either case. That leaves just three partners managing a $525 million European fund raised in 2008.

*** Today is your last chance to vote on the location of our next peHUB Shindig

*** Publishing Note: We’re off Monday for the President’s Day holiday. Be back Tuesday morning… Enjoy the long weekend.

Top Three

SkillSoft PLC (Nasdaq: SKIL), a Dublin, Ireland-based provider of e-learning and performance support SaaS solutions, has agreed to be acquired by Advent International, Bain Capital and Berkshire Partners. The deal is valued at approximately $1.1 billion, with SkillSoft stockholders to receive $10.80 per share (10.66% premium over yesterday’s closing price). Credit Suisse Securities advised SkillSoft on the deal.

CaliSolar Inc., a Sunnyvale, Calif.-based developer of solar cells using “dirty” metallurgical grade silicon, has acquired 6N Silicon Inc., an Ontario-based supplier of solar-grade silicon to the photovoltaic industry. No financial terms were disclosed, except that CaliSolar has raised $22.5 million in new funding from existing shareholders and 6N Silicon backers. CaliSolar previously raised over $100 ! million from Hudson Clean Energy, Advanced Technology Ventures and Globespan Capital Partners. 6N Silicon had raised more than $20 million from Good Energies, Ventures West Management and Yaletown Venture Partners.

Evercore Partners (NYSE: EVR) has agreed to acquire a minority stake in Trilantic Capital Partners, a private equity firm formed last year by the former principals of Lehman Brothers Merchant Banking. As part of the deal, Evercore has committed up to $50 million for Trilantic’s next fund. The deal will not affect Evercore’s existing private equity vehicles, which will ! continue to be managed independent of Trilantic.

VC Deals

Cuculus GmbH, a German provider of smart metering solutions to utility customers, has raised €2.6 million in VC funding. Yellow&Blue Investment Management led the round, and was joined by KfW and return backers High-Tech Gruenderfonds, SIEGMUND Beteiligungsgesellschaftand company management.

Buyouts Deals

North Castle Partners has recapitalized Flatout Inc., a Saline, Mich.-based maker of premium flatbreads, wraps and snack crisps. No financial terms were disclosed for the deal, which also included participation from Glencoe Capital’s Michigan Opportunities Fund.

PE-Backed IPOs

Merlin Entertainments, a theme park operator owned by The Blackstone Group, said that it has no near-term plans to go public. Last fall, Reuters reported that Blackstone had called in various banks to discuss the possibility of a £2 billion flotation in March.

New Look, a UK fashion retailer backed by Apax Partners and Permira, has indefinately postponed its planned $1 billion IPO.

NEXX Systems Inc., a Billerica, Mass.-based provider of processing equipment for wafer-level packaging applications, has filed for a $42 million IPO. Canaccord Adams and CIBC are serving as co-lead underwriters. NEXX has raised around $33 million in VC funding, from firms like Sigma Partners and Enterprise Partners Venture Capital.

QuinStreet Inc., a Foster City, Calif.-based provider of online vertical marketing solutions, raised $150 million in its IPO. The company priced 10 million shares at $15 per share, compared to a revised price range of between $17 and $19 per share. The company originally planned to raise $250 million. QuinStreet has set its IPO terms to 10 million common shares being offered at between $17 and $19 per share. It had originally filed to raise $250 million. The company closed flat in its first day of trading on the Nasdaq. It had raised nearly $60 million in VC funding, from firms like Split Rock Partners (16.3% pre-IPO stake), Sutter Hill Ventures (10.5%), Granite Global Ventures (7.6%), Catterton Partners (5.8%), Partech International (5.5%), Focus Ventures, Rosewood Capital,Charter Growth Capital, VSP Capital, J&W Seligman and Stanford University. Direct secondaries firm W Capital Partners reported a 6.! 8% stake.

Travelport, a New York-based travel services company owned by The Blackstone Group, has called off its $1.28 billion London IPO, citing poor market conditions. The deal would have valued Travelport at $3.13 billion, were it to have priced in the middle of its offering range.

PE-Backed M&A

Zynga, a San Francisco-based social gaming company, has agreed to buy smaller competitor Serious Business for an undisclosed amount. Zynga hasraised around $240 million in total VC funding, from Digital Sky Technologies, Andreessen Horowitz, Tiger Global, Institutional Venture Partners, Kleiner Perkins Caufield & Byers, Union Square Ventures, Foundry Group and Avalon Ventures. Serious Business has raised $4 million from Lightspeed Venture Partners.

PE Exits

Dell has agreed to acquire KACE Networks Inc., a Mountain View, Calif.-based systems management appliance company focused on mid-sized businesses and public institutions. No financial terms were disclosed. KACE has raised over $11 million in VC funding, from Norwest Venture Partners, Focus Ventures and Sigma Partners.

Google Inc. (Nasdaq: GOOG) has agreed to acquire Aardvark, a San Francisco-based social search company. The deal reportedly is worth around $50 million. Aardvarkhas raised around $6 million in VC funding from August Capital, Baseline Ventures and Harrison Metal Capital.

Oracle has agreed to acquire Convergin Inc., a Herzliya, Israel-based provider of real-time service brokering solutions. N! o financial terms were disclosed. Convergin has raised around $10 million in VC funding from Pitango Venture Capital and Rich Investment Ltd.

Firms & Funds

Lloyds Banking Group reportedly remains in the early stages of considering options for its private equity unit, which has garnered interest from at least five buyout firms.