peHUB Wire: Friday, June 11, 2010

Text of the financial reform conference report was posted online yesterday, including the Volcker Rule provisions that would prevent banks from sponsoring or investing in private equity funds.

The 1,974-page document will essentially serve as a draft to be edited over the next few days by a bicameral committee (opening statements yesterday, real work begins today).

I take the term “private equity” quite literally, which results in a broad interpretation that includes seed-stage angel investments all the way through leveraged mega-buyouts. Congress, however, implictly claims to have a more nuanced understanding.

The bill makes reference to private equity in two different sections. The first involves registration exemptions, in which “private equity” funds and “venture capital” funds each receive their own subsections.! The second is in the Volcker Rule area, when only “private equity” funds are referenced. In other words, it would appear that banks would still be allowed to sponsor and invest in venture capital funds, were the current language to stand.

What remains entirely unclear, however, is how “private equity” and “venture capital” would be distinguished from one another. You’d think Congress might have included some parameters, like investment holding periods or portfolio company size or the use of leverage. Or perhaps company control (although that could get tricky for early-stage VC firms)…

Instead, it simply punts — telling the SEC to come up with definitions within a year from the bill’s (expected) passage. In other words: “Hey SEC: These two things are different because we called them by different names. Now it’s your job to explain why we used different names.”

The obvious implication here is that Congress believes “private equity” poses a systemic ris! k, whereas “venture capital” does not. A very bold claim, considering that Congress has explicitly admitted that it doesn’t know what it’s talking about.

*** My goal this morning is to better understand the EU’s Directive on Alternative Investment Fund Managers. On first glance, it would seem to put major new requirements on North American and Asian funds that receive LP commitments from European institutions. Everything from registration requirements, disclosure requirements, capital requirements, marketing requirements and custodial requirements.

Again, I really need to walk deeper into the weeds. But, if my initial reaction is correct, some of these requirements would be unworkable for most funds, and acceptable only to the most desperate. As such, it could further exacerbate fundraising difficulties that already will face an uphill climb once U.S. banks are removed from! the equation.

*** Yesterday I noted Fred Wilson’s post on “panel pile-ups,” and asked if any investors out there had done a deal based on a post-panel interaction. A few positive responses trickled in, and I’ve posted them here. Keep ‘em coming.

*** Correction: Yesterday’s news section noted a bunch of new hires for RBS. Only problem is that the employer is actually RBC. Apologies. Full item here.

*** Where in the World: I’ll be in Chicago for part of next week, both for our peHUB Shindig and for the Buyouts Chicago conference. The latter will feature a keynote panel I’m moderating with Bruce Rauner (GTCR), Adam Max (Jordan Co.) and Steven Tas! litz (Sterling Partners). Hope to see some of you there… Also think I’ ll try to grab dinner at Frontera Grill after the Shindig, if anyone’s interested…

Top Three

TPG Capital has agreed to buy Vertafone, a provider of software and services to the insurance sector, from Hellman & Friedman and JMI Equity. The deal is valued at $1.4 billion, and is expected to close next quarter.

Igenica Inc., a developer of antibody-based cancer medicines, has raised $24 million in Series B funding. Return backers include The Column Group, OrbiMed Advisors and 5AM Ventures. The Burlingame, Calif.-based company previously raised just over $5 million.

Reinhold Industries Inc., a maker of aircraft seating components and aerospace solutions, has acquired Enpro Engineered Products Inc., a supplier of custom designed and manufactured components for the com! mercial aircraft industry. No financial terms were disclosed. Reinhold Industries is owned by The Jordan Company.

VC Deals

Precision Therapeutics Inc., a Pittsburgh-based oncology services company, has raised $35 million in new VC funding. Bain Capital Ventures led the round, and was joined by Hillman Co. and return backers Adams Capital Management, Birchmere Ventures, Draper Triangle Ventures, Longitude Capital, Quaker BioVentures and TVM Capital. It previously raised over $125 million since its 1995 inception.

Inotek Pharmaceuticals Corp., a Beverly, Mass.-based drug development company, has raised $18 million in fourth-round funding. Devon Park Bioventures led the round, and was joined by return backers Rho Ventures, Care Capital, Pitango Venture Capital, MedImmune Ventures and Bio*One Capital. The company previously raised around $75 million.

Otonomy Inc., a San Diego-based drug company focused on disorders of the inner and middle ear, has raised $10 million in Series A funding from Avalon Ventures.

Collecta, a Los Angeles-based provider of streaming real-time search, has raised $4.7 million in new VC funding. Dace Ventures was joined by return backer True Ventures.

Soonr Inc., a provider of cloud apps for file availability and continuity, has raised $4.5 million in VC funding from HighBAR Ventures and undisclosed prior investors. The company previously raised $15.5 million from Cisco Systems, Intel Capital and Clearstone Venture Partners.

Octoshape, a Denmark-based developer of technology for optimizing end-to-end video delivery, has raised €4 million from Nexit Ventures.

TeamSnap, a Boulder, Colo.-based provider of an onlineservice to manage sports teams and other groups, has raised $700,000 in first-round funding from eonBusiness and individual angels.

Intelligent Clearing Network, a New Canaan, Conn.-based digital coupon clearing network at retail outlet points-of-sale, has raised an undisclosed amount of new VC funding from Early Stage Partners and return backer Wolverine Venture Fund.

Buyouts Deals

Brit Insurance (LSE: BRE) reportedly has rejected a takeover approach from Apollo Management, which would have valued the business at more than £570 million.

Enterprise Investors has agreed to acquire a 49% stake in Polish supermarket chain Dino, for approximately €50 million.

PNC Equity Partners has acquired Wheaton Industries Inc., a Millville, N.J.-based maker and re-packager of laboratory supply and packaging products. No pricing terms were disclosed. Madison Capital Funding and Amalgamated Capital provided senior debt, while Babson Capital Management provided subordinated notes.

PE Exits

CrowdGather (OTCBB: CRWG) has acquired Adisn Inc., a Long Beach, Calif.-based online ad network, for $5.5 million in stock. Adisn had raisedover $1 million in VC funding from Battery Ventures and MHS Capital.

KeyOn Communications Holdings Inc. (OTCBB: KEYO) has acquired the wireless broadband assets of Dynamic Broadband, an Iowa-based company that raised a small amount of VC funding from Aavin Private Equity. No financial terms were disclosed.

The Riverside Co. has sold Houston-based environmental consultancy Entrix Inc. to Cardno Ltd. (ASX: CDD). No financial terms were disclosed, except that Riverside reports a 20% gross IRR and 2.8% gross cash-on-cash return.

Synopsys Inc. (Nasdaq: SNPS) has acquired Synfora Inc., a Mountain View, Calif.-based provider of algorithmic synthesis tools for IC and system designers. No financial terms were disclosed. Synfora has raised around $27 million in VC funding, from firms like ATA Ventures, Foundation Capital, Wafra Partners, Xilinx and U.S. Venture Partners.

TDC, a Danish telecom company backed by several PE firms, is unlikely to proceed with a share s ale later this year.

PE-Backed M&A

Beringea has sold its stake in Plum Baby, a maker of organic baby food, to Darwin Private Equity. No financial terms were disclosed., a Salt Lake City-based provider of online crime-mapping solutions, has acquired TipSoft, a police tip acquisition and intelligence management tool for law enforcement. No financial terms were disclosed. CrimeReports has raised over $7.2 million from Austin Ventures and vSpring Capital.

HealthcareFirst, an acquisition platform sponsored by The Riverside Co., has acquired Lewis Computer Services, a Baton Rouge, La.-based provider of software for the home health agency market. No pricing terms were disclosed. Wells Fargo Capital Finance provided the senior financing, while THL Credit provided junior debt.

Komli Media, an Indian digital media network platform, has acquired PostClick, an Australianwebsite representation firm. No financial terms were disclosed. Komli Media has raised over $9 million from Draper Fisher Jurvetson, Helion Venture Partner and Nexus Venture Partners.

Moss Inc., a provider of tensioned fabric solutions to the retail and even! t markets, has acquired the Pink Inc., a New York-based provide r of tensioned fabric solutions used to enhance visual environments and event atmospheres. No financial terms were disclosed. Moss is a portfolio company of Century Park Capital Partners.

Firms & Funds

Adlevo Capital Managers has held a $52 million first close on a fund that will make expansion equity investments in African tech-enabled companies. A final close in expected in Q1 2011.

Human Resources

Jon Atzen has joined the Los Angeles office of Sheppard, Mullin, Richter & Hampton LLP as a partner focused on emerging companies. He previously was a partner with DLA Piper.

Mark Tsimelzon has joined Mohr Davidow Ventures as an entrepreneur-in-residence, according to his LinkedIn profile. He previously served as director of engineering for Hadoop and cloud computing at Yahoo, and before that was founder or Coral8 (acquired by Sybase).