The Blackstone Group has been the tortoise of private equity fundraising — slow, steady and winning. Now, however, the last part of that fiscal trinity is in question.
Blackstone yesterday sent a letter to its limited partners, saying that it would hold a final close on its sixth global buyout fund at, or around, the end of Q2. The firm also said the vehicle had secured approximately $9 billion in commitments to date.
News of the letter was first reported by Private Equity Insider, and has since been confirmed by peHUB.
Why is the letter notable? Because it basically confirms that Blackstone won’t get anywhere close to the $20 billion it wanted when it began fundraising in October 2007 (a predecessor fund closed a f! ew months earlier on $21.7 billion). Blackstone also is unlikely to hit its downwardly-revised $15 billion target, considering that it’s only raised around $1.1 billion over the past 17 months (and virtually nothing over the past two quarters).
On the one hand, such stagnation isn’t surprising. The institutional investor market has been pretty dark since the financial bubble burst in late 2008, particularly when it comes to supporting mega-LBO funds (see here). After all, it’s not a coincidence that Henry Kravis — whose firm is raising a new fund this year — seems to have recently graduated from the Jon Gosselin School of Media Availability.
But there was reason to believe that Blackstone had an ace or two up its sleeve. During a quarterly media call in early August, I asked firm president Tony James if the credit crunch meant his firm no longer needed $15 billion to $20 billion in fund capital. He replied: “We feel there is plenty of opportunity for a fund we! ll into the teens. We probably won’t get to $21 billion, but well into the teens…”
Call me naive, but I assumed James knew something the rest of us didn’t. After all, why not tamp down expectations by saying something like: “A $10 billion fund would certainly suffice, but we may take a bit more to give us flexibility.” Or just publicly accept my premise about recalibrating to meet downsized market conditions.
Maybe Blackstone has got an SWF ready to commit $500 million — or a few public pensions ready to come in from the cold — but chances are Blackstone will raise both the year’s largest and most underwhelming fund (really quite the feat).
For most firms, such a let-down would simply be a PR hiccup that gets briefly batted around by hacks like yours truly. But Blackstone is a public company, and fund-related fees account for a goodly portion of revenue. We’re talking hundreds of millions of “lost” annual revenue, and more once “lost” carried interest is taken into account. I haven’t seen the issue raised in any recent ana! lyst reports, but I’d expect to once the final close occurs.
A Blackstone Group spokesman declined to discuss fundraising.
It’s also worth briefly noting the “timing” aspect of the letter. I’m told that Blackstone’s decision to end fundraising around June 30 is because that’s when the firm believes it will have burned through most of its Fund V dry powder (based on the expectected size of a couple coming deals).
*** Deal Scoop: Battery Ventures has invested $10 million into Istra Research, a stealthy “quantitative financial research firm focused on high frequency trading strategies.” Istra was founded by Michael Lewin, who previously founded Battery portfolio company Kashya (sold to EMC for $153m). Battery’s Scott Tobin, who also led the Kashya deal, has taken a board seat.
*** Personnel Scoop: Doyle Burkett left Aurora Capital late! last year. He had been a vice president.
*** CalPERS doc dump: CalPERS is about to release a ton of docs related to placement agents used by their general partners. We’re going to try getting them up as soon as possible. Go here to see them, and help us read through them for interesting items.
Top Three
Leonard Green & Partners has invested $250 million into AerSale, a Coral Gables, Fla.-based provider of aftermarket aircraft, engines and components. Imperial Capital advised AerSale on the deal.
CSIdentity, an Austin, Texas-based provider of identity theft and fraud protection solutions, has raised $35 million in funding from Investcorp Technology Partners.
SAIC (NYSE: SAI) has agreed to acquire CloudShield Technologies Inc., a Sunnyvale, Calif.-based provider of IP services control and security solutions. No financial terms were disclosed for the deal, which is expected to close in the middle of next month. CloudShield has raised over $65 million in VC funding since 2002, from firms like Tektronix Inc., ComVentures, TPG Growth, Foundation Capital and Paladin Capital.
VC Deals
Visible Technologies, a Seattle-based provider of Internet brand and reputation management services, has raised $22 million in Series C funding. Investor Growth Capital led the round, and was joined by return backers Centurion Holdings, Ignition Partners, In-Q-Tel and WPP Group.
Synchrony Inc., a Roanoke, Va.-based maker of magnetic bearings, power and control systems, has raised $10 million in Series C funding from existing investor Third Security LLC. The company previously raised $15 million.
Impact Radius, a Santa Barbara, Calif.-based provider of multi-channel advertising platform, has raised $6 million in VC funding led by Redpoint Ventures. Impact Radius’ founding team previously worked together at Commission Junction.
EBS Technology GmbH, a German maker of medical devices for the treatment of neurological deficits that result from stroke or brain trauma, has raised €3 million in second-round funding. Earlybird led the round, and was joined by BC Brandenburg Capital and High-Tech Gründerfonds.
iForem, a Redwood Shores, Calif.-based provider of digital asset preservation, has raised $2 million in new VC funding from existing shareholder Gabriel Venture Partners. The company also announced its acquisition of EnMoDa, a digital privacy company focused on the mobile communications market.
Presto Engineering Inc., a San Jose, Calif.-based provider of outsourced testing services to the semiconductor industry, has raised $2 million in VC funding from French investment firm Masseran Gestion.
SocialGO, a Redwood City, Calif.-based maker of a platform for creating social networking sites, has raised $800,000 in VC funding from Gibraltar-based Veddis Ventures.
VirtualLogix Inc., a Sunnyvale, Calif.-based provider of real-time virtualization software, has received an undisclosed amount of new VC funding. Progression Partners led the round, and was joined by return backers Atlas Venture, Index Ventures, DFJ Esprit, Intel Capital, Motorola Ventures and Texas Instruments. The company previously raised around $40 million.
Buyouts Deals
BC Partners has dropped out of the auction for UK discount retailer Matalan, which is being shopped with an asking price of approximately $2.5 billion. This follows an earlier withdrawal by Blackstone Group. Remaining suitors include Warburg Pincus, TPG Capital and Advent International.
The Carlyle Group is among those expected to submit final bids for South Korean convenience store chain Buy the Way. The deal is! expected to generate at least $223 million for seller Unitas Capital, with other bidders to include Japanese retailer ministop and South Korea’s Lotte Group.
H.I.G. Capital has completed its acquisition of Allion Healthcare Inc. (Nasdaq: ALLI) for $278 million, including the assumption or repayment of $79 million of indebtedness. The $6.60 per share sale price represented a 21.32% premium over Allion’s closing price prior to the original deal announcement. Allion provides pharmacy and disease management services focused on HIV/AIDS patients, plus specialized biopharma medications and services to chronically ill patients.
H.I.G. Capital has sponsored a recapitalization of TRAKAmerica, a Naples, Fla.-based provider of accounts receivable management services to consumer credit originators and debt buyers. No financial terms were disclosed for the deal, which will result n TRAKAmerica becoming part of an H.I.G. acquisition platform called Reprise Management Group. Gree! nberg Advisors advised H.I.G. and Reprise on the deal.
Oaktree Capital has agreed to acquire SGD, a French maker of specialty glass packaging in the perfumery, cosmetic and pharmaceutical products industry. No financial terms were disclosed.
Protective Products of America, a Sunrise, Fla.-based maker of bulletproof vests and body armor, has filed for Chapter 11 bankruptcy protection. The company also said that it has agreed to sell most of its assets to Sun Capital Partners for around $8 million.
PE-Backed M&A
CitySquares Online Inc., a Boston-based local search startup, has acquired Framingham, Mass.-based rivalYokel.com. No financial terms were disclosed. CitySquares has raised a small amount of VC funding from eCoast Angels, while Yokel had been backed by Boston Capital Ventures.
Health and Safety Institute, an acquisition platform sponsored by The Riverside Company, has acquired EMP Canada Services Inc., a provider of CPR, EMT and occupational safety training materials and training programs. No financial terms were disclosed.
RoadSafe Traffic Systems Inc., a Bensalem, Penn.-based provider of traffic safety services, has acquired CSW Safety Services, a Denver-based provider of temporary traffic ! control and protection and pavement marking services in the Rocky Mountain area. No financial terms were disclosed. RoadSafe is a portfolio company of Aperion Management and Falcon Investment Advisors.
Rosetta, a Hamilton, N.J.-based interactive marketing agency, has acquired healthcare marketing agency Wishbone. No financial terms were disclosed. Rosetta is a portfolio company of private equity firm Lindsay Goldberg LLC.
US LBM Holdings, a Green Bay, Wis.-based supplier of lumber and building materials, has acquired Universal Supply Co. from Stock Building Supply. No financial terms were disclosed. US! LBM is a portfolio company of Bla ckEagle Partners and Building Industry Partners.
PE Exits
Life Technologies Corp. (Nasdaq: LIFE) has agreed to acquire AcroMetrix, a Benicia, Calif.-based provider of controls and standards for molecular diagnostics tests. No financial terms were disclosed. AcroMetrix has raised a small amount of VC funding from Telegraph Hill Partners.
Firms & Funds
Alstom SA and Schneider Electric said that they have launched a €70 million venture capital fund called Alster Capital, with a focus on investments in the energy and environmental sectors. www.alstom.com
Human Resources
Scott Gable has joined Hercules Technology Growth Capital as chief operating officer. He previously was head of U.S. operations for United Commercial Bank.
Scott Peters and Tolman Geffs have been named co-presidents of JEGI, an investment bank focused on the media and marketing sectors.
Ryland Reed, co-founding managing director of Point Capital Partners, has joined ComStar Media as executive VP of business development. He will be charged with raising a $50 million production fund.
Brent Saunders has joined General Atlantic as a senior advisor foc used on the healthcare sector. He previously was a senior exec with Schering-Plough, including as president of Global Consumer Health Care and d Head of Integration for Schering-Plough’s merger with Merck & Co.
Wendy Webb has joined Tennenbaum Capital Partners as a managing director of investor relations. She previously spent 20 years with The Walt Disney Co., including as executive director of The Walt Disney Company Foundation and senior VP of investor relations and shareholder services! .
Cogent Partners has promoted Chris Bonfield to vice president. He joined the firm in 2007 from Bank of America.
Institutional Venture Partners has promoted Jules Maltz to the position of principal, with a focus on Internet and software companies. He joined the firm in 2008 as a vice president, and has worked on such deals as Spiceworks, Twitter and Yext.
The Carlyle Group has promoted 33 professionals, including the following seven to managing director: Anand Balasubrahmanyan (Asia buyout), Pam Bentley(Accounting), Oussama Daher (European real estate), Shary Moalemzadeh(global distressed and corporate opportunities)! , Chris Ullman (communications), Stephen Wise (U.S. buyouts) and Alex Y ing (Asia buyouts).
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