The rain is falling, the Bernanke buzz is building and Brett Favre showed again why Mary made the right choice. In other words, it’s time for some Monday Mouth-Off.
Almost all the email last week was about the Volcker rule, which could kick banks out of the private equity investment game.
Leading us off is Jonathan: “Do you think it ever occurred to Obama that internal private equity (or hedge fund, for that matter) activity had exactly zero to do with banks’ liquidity problems? I’m not sure, but I don’t think IndyMac or WaMu were taken down by private equity investments. And Blackstone, Apollo, KKR, etc. were not at risk. Furthermore, if banks that take FDIC-insured deposits were unable to own proprietary trading businesses, JP Morgan could not have acquired Bear Stearns and BofA could not have acquired Merrill Lynch. Neither Bear, Lehman nor AIG took FDIC-insured deposits, but they all failed… It is clear that Obama’s inclusion of hedge and PE fund! activity has nothing to do with preventing crises or reducing risk, but all about creating strawmen and scapegoats. Even if he fails in fundamental economic understanding, Obama excels at that.”
DB: “Obama has got it spot on… PE firms have typically been the last ones in and the first ones out in each of the last three cycles. This has created mayhem with entry multiples going up astronomically (due to deal fever creeping in and hefty fees being the main incentive to get a deal done) and fund sizes getting too large as an increasing number of banks/bank-related fund of funds clamor to access the most sought after GPs. It makes the role of us other asset managers and pension fund managers all the more unmanageable and it is difficult to see where they have been additive to the industry (other than through the provision of leverage which is clearly crucial). The secondary firms will be happy for the next 2-3 years as this all unwinds but clearly this ! might have long-term implications on one of the mainstays of their dea l flow.”
Phil: “When I put my money in a bank I want my money to be safe and available to me wherever I am (ease of use). For this service, I’m happy to pay a fee. I also want my funds invested safely in boring things like T-bills and local enterprises which offers safety and low interest (cost-quality tradeoff). I do not expect my funds to be used as fairy dust to create ephemeral profits and huge bonuses which when the dance ends, simply result in an even smaller return on my deposit (unnecessary complexity, high cost).”
Mike: “Why not set up the lower-risk banking part of the business in its own subsidiary (with all the capital requirements, restrictions on risky activities, etc)?All the trading, private equity, hedge fund, etc. activities could be in different subsidiaries that would not carry any government guarantees or other special preferences. Moreover any of these could be allowed to fail or go bankrupt without impacting the bank subsidi! ary. It seems like this is how insurance companies work (i.e. AIG’s life insurance customers would have been OK even if the rest of the business was allowed to fail). It would seem to address the stated concerns of Obama without messing up the whole industry.”
Rodrigo: “I agree thatadding private equity to the mix makes no sense. I see no link between bank private equity investment or sponsorship with the recent financial debacle. As you correctly point out, PE creates no serious liquidity issues for banks.”
Philip: “It makes no sense since most could be structured in such a way as to shelter the bank/depositors from the risks. In reality, it’s all political so it doesn’t have to make sense.”
Michael: “Dan, your argument hinges on an implicit logic that is not proven at all and the exact party line of the major banks: That the ownership of hedge-funds, private equity funds and venture funds by a bank provides a benefit to the custom! er. There is a clear and distinct difference between the benefit of in vesting by acustomer in such a fund and its ownership by the bank. In fact, customers at that level of wealth typically have choices even if advised by large banks in which alternative investment vehicles they like to invest (i.e., a GS customer may choose other banks or vehicles), you could even argue that a customer will get a better deal, better execution etc, if such investment vehicles are NOT owned by the investment advisor.”
Top Three
Better Place, a Palo Alto, Calif.-based provider of electric vehicle services, has raised $350 million in Series B funding at a $1.25 billion post-money valuation. HSBC Group led the round, and was joinedby Morgan Stanley Investment Management, Lazard Asset Management and return backers Israel Corp., VantagePoint Venture Partners, Ofer Hi-Tech Holdings, Morgan Stanley Principal Investments and Maniv Energy Capital. Better Place previously raised $200 million in October 2007. The company plans to develop an electric car networkthat willlease out batteries that can be exchanged at its own charging stations by all-electric car owners.
ExteNet Systems Inc., a Lisle, Ill.-based network infrastructure company, has raised $128.4 million in new private equity funding. Soros Fund Management and SBA Communications were joine! d on the deal by return backers Centennial Ventures, Columbia Capital, Sevin Rosen Funds, CenterPoint Ventures and Palomar Ventures.
BioScrip Inc. (Nasdaq: BIOS) has agreed to buy Critical Homecare Solutions from Kohlberg & Co. for $343.2 millionin cash and stock. The deal also includes the issuance of 3.4 million BioScrip warrants with a $10 exercise price. Critical Homecare Solutions provides home infusion and home health agency services to patients suffering from chronic and acute medical conditions. It had agreed to be acquired for $534 million two years ago by a blank-check acquisition company called MB! F Healthcare Acquisition Corp., but the deal was later renegotiated do wn to $469 million and then mutually-terminated.
VC Deals
Cymbet Corp., an Elk river, Minn.-based, has raised $31 million in third-round funding. Perseus LLC and Intel Capital co-led the round, and were joined by Texas Instruments and return backers BekaertNV, Helmet Capital, Cedar Point Capital, The Dow Chemical Co. and The IGNITE Group. The company previously raised around $21 million.
Mimecast, a UK-based provider of SaaS-based enterprise email archiving, has raised £13 million in Series B funding from Index Ventures and Dawn Capital.
Coraid Inc., a Redwood City, Calif.-based developer of scale-out storage solutions, has raised $10 million in Series A funding. Allegis Capital and Azure Capi! tal Partners co-led the round.
Alvenda Inc., a Minneapolis-based distributed commerce network that helps merchants sell through Facebook and other advertising media, has raised $5 million in Series A funding from Split Rock Partners.
Comet Solutions, an Albuquerque, N.M.-based provider of early simulation software for product development, has raised $2 million in Series B funding co-led by Athenian Venture Partners, Tri-State Growth Capital Fund and Kentucky Co-Investment Partners. Series A backers include Flywheel Ventures, Fort Washington Capital Partners Group, ITU Ventures and New Mexico Angels.
TheSixtyOn! e, an online music exploration site founded in 2008, has raised an undisclosed amount of VC funding from Joi Ito and Reid Hoffman, according to ReadWriteWeb.
Harvest Power Inc., a Waltham, Mass.-based manager of food and yard waste composting facilities, has raised an undisclosed amount of VC funding from Waste Management Inc. (NYSE: WM). As part of the deal, existing Harvest Power shareholders Kleiner Perkins and Munich Venture Partners also increased their investments.
iSoftStone Information Service Corp., a Beijing-based provider of IT consulting and software services, has raised an undisclosed amount of new VC fund! ing led by Everbright Private Equity. Other participants included Wuxi Jinyuan Industry Investment Development Co. Ltd. and return backers AsiaVest Partners, Fidelity Asia Ventures, Infotech Pacific Ventures and Mitsui Ventures Global Fund.
Jiangsu Chuangzhou CTC Technical Fabrics,a Chinese maker of glass fiber fabrics,has raised an undisclosed amount of first-round funding. WI Harper Group led the deal, and was joined by Shenzhen Capital Group Co., Changzhou Wujin Hongtu Venture Capital Co. and Changzhou Hongtu Venture Capital Co.
Buyouts Deals
Atlanta Equity has acquired Consumer Financial Services LLC, a Southport, Conn.-based provider of delinquent secured accounts receivable resolution services. No pricing terms were disclosed for the deal, which included financing from Branch Banking and Trust Co. and Peachtree Equity Partners.
Bain Capital has agreed to acquire the Japan franchisee of Domino’s Pizza from Higa Industries Co., at an enterprise value of approximately $66 million.
CVC Capital Partners has agreed to acquire a 90.76% stake in Indonesian retailer Matahari Putra Prime for approximately $773 million.
RiskMetrics Group Inc. (NYSE: RMG) has put itself up for sale. The risk advisory firm has retained Evercore Partners to manage the sale, which could be worth upwards of $1.3 billion.
KKR and Hellman & Friedman have partnered on a bid for Siemens AG’s hearing aids unit, which also is being pursued by Bain Capital, Cinven and Permira. The deal is expected to fetch more than €2 billion.
Mid Europa Partners has completed its tender offer to acquire all outstanding ordinary shares of Invitel Holdings AS (AMEX: IHO), a fixed-line telecom and broadband internet se! rvices provider in the Republic of Hungary. Mid Europa now holds 91.8% of the shares, and plans to acquire the remainder via separate transactions.
PE-Backed IPOs
Convio Inc., an Austin, Texas-based provider of online constituent relationship management solutions for nonprofit organizations, has filed for a $57.5 million IPO. It previously filed for an $86.25 million IPO in August 2007, but withdrew registration one year later due to “unfavorable market conditions.” The company plans to trade on the Nasdaq under ticker symbol CNVO, with Piper Jaffray and Thomas Weisel Partners serving as co-lead underwriters. It hasraised over $47 million in VC funding, and lists shareholders like Granite Ventures (20.1% pre-IPO stake), Austin Ventures (15.7%), El Dorado Ventures (9.2%), Adams Street Partners (8.9%), Silverton Partners (5.2%), Pacific Partners (2.8% and Rembrandt Ventures (2.7%).www.convio.com
Everyday Health Inc., a Brooklyn, N.Y.-based, has filed for a $100 million IPO. The company plans to trade on the Nasdaq under ticker symbol EVDY, with! Goldman Sachs and J.P. Morgan serving as co-lead underwriters. Shareholders include WF Holding Co. (29.5% pre-IPO stake), Rho Ventures (24.6%), Scale Venture Partners (7.5%), Foundation Capital (6.1%) and NeoCarta Ventures (6%).
Motricity Inc., a Durham, N.C.-based provider of mobile marketplace management solutions, has filed for a $250 million IPO. It plans to trade on the Nasdaq under ticker symbol MOTR, with Goldman Sachs and J.P. Morgan serving as co-lead underwriters. The company has raised over $365 million in VC funding, from Advanced Equities (26.4% pre-IPO stake), Carl Icahn (21.12%), New Enterprise Associates (8.38%), Technology Crossover Ventures (5.54%), Massey-Burch Capital, Noro-Moseley Partners, Intel Capital, Qualcomm Ventures, Sienna Ventures, TriState Investment Group and Wakefield Group.
Ryerson Holding Corp., a C hicago-based metals processor, has filed for a $350 million IPO. It plans to trade on the NYSE under ticker symbol RYI. Platinum Equity took Ryerson private in October 2007 for approximately $2 billion. In its S-1 filing, Ryerson says its has reduced its annual costs by around $280 million since the buyout, of which it believes $180 million in permanent. www.ryerson.com
PE-Backed M&A
ActivStyle, a Riverside Co. portfolio company focused on incontinence products, has acquired Advocate Medical Services, a provider of incontinence products in Florida and Texas. No financial terms were disclosed.
StockTwits, afinancial media company launched in 2008 as a Twitter-based messageboard for traders, has acquired financial opinion and links site Abnormal Returns. No financial terms were disclosed. StockTwits has raised nearly $4 million in VC funding from True Ventures and Foundry Group. www.stocktwits.com
Woodbury Products, an Oceanside, N.Y.-based maker of incontinence products, has acquired two companies: Continence Connection, a maker of products for th! ose suffering from chronic incontinence, and DHP Home Delivery, a direct-to-consumer distributor of disposable healthcare products. No financial terms were disclosed. Woodbury is a portfolio company of HealthEdge Investment Partners.
PE Exits
AOL Inc. (NYSE: AOL) has acquired StudioNow, a Nashville, Tenn.-based provider of online video-creation services. The deal closed last week, and is valued at $36.5 million in cash and stock. StudioNow had raised $4.1 million in VC funding fromClayton Associates and Claritas Capital.
Unitas Capital has agreed to sell South Korean convenience store chain Buy the Way to local retailer Lotte Group for around $235 million.
Firms & Funds
Citigroup Inc. is trying to move to London a New York lawsuit by UK private equity firm Terra Firma Capital Partners, over that firm’s purchase of music business EMI Group.
ShoreCap Management is raising $100 million for its second fund, which is focused on small business banks and microfinance institutions in low-income African and Asian countries. It has received a $10 million commitment from UK development finance institution CDC Group PLC.
Human Resources
Sean Moriarty and Rajeev Chawla have joined Mayfield Fund as entrepreneurs-in-residence. Moriarty is the former CEO of CEO of Ticketmaster, while Chawla is the former CEO of Neopath Networks (acquired by Cisco).
Gaston Caperton, president of the College Board, has joined Leeds Equity Partners as a member of its board of advisors.
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