peHUB Wire: Wednesday, August 4, 2010

Today’s column didn’t quite come together in time (it’s a fun one), so just a couple quick notes to pass the time until tomorrow…

*** One of the big knocks on pre-crisis private equity was that it had eschewed its buy-low/sell-high mantra, in favor of buy high and (hope to) sell higher. A lot of it was properly pinned on cheap debt, but some was caused by a sheep-like portfolio land rush (“They did a deal? Well then, we’ll do a deal…”).

I bring it up today because of some new data from Thomson Reuters. It’s the number of announced and closed PE-backed M&A transactions in 2010 (through Monday). It works out to 1,755 global deals valued at just over $103 billion. This compares to 1,558 deals worth nearly $39 billion over the same period in 2009.

In other words, average deal size is skyrocketing. My initial assumption was this was again a case of private equity investors straying from their knitting, perhaps egged on by competition borne of record fund overhang. But then I noticed the median EBITA multiples being paid in Q1 2010 were about the same as in Q3 2009 (between 7x-8x), and the Q2 2010 EBITDA multiple is still way lower than that of Q4 2009.

So does this mean PE firms, in general, are buying stronger companies? Or is there some other explanation for why deal sizes are climbing while EBITDA multiples are falling?

*** Speaking of overhang, the NY Post this morning is reporting that Moelis & Co. will hand back around half of a $1.5 billion co-investment fund to limited partners. Bain Capital did something similar – albeit less severe – with a co-investment fund earlier this year, so this isn’t unprecedented. But private equity fund size cuts are extremely rare, so it’s worth taking note whenever we see one.

*** Bertram Capital has raised more than $500 million for its second growth equity fund, as we first reported at peHUB last night. The San Mateo, Calif.-based firm still needs to make a few more allocation decisions, and expects to hold a final close on $520 million within the next few weeks (including up to a $20 million general partner commitment). More info here.

Top Three

Altegrity, a portfolio company of Providence Equity Partners, hascompleted its $1.13 billion acquisition ofinvestigations company Kroll from Marsh & McLennan Cos.Altegrity is led by former Marsh CEO Michael Cherkasky.

GTCR has formed Jessamine Healthcare Inc., a Rockville, Md.-based platform to acquire companies in the healthcare payor and outsourced payor services industries. No financial terms were disclosed. Jessamine Healthcare will be led by Sale Wolf, former CEO of Coventry Health Care (NYSE: CVH).

Blue Cod Technologies, a Marlborough, Mass.-based provider of outsourcing and hosted policy administration services to the property and casualty insurance industry, has raised $8 million in new VC funding. General Electric Pension Trust led the round, and was joined by return backer Edison Venture Fund.

VC Deals

BoxTone, a Columbia, Md.-based provider of mobile service management software, has raised $7.5 million in Series B funding from Lazard Technology Partners.

Zulily, a Seattle-based private-sale shopping site for children’s items, has raised $6 million in Series B funding. August Capital led the round, and was joined by return backer Maveron LLC.

Bright Automotive Inc., an Anderson, Ind.-based maker of hybrid and electric vehicles, has raised $5 million from GM Ventures. It previously raised over $11 million from White Pines Partners and Duke Investments.

WeShop, a New York-based operator of an online shopping platform where consumers control their data, has raised $4.25 million in Series A funding. Backers include Jonathan Miller (News Corp.), Frank Kenny (Delta Partners), Martin White (Abacus Direct) and Carlos Sala (Abacus Direct).

Xtify, a New York-based developer of a mobile push notification platform for businesses, has raised $2.8 million in first-round funding. Backers include Acadia Woods Partners andSeventySix Capital.

RealPractice Inc., a Santa Ana, Calif.-basedprovider of legal technology products and services,has raised an undisclosed amount of new VC funding. Return backers include Rustic Canyon Partners and Miramar Venture Partners. The company previously raised over $5.5 million.

Buyouts Deals

Francisco Partners has acquired a majority of the share capital and voting rights of Emailvision SA (NYSE Euronext: ELEMV), a provider of email marketing software. The deal was valued at approximately €46 million.

GI Partners has sponsored a management buyout of SoftLayer Technologies, a Dallas-based provider of on-demand data center services. No financial terms were disclosed. DH Capital advised SoftLayer on the deal.

Language Stars LLC, a provider of language instruction to the pre-school and elementary school market, has raised an undisclosed amount of private equity funding from Hispania Capital Partners.

SCM Insurance Services Inc.,a Canadian provider of outsourced services to the insurance industry, has secured a “significant equity investment” from TorQuest Partners.

PE-Backed IPOs

Horizon Pharma Inc., a Northbrook, Ill.-based drug developer focused onarthritis, pain and inflammatory diseases, has filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker symbol HZNP, with Jefferies & Co. and Piper Jaffray serving as co-lead underwriters. The company has raised around $54 million in VC funding since its 2004 founding as Nitec Pharma. Shareholders include Atlas Venture (17.4% pre-IPO stake), Essex Woodlands Health Ventures (14%), Scale Venture Partners (13.4%), NGN Biomed (9.9%), Sutter Hill Ventures (5.9%), FirstMark Capital (7.9%), Global Life Sciences Ventures (7.8%) and TVM (5.7%).

PE-Backed M&A

Brightree LLC, a Duluth, Ga.-based provider of business management softwarefor themedical equipment industry, has acquired Harrisburg, Penn.-based rival Computer Applications Unlimited. No financial terms were disclosed. Brightree is a portfolio company of Battery Ventures.

PE Exits

PerkinElmer Inc. (NYSE: PKI) has acquired VisEn Medical Inc., a Bedford, Mass.-based developer of fluorescence molecular imaging technology platforms. No financial terms were disclosed. VisEn had raised around $30 million in VC funding fromMerck Capital Ventures, Flagship Ventures, Siemens AG Medical Solutions and Spinnaker Capital.

Firms & Funds

Commerce Street Income Partners has closed its second credit fund with $125 million in capital commitments. It will focus on acquiring senior pieces of securitized bank holding company debt.

Tata Capital of India said that it plans to launch a Singapore-based private equity fund, in partnership with Japan’s Mizuho Securities.

Human Resources

Brian Dunn has joined Sorenson Capital as chief financial officer, after having served as CFO of Abacus Private Equity Group. The firm also announced the promotions of Curtis Toone to managing director, and of Mark Ludwig and Mike Scott to principal.

Thomas Putter has stepped down as head of Allianz Capital Partners, which he joined back in 1998. He will be succeeded by Karl Ralf Jung.

Philip Raygorodetsky has joined Black Diamond Capital Management as a managing director in the firm’s controlled distressed debt/private equity team. He previously was with GSC Group.

Bipul Sinha has joined Lightspeed Venture Partners as a principal. He previously was a principal with Blumberg Capital.

Dean Tarpley, former senior VP of retail at Palladium Group, has joined Alvarez & Marsal to launch a retail industry practice.