peHUB Wire: Thursday, May 6, 2010

This is Erin filling in for my last peHUB column before embarking on a new adventure…

I started covering private equity at Thomson Reuters two and a half years ago, right as a black cloud descended upon the industry. It was the fall of 2007: Blackstone Group had just gone public, BusinessWeek had cursed private equity by affording it a cover and the credit crunch was settling in for a nice, long winter.

I couldn’t have picked a worse time.

The collapse of private equity brought me on a pretty dark ride, from the pendulum of stress and SEIU vs. Kravis to reCrapilizations and fundraising purgatory.

In the past two years, I’ve gotten to write headlines like Merry Christmas, Your Firm May Fail and There’s More Than One Way To Spell “Jackass.” I’ve badgered firms like Sun Capital, Apollo Management and American Capital. I documented layoffs, clawbacks and writedowns and cover! ed PE-backed bankruptcies in meticulous detail.

Basically, things got ugly.

Two and a half years later, I’m leaving, and so is the black cloud. My stories of impending doom read like they were written in another era. The unthinkable is happening. Private equity, it seems, is back on top, with few bruises to show for its mistakes.

Larger and larger deals are being struck with cheaper ad cheaper debt. We’ve seen the brazen return of staple financing, PIK toggles and second lien loans.

Meanwhile, large buyout firms were able to fend off the “wall of debt” facing their overleveraged portfolio companies with last year’s amend and extend phenomenon. Private equity lost a small percentage of its portfolio companies to bankruptcy, not nearly to the extent some predicted. This year’s LBO-backed bankruptcy list, typically a goldmine of writing material, has dwindled to just one or two companies a month. Other than Chrysler, the m! ega-buyouts have not crumbled. Half of them are gearing up to IPO! Meanwhile buyout firms across the board wrote up their portfolios at the end of 2009. Before you know it, Steve Schwarzman will be throwing a birthday parties all over again. (To this I say: Never Forget!)

It doesn’t seem fair, after all of those dividend recaps and risky capital structures and irrationally frothy auctions, that private equity, particularly the mega-firms, could come out unscathed. It reminds me of when you run into that horrible bully from your high school, the one you like to imagine is bagging groceries in some dead-end town. But it turns out he ended up with a great family, successful career and an all-around happy life. Conventional thinking (and the teen movie canon) teaches us that such guys always get their comeuppance. Not so in the real world, and not so in private equity, apparently.

Perhap! s private equity can thank the lobbying forces of the PEC, or the half -hearted rage of LPs that appears to be settling for modest compromises on fees and terms. There’s also that lovely “private” aspect of the industry, and lastly, the built-in long-term nature of the business. In recent months, private equity has confounded me with its resilience, or perhaps infallibility, or perhaps its dumb luck. Either way, you all are not going anywhere.

*** As a parting gift, I put together a brief video memorializing the sometimes ridiculous images we bloggers use to liven up dry financial stories. I somewhat insanely saved every image I used on more than 1500 stories, and compiled them. Watch it here.

*** For the record, there are a number stories I wish I had had time to write over the years. Their headlines, from my rainy day file, include:

This Debt Thing is Getting Out Of Control People

Either KKR is Lying or I’m Clueless

Checking For A Pulse: Have You All Given Up On M&A Altogether?

Zombie Companies Have A Debt Wish

Go Ahead, PIK Your Toggle

IFRS: Your New Best Frenemy

Stop Naming Your Firms After Subdivisions, Star Signs and Latin Phrases

*** Farewell!

Top Three

Irving Place Capital Partners has agreed to sell its 55% stake in women’s footwear maker Stuart Weitzman Holdings LLC to Jones Apparel Group Inc. (NYSE: JNY) for around $180 million in cash. Stuart Weitzman will retain the other 45% ownership position.

Invidi Technologies Corp., a Princeton, N.J.-based provider of targeted advertising for broadband TV services, has raised $23 million in Series D funding. Google Ventures led the round, and was joined by return backers WPP Group, EnerTech Capital, InterWest Partners and Menlo Ventures.

Ping An Insurance has received approval from Chinese regulators for its previously-announced plan to acquire up to a 30% stake in Shenzhen Development Bank. Sellers would include TPG Captial, which could make a profit of more than $2 billion on the deal.

VC Deals

Secure EDI, a Charlotte, N.C.-based healthcare IT company, has raised $40 million in growth equity funding from Abingworth.

International Battery, an Oakland, N.J.-based maker of large-format, rechargeable lithium-ion cells and batteries, has raised $35 million in Series C funding. The round was led by existing shareholder Digital Power Capital, an affiliate of Wexford Capital.

Aepona, a Belfast, Ireland-based provider of software that enables “network-as-a-service” for mobile operators, has raised $10 million in new VC funding. BlackBerry Partners Fund led the round, and was joined by return backers Amadeus Capital Partners, Polaris Ventures, Innovacom, Nordic Venture Partners and Sutter Hill Ventures.

Schrödinger Inc., a New York-based provider of chemical simulation for pharma and biotech research, has raised $10 million in equity funding from Cascade Investment LLC, an investment vehicle owned by Bill Gates.

HelloWallet, a Washington, D.C.-based personal finance website, has raised $3.6 million in Series A funding. Grotech Ventures led the round, and was joined by Jean and Steve Case.

Newsy, a Columbia, Mo.-based video news service that analyzes and highlights key differences in reporting, has raised $2 million in second-round funding from individual angels.

Buyouts Deals

Austin Ventures has acquired creative agency Exopolis for an undisclosed amount.

Lee Equity Partners has completed its acquisition of pizza chain Papa Murphy’s International from Charlesbank Capital Partners. The deal reportedly is worth around $180 million, which represents a 10x EBITDA multiple.

Spire Capital Partners has acquired Rainbow Early Education, a provider of early education services for children in the Eastern, Midwestern and Southern U.S. The deal was done in partnership with company management. No financial terms were disclosed.

Sun European Partners has agreed to buy Hewden Stewart, the UK equipment rental business of Finning International (TSX: FTT), for around $166 million.

TPG Telecom (AX: TPM) is in talks to acquire AAPT, the Australian subsidiary of New Zealand’s Telecom Corp. (NZ: TEL) for approximately $400 million. Other bidders include Quadrangle Group and the Australian unit of Singapore Telecommunications.

PE-Backed IPOs

Falck, a Danish ambulance company owned by ATP Private Equity and Nordic Capital, will announce details of its planned IPO within the next week.

PE-Backed M&A

GoTV Networks Inc., a Sherman Oaks, Calif.-based made-for-mobile television provider, has acquired the HOMBRE mobile application development unit of Hands-On-Mobile, a San Francisco-based mobile gaming publisher. No financial terms were disclosed. GoTV has raised over $29 million from Bessemer Venture Partners, Charles River Ventures, Motorola Ventures and Qualcomm Ventures. Hands-On Mobile has raised over $100 million from firms like Bessemer Venture Partners, General Catalyst Partners, eFund, Draper Fisher Jurvetson and Institutional Venture Partners.

Cash Cycle Solutions Inc., a Charlotte, N.C.-based provider of outsourced transaction processing services, has acquired San Diego-based Sea-Net Holding Inc. The deal was partially financed by $15 million in debt from BIA Digital Partners and RBC Bank.

PE Exits

Digital River Inc. (Nasdaq: DRIV) has acquired Fatfoogoo, an Austrian provider of in-game and online commerce services. The deal is valued at approximately $10 million in cash. Fatfoogoo had raised VC funding from Digital River, NextMarch, Gamma Capital Partners and Ueber.mut.

Patni Computer Systems (BO: PTNI) is in talks to sell a majority stake for around $1 billion. Suitors include NTT Data Corp. and Fujitsu. Sellers would include private equity firm General Atlantic, which holds a 17.7! % stake.

Firms & Funds

Earth Capital Partners, a UK-based private equity firm, is raising upwards of $300 million for a new fund that invest in sustainable timber plantations in Brazil and other Latin American countries.

KKR Financial (NYSE: KFN) has canceled a planned sale of 25 million shares, citing unfavorable market conditions.” The offering was designed to finance future acquisitions.

Partners Group has closed its latest fund with €537 million in capital commitments. The Switzerland-based firm had been targeting €500 million.

Human Resources

Stefan Franssen has joined GMT Communications Partners as a partner. He had spent the past eight years with Cinven.

Ian Jacobson has stepped down as a vice president with Winona Capital Management, in order to become chief financial officer of Eco-Products Inc., a Boulder, Colo.-based maker of green foodservice disposables.

John Pollock and Mike Miller have joined mid-market I-bank Fidus Partners as managing directors. Pollock previously was a managing director and head of the healthcare practice with Edgeview Partners! . Miller was a managing director and head of business development for Allied Capital, and will run business development for Fidus.