Put 30 limited partners in a room and you’ll quickly find yourself disabused of several of the biggest promotional themes in this business. Among them: that all PE firms produce proprietary deal flow, achieve top-quartile returns, avoid clawback situations, create foolproof succession plans, always do the right thing by investors.
General partners also routinely claim to publish timely, informative, transparent quarterly reports. Many surely do. But our sister magazine, the bi-weekly Buyouts, decided to examine this particular chestnut. The resulting article, out this week in a special supplement, finds investors growing far more demanding when it comes to the data that they want flowing from their GPs. And—OK, we were a little surprised—they are generally pleased with how GPs have responded.
We particularly liked the quote from Katharina Lichtner, a managing director at PE asset manager Capital Dynamics of Switzerland: “A large number of managers were already providing phenomenal reporting even before the [financial] crisis. The difference is that it has now trickled down to those that weren’t as forthcoming.” Our cynical take: The tight fundraising market has more GPs realizing they’d better become responsive to LPs if they ever want to secure that next Roman numeral.
Still, the article found room for improvement when it comes to investor reporting. Here’s a quick summary of what GPs could be doing better.
• Standardization: GPs may by and large be providing the data investors need. But it comes in so many different formats that LPs (or their fund administrators) end up re-keying everything. Granted, LPs aren’t exactly all on the same page here either. It may take some kind of industry-wide effort to get both GPs and LPs to agree to st! andardized reporting formats.
• Consistent Valuations: The intent of FAS 157 was ostensibly to bring more rigor to the process of setting valuations for privately-held (and therefore illiquid) companies. LPs applaud the insights they’re getting into how GPs are formulating their valuations. But some GPs seem to be taking advantage of the inherent flexibility! of FAS 157 to pick and choose the valuation methodology that’s most favorable, the article found. It’s also not unusual for GPs to value the same securities using different methods.
• Information on ESG Risk: Many investors are starting to measure the environmental, social and governance (ESG) risks lurking in their investment portfolios. They need new kinds of data from GPs to do it.
• More Timely Reporting: It can easily take two and a half months after the end of a quarter for LPs to get a quarterly report, and until late spring or even later to get year-end NAVs. One LP quoted in the article said it would be “helpful” to have quarterly reports within four weeks of quarter’s end.
*** The Outlier: More than a third of U.S. venture firms and about one in six U.S. buyout firms withhold certain information from investors governed by Freedom of Information Act laws. That’s according to the Reuters PE/VC Partnership Agreements Study 2010-2011.
Partners Group closed its largest dedicated direct investment program, Partners Group Direct Investments 2009, at its €650 million hard cap. The Zug, Switzerland-based manager said the program attracted investors worldwide. Investors include sovereign wealth funds, endowments, corporate and public pension plans, insurance companies, family offices and selected entrepreneurs.
India-based mobile handset company Micromax Informatics has received roughly $43 million from Sequoia Capital, Sandstone Capital, and Madison India Capital for an undisclosed minority stake in the company. Micromax’s previous investors include TA Associates.
Nexant Inc. has received $43 million in investments. The San Francisco, Calif.-based provider of intelligent grid software and clean energy solutions plans to use the capital to fund its growth and expansion. The financing came from Oak Investment Partners and Intel Capital, as well as existing investors TeleSoft and Beacon.
Laser Light Engines, a Salem, New Hampshire-based manufacturer of laser lights for cinema screens, has secured $13 million in a Series B round of fund-raising. Funds came from two returning venture capital firms, Braemar Energy and Harris & Harris Group, and the rest came from Imax Corp, with whom Laser Lights has a strategic partnership. Laser Lights intends to use the funds to develop a custom version of its laser engine for use in Imax screens.
Bain Capital Ventures has invested $10 million after a Series C round of fund-raising by Boston Heart Lab, a company that works on diagnostics for patients with heart disease. Boston Heart Lab has also named Susan Hertzberg as new chief executive. Hertzberg is the former president of the North American division of the French medical company Ipsogen.
Hasso Plattner Ventures invested $6 million in software company Panaya. Hasso Plattner, along with existing investors Benchmark Capital and Battery Ventures, plans to acquire Tamares Group’s stake in the company that develops software as a service for automating SAP upgrades.
Data Impact, a Huntington Beach, Calif.-based provider of modular electronic invoice presentment and payment solutions, secured $5 million in a new round of funding. Zon Capital Partners led the round. Additional investment came from private investors and Data Impact’s founders. Square One also granted a credit line.
immatics biotechnologies, a German biotechnology firm, has raised EUR54m ($71m) in Series C funding to continue research into a new vaccine to protect against renal cell carcinoma. Half the funding came from return investors dievini Hopp Biotech holding and venture capital firm Wellington Partners, while the rest came from a first-time investor, MIG Verwaltungs AG. Dr. Matthias Kromayer of MIG will join the immatics board.
Northwestern Management Services, majority owned by the private equity firm Beekman Group, has acquired The Dental Team, a Florida-based denistry group with six offices across the state. Terms of the acquisition were not disclosed.
KPS Capital Partners LP acquired a controlling stake in Motor Coach Industries International Inc., which is a Schaumburg, Ill.-based maker of buses. Financial terms were not disclosed.
Accuvant, a portfolio company of Sverica International, has bought Ciphent, which provides cyber security services. Financial terms were not announced. Sverica is a PE shop with more than $425 million in assets under management.
Rosetta, which is backed by Lindsay Goldberg, has acquired LEVEL Studios, a digital market and technology services agency. Financial terms were not announced. Rosetta is a large digital ad agency. News of the deal was disclosed by AdMedia Partners, which acted as financial advisor to LEVEL Studios.
Spirit Airlines Inc. filed its plans for an IPO with the Securities and Exchange Commission. The Miramar, Fla.-based low-cost airline will seek to raise up to $300 million from the proposed stock offering. Affiliates of Oaktree Capital Management own 33.8 percent of Spirit Airlines.
Firms & Funds
Standard & Poor’s Capital IQ unit plans to acquire rival TheMarkets.com for $300 million, the Wall Street Journal reported. TheMarkets.com is a joint venture of several Wall Street banks including JP Morgan Chase & Co. and Goldman Sachs Group Inc. Capital IQ provides data and analytical tools to investment banks, private equity firms and others.
Ashok Aram has left the biggest private equity firm in the Middle East, Abraaj Capital, to return to Deutsche Bank as chief executive for the Middle East and North Africa. Aram left Deutsche Bank in July 2009 to take up a position as managing director of Abraaj. He will remain on the company’s board.
Marcello Bottoli joined Advent International’s operating partner program. He will advise the Boston, Mass.-based firm on global investment opportunities in the retail and consumer sectors, with a focus on branded consumer products, fashion and luxury goods. Bottoli was president and CEO of Samsonite until January 2009.
Benchmark Capital has announced that it’s brought two new entrepreneurs-in-residence aboard: Paul Davidson, formerly VP of business development at MetaWeb, and Daniel Hoffer, a director of product and program management at Symantec and the cofounder and COO of Couchsurfing.com, an online network for making connections between travelers and the local communities they visit. Benchmark now has six EIRs.
Institutional Venture Partners has promoted Melanie Chladek to the position of administrative partner and chief financial officer. She will be responsible for managing the firm’s financial, operational and administrative activities at the later-stage venture capital and growth equity firms. The Menlo Park, Calif.-based company said Chladek was instrumental in the closing of its $750 million Institutional Venture Partners XIII in August.
News items written and compiled by Research Editor Eamon Beltran and Contributor Barry G. Whyte