peHUB Wire: Wednesday, May 5, 2010

A few months back, I asked you to participate in our bi-annual Dealmakers Survey, which is done in conjunction with the Association for Corporate Growth (ACG). We got over 680 responses, including GPs, bankers, lenders and LPs.

The top-line results reflect increased optimism, which 85% of respondents expecting an increase in M&A activity over the next six months. They also said it’s a buyer’s market. For context, only 56% predicted increased M&A activity in the year-ago survey.

Respondents said that healthcare and manufacturing/distribution would experience the most activity with 20% each, followed by financial services (13%) and technology (12%). Digging a bit deeper, business services is considered the sector with the best opportunities for future buyouts, while manufacturing/distribution will be best for distressed opps.

A whopping 79% of respondents said they expect to pay 5x EBITDA or less for companies over the next six months. They al! so said that 30% of their portfolio companies are expected to experience job growth, with 7% to experience job cuts.

One confusing result is related to portfolio company valuations. Thirty-five percent of respondents said they have marked down portfolio values over the past 12 months, while 22% had marked them up. That seems odd not only due to how fair-market accounting should interact with rising public markets, but also because 74% of respondent portfolio companies have improved EBITDA in the past year. Really not sure what to make of all that…

Finally, most respondents expect continued credit market improvement. Maximum leverage levels in today’s environment was reported by most at between 2x-3x.

*** Answer Key: Last Friday, I asked which mid-market lender is in talks to be acquired by a private equity firm? The answer is Churchill Financial, which has signed an agreement with Olympus Partners.

Ok, it was kind of a trick question, ! because Churchill already is owned by a private equity firm (Irving Pl ace Capital). I’m not certain if Irving Place will completely sell out, although we’ll probably find out when a formal announcement is made within a week or so. Expect Churchill debt-holders to take a slight haircut, and Irving Place to take a severe one (albeit with some earn-out potential).

Reps from all three firms declined comment.

Worth noting that this isn’t the first time Olympus Partners has expressed interest in mid-market banking. Back in 2008, the Stamford, Conn.-based firm considered launching its own senior lending group, before deciding the startup costs would be too high. Instead, it created a created a vehicle called Neptune Financial, which bought more than 100 small positions in broadly-syndicated loans via the secondary market.

*** Good Times: Reader’s Digest CEO Mary Berner sent out an email to ! U.S. employees on Monday, announcing that a 16-month “recession plan” would end, as scheduled, in July. That means the return of 401(k) matching, an end to unpaid shutdown days and a set-aside for merit increases.

The plan was put into place when Reader’s Digest was still owned by private equity firm Ripplewood Holdings. It filed for Chapter 11 bankruptcy protection last August, before emerging earlier this year. Ripplewood was wiped out.

*** It’s Finally Over: It’s been more than two years since we first discussed Madison Dearborn Partners’ efforts to raise its sixth fund, and LBO Wire now reports that the Chicago-based firm has held a $4.1 billion final close. Obviously well below the original $10 billion target and $7.5 billion revised target.

Got to be bittersweet for the MDCP folks, and it sounds as if they’re channeling a bit of Theo Epstein. Specifically, this fund might be us! ed as a bridge to (1) Remind LPs that the team can produce strong retu rns and (2) Allow MDCP to return to fundraising when LP pockets are looser. Hopefully it works out better for MDCP than it’s working out for Theo…

Top Three

Vista Equity Partners has agreed to sell Ventyx, an Atlanta-based provider of software for utilities and grid operators, to Swiss engineering group ABB. The deal is valued at more than $1 billion.

TearScience, a Morrisville, N.C.-based developer of a device to diagnose and treat chronic dry eye disease, has raised $44.5 million in Series C funding. New backers include Essex Woodlands Health Ventures, Investor Growth Capital and General Catalyst. Returning shareholders include De Novo Ventures, Spray Ventures and Quaker Bio Ventures.

Douglas Dynamics Inc., a Milwaukee-based maker of snow plows and salt spreaders for light trucks, raised around $112.5 million in its IPO. The company priced 10 million shares at $11.25 per share, compared to an original price range of between $14 and $16 per share (it amended the range to $11.25-$11.75 per share prior to pricing). It will trade on the NYSE under ticker symbol PLOW, while Credit Suisse and Oppenheimer & Co. served as lead underwriters. Shareholders include Aurora Capital Group (68.65% pre-IPO stake), Ares Corporate Opportunities (33.03%) and the GE Pension Trust (15.23%).

VC Deals

Netronome Systems Inc., a Cranberry Township, Penn-based provider of network flow processors, has raised $23 million in Series D funding. DFJ Esprit led the round, and was joined by return backersRaptor Group, Top Technology Ventures and Tudor Ventures. DFJ Esprit also is an existing shareholder, based on its acquisition of 3i Group’s Netronome stake via a direct secondary portfolio acquisition.

SuVolta Inc., a Los Gatos, Calif.-based developer of low-power CMOS semiconductor technology, has raised $22.17 million in new equity funding, according to a regulatory filing. The only new board member listed in Forest Baskett of New Enterprise Associates. SuVolta previously raised just over $20 million from August Capital, DAG Ventures and Kleiner Perkins Caufield &

StackOverflow, a free programming Q&A site, has raised $6 million in VC funding. Union Square Ventures led the round, and was joined by Ron Conway, Chris Dixon, Caterina Fake, Naval Ravikant, Nirav Tolia, Joshua Schachter, Micah Siegel and Bob Paske.

Enquisite Inc., a San Francisco-based provider of marketing measurement and optimization solutions, has raised $5.2 million in new VC funding. Rho Canada Ventures led the round, and was joined by return backers Castile Ventures, Formative Ventures, Retro Venture Partners and The Entrepreneurs’ Fund III. The company previously raised around $9 million.

Proferi, a San Mateo, Calif.-based analytics software startup, has secured $2 million of a $6 million fundin! g round from Andreessen Horowitz and Greylock, according to a regulatory filing. The stealth-mode company was co-founded by former Greylock entrepreneur-in-residence Christian Gheorghe.

Internet Pawn Inc., a Denver-based online pawn shop, has raised $1.5 million in Series A funding. New backers include Daylight Partners and Access Ventures.

Buyouts Deals

Providence Equity Partners has agreed to acquire a 25% equity stake in online automotive shopping site, a subsidiary of Cox Enterprises Inc.No financial terms were disclosed. Cox was advised on the sale by Goldman Sachs.

PE-Backed IPOs

Gilt Groupe, an online luxury retailer, has hired former StubHub CFO Andrew Page as its new CFO and may consider an IPO next year, according to the Wall Street Journal. Gilt Groupe has raised around $48 million from General Atlantic and Matrix Partners.

GSW, a German property company backed by Cerberus Capital Management and a Goldman Sachs affiliate, has canceled plans for a public stock flotation.

NXP Semiconductors NV, whose parent i! s prepping a $1.15 billion IPO, said its quarterly loss fell by more than half as sales improved. Backers include KKR, Bain Capital, Apax Partners, AlpInvest and Silver Lake Partners.

PE-Backed M&A

AudienceScience Inc., a New York-based provider of behaviorally-targeted audience analyticsfor Web advertising, has acquired Consorte Media, a leading digital marketing company that connects advertisers with Hispanics online. No financial terms were disclosed. AudienceScience has raised over $100 million in VC funding from Mayfield Fund, Mohr Davidow Ventures, Meritech Capital Partners and Integral Capital Partners.

ChoiceVendor, a San Francisco-based B2B reviewsite focused on vendors, has acquired rival VendorCity. No financial terms were disclosed. ChoiceVendor has raised VC funding from Battery Ventures.

Infoblox, a Santa Clara, Calif.-based provider of realt-time network infrastructure solutions, has! acquired Netcordia Inc., an Annapolis, Md.-basedprovider of network change and configuration management solutions. No financial terms were disclosed. Infoblox has raised over $75 million in VC funding from Focus Ventures, Chess Ventures, Duchossois Technology Partners, Sequoia Capital, Open Prairie Ventures and Tenaya Capital. Netcordia has raised over $17 million from firms that include Novak Biddle Venture Partners and Trinity Ventures.

PE Exits

Australia and New Zealand Banking Group Ltd. (AX: ANZ) has hired banks to advise it on a bid for Lone Star Funds’ majority stake in Korea Exchange Bank. The deal is expected to be worth more than $4 billion.

Global Environment Fund has agreed to sell Unirac Inc., an Albuquerqu! e-based provider of photovoltaic solar mounting solutions, to Hilti Group. No financial terms were disclosed.

Tessera Technologies Inc. (Nasdaq: TSRA) has agreed to acquire Siimpel Inc., an Arcadia, Calif.-based maker of integrated optical microsystems. The deal is valued at $15 million in cash. Siimpel had raised over $75 million from firms like Motorola Ventures, NTT DOCOMO, DFJ, Global Catalyst Partners, LG Innotek, Portage Venture Partners, Scale Venture Partners, Sun America Ventures and Zone Venture Partners.

Firms & Funds

Arlington Capital Partners has secured $217 million for its third fund, according to a regulatory filing. This is just $13 million more than the firm reported in a August 2009 filing. The listed maximum offering amount remains at $750 million, with Credit Suisse serving as placement agent.

Conor Venture Partners has held a €46.5 million first closing on its second fund. The Finland-based firm invests in early-stage tech companies in the Nordic and Baltic regions of Europe. Limited partners include European Investment Fund, Finnish Industry Investment, Etera Mutual Pension Insurance Company, Veritas Pension Insurance Co., Atine Investment Partners and a fund-of-funds managed by Finnish Industry Investment.

Human Resources

Kate Mitchell, a managing partner of Scale Venture Partners, has been elected chair of the National Venture Capital Association’s board of directors. She succeeds Terry McGuire of Polaris Venture Partners. Also joining the board in director capacities are Bruce Evans ofSummit Partners, Norm Fogelsong ofInstitutional Venture Partners, Robert Nelsen of ARCH Venture Partners, Scott Sandell ofNew Enterprise Associates and Theresia Gouw RanzettaofAccel Partners.

Kevin Beeston, former chairman and CEO of Serco Group PLC, has joined Advent International as an operating partner. He will continue as chairman of Advent portfolio company Domestic & General, which provides post point-of-sale extended warranty services.

Jeff Schlosser has joined Alvarez & Marsal as a New York-based managing director in the firm’s private equity services operations group. He previously was national partner-in-charge of KPMG’s business due diligence group.

Highland Capital Management has promoted Patrick Boyce and Lane Brittain to partner. Boyce is the firm’s COO and CFO, while Brittain is a portfolio manager and co-head of research.

Heather Wingate has joined Nomura Holding America to lead the company’s government affairs efforts in the U.S. She also will open a Washington! , D.C. office. Wingate previously w as head of federal governmental affairs for Citigroup.