peHUB Wire: Friday, July 17, 2009

The sun is shining, the bulge bracket is booming and I need to bone up on healthcare IT before next week’s conference in LA (well, Pasadena). In other words, it’s time for some Friday Feedback:

Most email this week revolved around the operator vs. non-operator VC issue. First, a couple emails on methodology. Chris: “Obviously the most relevant point would be to look at the total scope of VCs. It may be that 40-odd of the Midas folks are C’s and O’s, but if there were only 100 of them in the total VC sphere, then the odds would be pretty good versus the thousands of X’s vying for one of those 50 slots.” Anon: “I would also think that controlling for familiarity bias might be a good idea. That is, do VC firms with lots of former ex-bankers and consultants tend to hire bankers and consultants? Do former operators tend to hire former operators? I would guess this is the case.”

Mike: “I am not surprised that oper! ators don’t make up the majority of the list… A good VC needs to not just be smart about business and understand the industry, but must also have the right deal flow to be a successful investor. That comes from relationships and connections – departments where operators are often way behind bankers, etc. From the company perspective, however, the most invaluable investors/VCs/board members to bring in are often former operators, particularly with experience in your business. I have raised a lot of capital from all flavors of VCs and, in my opinion, it is important to have the balance.”

John: “I would wager your numbers actually overstate the C’s in the top 100. How many were really CEO’s or successful founders? My experience is that VC skills are very different from operating skills — which isn’t to say one can’t become the other (plenty of VC’s seem to have succeeded as operators as well). I think if you really analyzed the successful traits of VC’s you wou! ld actually find they are inconsistent with most good operators’ skill s. Ask why is it that more operating guys aren’t hired by funds or starting up more VC funds? It is certainly not for lack of trying. I get 100’s of resumes a month from guys looking to make the switch. Every job takes a lot skill to do well and it is naive to think that someone from outside that field can easily transition to be excellent. Should ex-C’s start as associates and work their way up to partner over 8-10 years?”

Jeff on the “broken” VC industry: “It’s clearly certain participants that are the problem, not the model (which has made lots of money and helped create many great companies). To use a basketball analogy: The NBA isn’t broken just because the Knicks are.”

Owen on Steve Rattner’s DC home purchase: “Amazing that he would buy such an expensive home at the same time that he’s overseeing layoffs in Detroit. I’m not saying he should be buying houses for out-of! -work GM employees, but how about showing little propriety?”

James: “Any comment on Antoine Walker’s gambling arrest?” No, except that I hope he did the wiggle on his way out of Harrah’s.

Alan: “Will you be hosting a Shindig in LA next week?” No Alan, but I am planning one in Dallas and one in London. And probably back in NYC and Boston. Early planning stages, so anyone interested in sponsoring should drop me a note…

Have a great weekend!

Top Three

Lazard Ltd. (NYSE: LAZ) has acquired The Edgewater Funds, a Chicago-based private equity firm focused on the middle markets. No financial terms were disclosed. Edgewater Funds was in the midst of raising $750 million for a new growth capital fund, and has over $1 billion in capital under management.

Warburg Pincus has committed up to $300 million to the formation of RegionalCare Hospital Partners, a hospital acquisition platform focused on non-urban markets. It will be led by CEO Martin Rash, former CEO of Province Healthcare.

Golden Gate Capital has won the bankruptcy auction for retailer Eddie Bauer, besting stalking horse bidder CCMP Capital. Golden Gate will pay $286 million, compared to CCMP’s $202 million agreement.

VC Deals

Norwest Venture Partners has acquired an 8.37% stake in Shriram City Union Finance, the consumer finance business of Chennai, India-based Shiram Group, from Indopark Holdings Ltd., a Merrill Lynch subsidiary. The deal was valued at nearly $25 million.

Narus Inc., a Sunnyvale, Calif.-based provider of real-time traffic intelligence for the protection and management of large IP networks, has raised $8.7 million inrecap venturefunding. Participants included American Capital, Mayfield Fund, NeoCarta Ventures, Panorama Capital and Walden International. The company previously raised around $105 million.

MedVentive Inc., a Cambridge, Mass.-based provider of pay-for-performance software for evidence-based medicine, has raised $7.25 million in Series C! funding. Excel Venture Management led the round, and was joined by return backers HLM Venture Partners andLong River Ventures. Past MedVentive rounds hadalso included Worcester Venture Fund.

Lat49, a Vancouver-based provider of a geo-contextual advertising network, has raised C$1.5 million in Series A funding. PenderFund Capital Managementled the round, and was joined by return backers like Discovery Capital.

PriceDrip, a Monroe Township, N.J.-based online auction site, has raised an undisclosed amount of seed funding from 2G Associates.

Buyouts Deals

Kellwood Co., an apparel maker bought last year by Sun Capital Partners, said yesterday that it failed to renegotiate and extend a $140 million bond issue before it matured.

Manchester Airports Group has walked away from talks to buy London’s Gatwick airport over price disagreements. MAG had been working with Borealis Infrastructure (Canada) and the Greater Manchester Pension Fund. Global Infrastructure Partners, which had its bid for Gatwick rejected in May, remains interested but is not in active discussions.

Sil! ver Lake Partners is considering a buyout offer for Tandberg (Oslo: TAA), a Norwegian maker of video conferencing systems, according to the Wall Street Journal. The deal could be valued at more than $2 billion.

Truvo, the European directories company previously known as VNU World Directories, has retained Houlihan Lokey to advise on “various business and capital structure alternatives.” In response, some of the companies lenders are looking to hire their own advisor to represent their interests. Truvo currently has a $1.69 billion debt-load, owing to its 2007 leveraged buyout by Apax Partners and Cinven.

Athabasca Potash Inc. (TSX: API), a Canadian maker of crop nutrient potash, said that i! t considering a sale of all or part of the company. The news sent the company’s stock up 42 percent.

Firms & Funds

Ascension Insurance Inc., a Kansas City-based insurance and employee benefits agency focused on mid-market companies nationwide, has acquired Haas & Dodd Insurance of Atlanta. No financial terms were disclosed. Ascension Insurance is a portfolio company of Parthenon Capital and Century Capital Management.

Coradiant Inc., a San Diego-based provider of Web performance management solutions, has acquired the assets of Palo Alto-based competitor Symphoniq Corp. No financial terms were disclosed. Coradiant has raised around $55 million in VC funding from firms like Desjardins, DCM, GrandBanks Capital, Mesirow Financial Private Equity and Miramar Venture Partners. Symphoniq had raised around $12 million from Greylock Partners and InterWest Partners.

PE-Backed IPOs

China Pacific Insurance, a portfolio company of The Carlyle Group, confirmed today that it will relaunch its Hong Kong IPO, after an earlier attempt failed due to market conditions. The company plans to raise around $3.5 billion, compared to a target of more than $4 billion the last time around. Carlyle holds a 17% ownership stake.

Firms & Funds

JM Financial, a publicly-traded Indian financial services firm, is planning to raise up to $400 million for a private equity infrastructure fund.

Human Resources

Larry Kellner is stepping down as chairman and CEO of Continental Airlines, in order to join a new Houston-based real estate private equity firm called Emerald Creek Group. He had been with Continental for 14 years, and will be succeeded by COO Jeff Smisek.