Secondary market prices for private equity funds are on the rise, according to a report being released today by Cogent Partners.
The data looks at transactions from the first half of 2010, and finds that average high bids rose to 79.6% of NAV from 72% of NAV during the second half of 2009. Buyout funds were particularly hot, increasing to 86.4% from 68.9 percent.
All of this leads me back to an argument I began making last fall: Secondary buyers blew it in 2009. They had a record amount of dry powder, but were paralyzed by fears that new deals would be like trying to catch a falling knife. “The sellers will cave,” secondary buyers thought, “particularly as their liquidity squeeze tightens.”
But they were wrong. The public equity market rally meant that liquidity concerns actually decreased, meaning that sellers could hold out for higher prices. Moreover, that same rally caused PE funds’ NAV to rise — particular! ly amount mega-buyout funds — meaning that buyers were faced with a pair of price boosts. Finally, secondary funds faced some internal pressures of their own, due to an excess of dry powder caused by last year’s depressed deal volume.
A few other notable findings from the Cogent study:
• “The composition of sale portfolios has migrated back to predominately funded assets, as sellers look to take advantage of increased pricing to actively manage current NAV exposure. The average fund marketed in H1 2010 was 73.6% funded versus the average fund in H1 2009, which was 60.6% funded.”
• “Despite the return to sales of funded assets and a re-engagement of many traditional buyers who were largely inactive for much of 2009, non-traditional buyers continue to successfully participate in the secondary market. A non-traditional buyer was the high bidder on over two-thirds of the funds that received bids from non-traditional buyers in H1 2010.”
• VC funds accounted for just 2% of all funds pitched on the secondary market in H1 2010. They typically represent between 25% and 33% of the total. Cogent writes: “To be clear, potential sellers have an interest in parting with portions of their venture fund portfolios, but holding these funds continues to be relatively more attractive given the discount to NAV at which most venture funds are likely to transact.”
*** Correction: Yesterday I made an error on one-year VC fund performance. The correct stats figure was 6.5%, compared to 49.6% for the DJIA and 56.9% for the Nasdaq.
*** In semi-related news, it’s worth noting that Camrbidge Associates also released March 31 marks for non-VC private equity funds (no NVCA participation, so no press release). The headline numbers are: 7.19% for 10-year, 10.35% for five-year and 22.35% for one-year. Those figures are described as “end-to-end pooled mean net period to limited partners.”
I’ve also uploaded some more recent, fund-specific data from UTIMCO. Particular kudos to Ampersand Ventures, which has positive IRRs for all four listed funds (vintages between 1995 and 2006). Find UTIMCO data here.
Ampersand Ventures. UTIMCO data shows 4 funds between 95-06, all w/ positive ! IRRs.
*** Yeah, been kind of data-heavy these past two days. Will get off the numbers today (or so I hope — my eyes are glazing over). Drop me some scoopiness via our anonymous tip line.
Top Three
ABRY Partners reportedly is planning to sell alarm monitoring company Monitronics, with an asking price of around $1 billion. Moelis & Co. and Citi are managing the process.
Envestnet Inc., a Chicago-based provider of online investment solutions and services to financial advisors, raised around $63 million in its IPO. The company priced seven million shares at $9 per share, compared to plans to sell 7.7 million shares at between $12 and $14 per share. The companyhad raised over $40 million in VC funding, from GRP Partners (29.14% pre-IPO stake), Foundation Capital (9.45%), Apex Venture Partners (7.2%), Edgewater Funds (7.15%) and Siguler Guff (5.24%).
The National Social Security Fund, the $103 billion Chinese sovereign wealth f! und, plans to begin making overseas private equity investments.
VC Deals
Morega Systems, a Mississauga, Ontario-based developer of media mobility solutions for the digital home, has raised US$10 million in Series B funding. Celtic House Venture Partners and GrowthWorks co-led the round, and were joined bythe Ontario Emerging Technologies Fund.
HemaQuest Pharmaceuticals, a Newton, Mass.-based developer of small-molecule therapeutics to treat serious blood disorders, has raised $4 million in new Series B funding from Latterell Venture Partners. The company previously held a $12 million first close on the round, from Aberdare Ventures (lead),De Novo Ventures, Forward Ventures and Lilly Ventures. It has now raised a total of $36 million.
Kenshoo, an Israel-based provider of online! demand generation SaaS solutions for the enterprise and local markets, has raised an undisclosed amount offunding from return backer Sequoia Capital.
Pelican Imaging Corp., a Soquel, Calif.-based company focused on commercializing computational cameras,has raised an undisclosed amount of VC funding from In-Q-Tel. It previously raised $7 millionfrom Granite Ventures andInterWest Partners.
SolidFire, an Atlanta-based cloud computing storage platform, has raised an undisclosed amount of first-round funding co-led by Valhalla Partners and Novak Biddle Venture Partners.
Buyouts Deals
American Securities is bidding for California Pizza Kitchen Inc. (Nasdaq: CPKI), a 25 year-old restaurant chain with a market cap in excess of $400 million. Moelis & Co. is managing the process. News of American Securities’ involvement was first reported by the NY Post.
Genstar Capital has acquired Evolution Benefits, an Avon, Conn.-based provider of benefit card payment services for healthcare and employee benefits accounts. No financial terms were disclosed.
The Sterling Group has completed its acquisition of New Orleans-based B&G Crane Services LLC. Nopricing terms were disclosed. Debt financing was provided by Wells Fargo Capital Finance, BNP Paribas, Capital One Leve! raged Finance and Whitney Bank.
Vector Capital has completed its $145 million take-private acquisition of Trafficmaster PLC, UK-based vehicle tracking company.
PE-Backed IPOs
Chesapeake Midstream Partners, a joint venture between Chesapeake Energy (NYSE: CHK) and Global Infrastructure Partners, raised around $446.25 million in its IPO. The company priced21.25 million units at $21 per unit ($19-$21 offering range). Itwill trade on the NYSE under ticker symbol CHKM, while UBS, Citi and Morgan Stanley serving as co-lead underwriters.
Molycorp Inc., a Greenwood Village, Colo.-based rare earth mining company, has cuts its IPO price expectations from between $15 and $17 per share to $14 per share. The company plansto trade on the NYSE under ticker symbol MCP, with J.P. Morgan and Morgan Stanley serving as co-lead underwriters. It reports a $28.6 million net loss for 2009 on around $7 million in net sales. Molycorpwas created in 2008 when Chevron Mining sold its Mountain Pass operations to an acquisition company formed by Pegasus Partners, Goldman Sachs, Traxys North America and Carint Group. www.molycorp.com
PE-Backed M&A
Canadian Stock Transfer Company Inc., a portfolio company of Pacific Equity Partners, has agreed to acquire the Issuer Services business of CIBC Mellon Trust Co. No financial terms were disclosed.
IMG, a portfolio company of Forstmann Little, plans to acquire ISP Sports, a U.S. college sports media rights company. No financial terms were disclosed.
PE Exits
IBM Corp. has agreed to acquire Storwize Inc., a Marlborough, Mass.-based data storage company. No financial terms were disclosed, although earlier press reports peggedthe price at around$140 million. Storwize has raised around $28 million in VC funding from Sequoia Capital, Bessemer Venture Partners, Tenaya Capital, Tamares Group and Tokyo Electron Device.
Firms & Funds
Tregaron Capital, a Palo Alto, Calif.-based firm focused on mezzanine debt and control equity investments, has raised $50 million for its latest fund.
The Oregon Investment Council yesterday approved a $200 million commitment to The Blackstone Group’s sixth fund, which is expected to close at $13.5 billion. The commitment included certain fee concessions that now will be offered to other large LPs. www.blackstone.com
Human Resources
Shawn Cross has been named CEO of the Burrill Merchant Banking Group. He joined the firm 13 months ago as a managing director.
Kevin Jackson has joined Gridiron Capital as a vice president. He previously was a senior associate with at CCMP Capital.
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