*Today Gotham Consulting Partners released the results of a private equity survey on operating value creation. Not surprisingly, buyout pros said operating value improvement was the most important “lever” and financial leverage was the least important. It’s a nice gauge of buyout pro sentiment, no doubt, but I wonder how helpful it is to know what buyout pros say they value without data to support it. No buyout firm in the country is going to say financial engineering and leverage is its most important tool, nor would a firm admit that it doesn’t really add much, operationally, to its portfolio companies. The contradictions are even apparent in the survey: Despite “operational improvements” b! eing in vogue since the credit crunch, the survey revealed that due diligence approaches have not changed much in recent years, and that approaches to portfolio management are still pretty much the same. Even the recent trend of adding operating partners to buyout firm rosters seems to have topped out with the onset of private equity layoffs, the survey states. You can get the full survey results here.
*This morning’s LBO Wire led with fundraising news of Prophet Equity, a Dallas-based turnaround firm in the market with its debut fund. According to the story, Prophet has $200 million in commitments toward its $250 million goal, which is a pretty impressive feat in this market. (I believe a random LP recently said, “It’s so bad out there, if you so much as get to a first close, you should throw a parade.) You may remember Prophet from our Dallas Fundraising Showdown article in October. We suggested that Prophet may have a fighting chance of getting its fund raised, despite market trauma, because it was doing everything right by LPs. The firm h! as a hefty GP contribution to the fund of 25%, or $50 million, and it distributes carried interest to every person on its team. LPs like a strong alignment of interest. Furthermore, the firm has an absolute hard cap to the size of current and future funds. LPs don’t usually take too kindly to massive fund size increases, which can mess with an investors allocation percentages.
The moves are counter to fundraising tactics of Prophet’s founder’s prior firm, Insight Equity. Also based in Dallas, Insight Equity is in the market with a fund, too. That vehicle bumped the firm’s carried interest to 30% on deals with returns greater than 4.5x and doubled its fund size. I haven’t heard any updates on that process since October, but with so many firms lowering their fund sizes and carried interest (for example on the latter, TA Associates), I have to wonder if Insight will pull back on its ambitious terms. At this point it’s not an admission of failure, it’s a matter of practicality.
* Speaking of LP treatment, I attended a Capital Roundtable masterclass last week about how to manage LP relationships. Appropriate for this time of year, the question of annual meetings arose, and LPs on one panel were split: Are retreat-style annual meetings held in places like Miami or Las Vegas a waste of time and money? Or are they a good informal way to get on a first-name basis with portfolio company CEOs and general partners?
Top Three
Terraliance Technologies, an energy exploration company backed by Kleiner Perkins Caulfield and Byers, Goldman Sachs, DAG Ventures and Passport Capital, has raised another round of funding to scale its Natural Resource Mapping technology and address new exploration opportunities. The company has secured $450 million in venture backing to date, with $150 million in debt.
Management of Babcock & Brown Infrastructure Fund North America LP and John Hancock Life Insurance Co said on Sunday they acquired Babcock & Brown’s interests in the fund as well as Babcock & Brown’s management rights.
KKR has hired Ambassador Ford M. Fraker, the former U.S. Ambassador to the Kingdom of Saudi Arabia and former Chairman of private investment banking firm Trinity Group Limited, as a Senior Advisor. KKR opened an office in Dubai in 2009.
VC Deals
Control Medical Technology, LLC closed a Series A financing led by Spring Bay Ventures, a medical-technology venture investor based in Jacksonville, Fla.
Accelerator Corporation, a Seattle-based biotechnology investment company, has launched XORI Corporation, an antibody discovery and development platform. XORI received a Series A investment from Alexandria Real Estate Equities; Amgen Ventures; ARCH Venture Partners, Inc.; OVP Venture Partners; PPD, Inc.; and WRF Capital.
DoubleVerify, an online verification business based in New York, has secured a Series A round of funding worth $3.5 million. Blumberg Capital led the round with participation from First Round Capital, Genacast Ventures and private investors.
Tobii Technology AB, a Stockholm-based eye tracking technology company, has raised $21.5 million in venture backing from Amadeus Capital Partners, Northzone Ventures and existing backer Investor Growth Capital.
Control Medical Technology, LLC closed a Series A financing led by Spring Bay Ventures, a medical-technology venture investor based in Jacksonville, Fla.
Buyout Deals
Fiat, Magna and private equity firm RHJ have had access to the books of General Motors German unit Opel. Fiat and Magna are expected to submit an offer on Wednesday.
Marlin Equity Partners, a buyout firm based in El Segundo, Calif., has purchased three software units from Requisite Technology, formerly known as Click Commerce, via its portfolio company, Emptoris. The buyout includes the Contract and Service Management solutions business. Financial terms were not disclosed.
Hutton Collins, a UK investment firm, is behind a possible bid for Italian restaurant and retail group Carluccio’s.
Argus Capital Partners, a merchant banking firm based in Dallas, has announced its deal to acquire a majority stake in Big Red, a Texas-based soft drink business. Annex Capital Management and Banque de Luxembourg’s Naxos Capital Partners have joined the buyside on the deal. Big Red was previously owned by Citigroup Venture Capital.
Riverside Company, a middle market buyout firm, has purchased Dementia Care Specialists, an Alzheimer’s and dementia care training firm. The deal is a platform acquisition to its portfolio company, Crisis Prevention Institute, paid for with equity from Riverside Capital Appreciation Fund 2003.
PE Exits
Solidcore Systems Inc., a Palo Alto, Calif.-based provider of IT control solutions, has sold to McAfee Inc. for $33 million in cash with a $14 million earn out. Solidcore has received $46 million in funding through four rounds of funding from the likes of Jafco Ventures, Matrix Partners, Menlo Ventures, and Sevin Rosen Funds.
Temasek Holdings, a private equity firm based in Singapore, has sold its 3.1% stake in Bank of America, according to an SEC filing.
PE-Backed M&A
Marlin Equity Partners, a buyout firm based in El Segundo, Calif., has purchased three software units from Requisite Technology, formerly known as Click Commerce, via its portfolio company, Emptoris. The buyout includes the Contract and Service Management solutions business. Financial terms were not disclosed.
Geodesic Limited, a provider of mobile and desktop communication systems, acquired Interactive Networks, a Source America-based software provider. Interactive Networks received investment from Prosperitas Capital Partners.
Human Resources
Behrman Capital, a private equity investment firm based in New York and San Francisco, today announced that Robert E. Flaherty has joined the firm as an Operating Partner. Flaherty was formerly President and CEO of Athena Diagnostics.
Victor Blank is to step down as chairman of Lloyds Banking Group in the next year, following intense criticism of his part-nationalised bank’s purchase of troubled rival HBOS.
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