PE Week Wire — Friday, December 10

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 Pull Yourself Together

I spent some time on the phone yesterday with Steve Barrett, who joined law firm Testa, Hurwitz & Thibeault less than two months ago as its chief marketing officer. The subject, of course, was that his new home had received a wrecking ball in the form of ten more partner-level attorney defections. As reported here on Tuesday, those departures will include seven private equity attorneys going to the Boston office of New York-based Proskauer Rose (opened this past February by three former Testa partners), and three general corporate partners (including Steven Browne, who had some private equity clients) going to Bingham McCutchen.

Barrett’s official line was that the defections will certainly hurt, but that the firm has a deep enough roster of talent to keep the private equity group up-and-running. It is a setback, but not a fatal one. In other words, press folk like me have been channeling Mark Twain a bit too much.

I want to believe Steve, I really, really do. I derive no joy from the protracted demise of a mighty organization, and even less so when that organization has regularly lent me a helping hand. But if the cavernous cubicle were transplanted from South Boston to Las Vegas, I’d be betting on the other team.

When this story first broke on Monday afternoon (congrats Boston Biz Journal), initial reaction was that Testa Hurwitz had two choices. The first was to simply fold up its fund formation tent and become a technology law boutique, while the second was to find fund formation talent elsewhere. Some of the remaining attorneys certainly have some fund formation experience, but the guts of that group were folks like Robin Painter and David Tegeler, and they are among the future fund formation group of Proskouer Rose. Since Barrett says that Option #1 is off the table, one would assume that the firm would be going with Option #2. Maybe they could pry some folks away from another Boston firm, or see if there are any remaining pieces from the Brobeck Phleger implosion out in Silicon Valley. After all, the Testa Hurwitz name still carries some serious cache.

The problem with Option #2, however, is that Testa Hurwitz is making itself a very unattractive employment destination. The firm is enforcing contract clauses for each of the ten departing partners, which will force them to stick around until March 31, 2005. Can you even imagine the tension flowing through 125 High Street over the next three months, let alone the partner meetings? What if someone starts out with: “This is going to be a six-month project.” Who among the 10 to-be-departed will snicker — or scream — first? And then there is the issue of business practice associates, who have the most regular contact with clients. Three needless months of “Please stay with us” or “Please come to Proskauer Rose with us.” What a colossal blunder.


Coller Capital has agreed to acquire the entire private investment portfolio of the Societe Innovatech du Grand Montreal for Cdn$80 million. Coller also will assume Innovatech’s Cdn$44 million in contractual obligations to its portfolio companies, plus plans to invest up to an additional Cdn$79 million.

Apax Partners and Goldman Sachs are planning to sell their positions in German cable television company Ish, according to various press reports. The two firms combined hold less than a 20% stake in the company, but could be looking for over $2 billion, in an auction to be run by Citigroup.

Bill Barrett Corp., a Denver-based oil and gas exploration company, has priced 13 million common shares at $25 per share, for a total IPO take of approximately $325 million. The company originally had filed to sell 12 million shares at between $20 and $23 per share. It had listed Warburg Pincus, Goldman Sachs and JPMorgan Partners as significant shareholders.

Feedster Inc., a San Francisco-based online news search engine operator, has received an undisclosed amount of venture capital funding from Omidyar Network.

Advent Solar Inc., a Scandia Park, N.M.-based developer of solar energy cells, has raised $8 million in venture capital funding, according to various press reports. EnerTech Capital Partners led the deal, and was joined by CMGI @Ventures, Fort Washington Capital Partners, New Mexico Co-Investment Partners and various seed backers.

Arrowhead Research Corp. (Nasdaq: ARWR) has agreed to provide $100,000 in additional funding over the next four years to nanotechnology research being conducted by Patrick Collier and his team at the California Institute of Technology. Arrowtech has been supporting the project since September 2003, in exchange for the option to exclusively license intellectual property generated through the research.

Blue Sage Capital has acquired a 100% interest in Mr. Gatti’s Inc., a Stephenville, Texas-based owner and operator of approximately 150 pizza and entertainment restaurants in nine states. The deal includes a $10.1 million equity investment from Blue Sage.

Wellspring Capital Management has completed its previously-announced acquisition of Home Decor, a Charlotte, N.C.-based unit of The Stanley Works (NYSE: SWK). No financial terms were disclosed. Home Decor supplies mirrored closet doors, closet organization and wall decor products, mostly through large retailers in North America and Europe. In related news, Wellspring said that it has installed Richard Dandurand, a senior executive with The Stanley Works, as Home Decor’s new CEO.

Bravida ASA of Norway has agreed to sell its telecom unit to Swedish private equity firm Altor Equity Partners for an undisclosed amount.

CVC Capital Partners, Nordic Capital and PAI Partners are among the remaining bidders for Dutch food company CSM NV‘s confectionary business, according to Dow Jones. Reuters reports that 3i Group had been involved, but recently pulled out due to the asking price, which is said to be worth over $1.1 billion.

Change Capital Partners and shoe retailer Jimmy Choo are competing to acquire UK shoe store chain LK Bennett, according to The Times of London. The deal could be worth upwards of GBP 75 million.

Tower Semiconductor Ltd. (Nasdaq: TSEM) has agreed to sell all of its holdings in Saifun Semiconductor to General Atlantic Partners for approximately $39 million in cash.

V.I. Technologies Inc. (Nasdaq: VITX) has entered into a corporate restructuring agreement, in order to conserve cash until the completion of its merger with privately-held Panacos Pharmaceuticals Inc. The moves taken include a 40% workforce reduction, temporary suspension of Phase II surgical studies on its Inactine system, a $20 million PIPE financing led by Great Point Partners and the filing of a $5.5 million shareholder rights offering of common stock.

AXA Private Equity has acquired GIMV‘s control position in Gealan Werk Fickenscher GmbH, a Germany-based manufacturer and distributor of PVC window and door profiles. No financial terms were disclosed.

First Reserve Corp. has sold over 3.69 million common shares of portfolio company Quanta Services Inc. (NYSE: PWR), for approximately $26 million. First Reserve has invested around $100 million in Quanta via PIPE financings since the company went public in 1998.

Siemens AG (NYSE: SI) has agreed to acquire Chantry Networks Inc., a Waltham, Mass.-based developer of WLAN solutions. No financial terms were disclosed for the deal, which is expected to close early next year. Chantry Networks has raised around $28 million in total VC funding since its 2002 inception, from investors like Flagship Ventures, Primaxis Technology Ventures, Skypoint Capital Corp., Ventures West Management and Siemens Venture Capital.

Sabre Holdings Corp. (NYSE: TSG) has agreed to acquire SynXis Corp., a McLean, Va.-based provider of reservation management, distribution and technology services to hotels. The deal is valued at approximately 440 million in cash. SynXis has raised venture capital funding from firms like NexGen Capital and Van der Heijden Holdings BV.

HouseValues Inc., a Bellevue, Wash.-based provider of online marketing solutions for residential real estate agents, will begin trading on the Nasdaq under ticker symbol SOLD. The company priced 6.25 million common shares at $15 per share (top of amended $14-$15 range), for a total IPO take of approximately $93.75 million. The company has raised over $16 million in venture capital funding, with William Blair Capital Partners holding a 31.8% pre-IPO stake and a 26.5% post-IPO stake (yesterday’s Wire incorrectly cited a 35% pre-IPO stake, based on HouseValues’ original S-1 filing. It was amended in subsequent filings).

Adeza Biomedical Corp., a Sunnyvale, Calif.-based provider of women’s health products, will begin trading on the Nasdaq under ticker symbol ADZA. The company priced 3.75 million common shares at $16 per share, for a total IPO take of approximately $60 million. Adeza had raised over $33 million in VC funding since its 1985 inception, from investors like Sprout Group, Enterprise Partners, Charter Ventures, Aeneas Venture Corp., Alliance Technology Ventures, Pantheon Ventures, Indosuez Ventures and Asset Management Co. It had previously filed to go public in May 1996, before pulling the offering later that same year.

MTM Technologies Inc. (Nasdaq: MTMC), a Stamford, Conn.-based computer and communications technology management company, has raised $12.5 million in PIPE funding from Constellation Ventures and Pequot Ventures.

Intermix Media Inc. of Los Angeles has received a $4 million PIPE investment from Redpoint Ventures. The deal also includes a non-binding term sheet for Redpoint’s investment in a newly-organized independent subsidiary of Intermix Media, called

Ben Smith and Wayne Yamamoto have joined Rustic Canyon Partners as entrepreneurs-in-residence. The pair recently founded Merchant Circle, an Intenet media company focused on small businesses. Before that, Smith served as co-founder and CEO of Spoke Software Inc., while Yamamoto was vice president of engineering at Broadvision Inc., and more recently served as a visiting scholar in the Department of Computer Science and Engineering at the University of Washington.

Scott Delman president and co-founder of Capital Z Investments, will resign from the firm next year, according to PrivateEquityOnline.

Dan Blanks, a founding partner of buyout firm Hicks, Muse, Tate & Furst, has decided to retire, according to PrivateEquityOnline.

Circle Peak Capital Management, a New York-based private equity firm, has added four executive advisors to its team. They are: James Gorman, founder and president of Momentum Brand Group; Brian Gustaitis, most recently president and COO of Kozy Shack Enterprises; Robert McCarthy, most recently president of Acosta Grocery Channel; and Alan Menkes, manager of middle-market private equity firm Empeiria Capital, and former co-director of private equity with Thomas Weisel Partners.

   Thursday, December 9

Friday Feedback?

The sun is shining, European retail shoppers are everywhere and Donald Rumsfeld is still at a loss for words. In other words, it’s time for Friday Feedback (ok, I know it’s not Friday, but I couldn’t come up with a good alliteration for Thursday – and I’m running too late to write my own column).

Almost all emails this week had to do with the CalPERS vs. CFAC settlement, which resulted in the disclosure of management fee and profit/loss information for all of CalPERS’ private equity and venture capital partnerships. Specifically, folks took on my assertion that a 20% average carried interest doesn’t make much sense. C writes: “I find it easy to believe that CalPERS is paying around 20% carried interest across its portfolio. This is still the level most funds are at. There are a handful of premier funds like Sequoia, Kleiner and InterWest that charge 25% or 30%, but these tend to be funds that don’t take state money, so odds are that CalPERS is not in most funds charging a higher amount. Also, FYI that Warburg Pincus once raised a fund with a lower carry than 20%, although I don’t know if they continued to do that.”

Steven adds: “After the market upheaval and issues with fundraising, almost everyone is at 20%, except if you can prove that you have a special market position unavailable with other funds. New funds and funds struggling to raise capital may cut carry deals with anchor or early investors to help fundraising activities; but since many institutional investors call for equal treatment under” most favored national” clauses, these discounts tend to be declining as well.”

To both C and Steven: I accept that 20% is the industry standard, despite firms like Accel Partners and ABRY Partners recently raising funds with 30% carries. But industry standards and industry averages are different. Were C’s Warburg example not isolated, then I could see how CalPERS gets a 20% average, but it isn’t. If you have most of your funds at 20%, and even just a small group at 25%/30%, how do you get an average of 20 percent? Moreover, lots of the CalPERs funds were bubble-era VC funds, which causes me to assume that the aforementioned small handful is actually kind of large. But, then again, both of you see a lot more term sheets than I do (given the info under your signatures).

Finally, there is Tom, who agrees with me that the disclosed data doesn’t necessarily lend itself to a conclusive analysis of carried interest: “I think that it is incorrect to assume an ‘average carried interest’ from profit by year numbers.Insome cases, these profits are offsetting prior losses.Carry is typically calculated on profits after a preferred return on the capital.In a rudimentary example, if afund calls$100 million for an investment and holds that deal for 4 years before exiting it at2x, $36 million of the $100 million in profit would go toward a preferred return (assuming 8% compounded).While the GP would still get $20 million of these profits (assuming 20% carry) due to catch-up provisions, there is no way to garner where each of the funds in CalPERS portfolio is based upon summary level data.Each GP handlesits carry calculationsin a somewhat unique matter – given the lack of consistency in partnership accounting practices across the industry, an ass! umption of standardization is not only inappropriate, but incorrect.”

He continues: “On the management fee side, no one seems to be talking about the fact that these fees are repaid before any carry/profit participation is considered. If an investor has a $100 million commitment and $90 million is invested while $10 million is paid to management fees, the GP must return $100 million to the investorbefore thepreferred return or carried interest are calculated.The assumption I get from reading various publications is that these fee dollars are expensed and gone (like on the public side), when that is not the case.Management fees paid are returned wheredistributions exceed paid in capital.”

Finally, an unrelated correction from yesterday: The DLJ Merchant Banking spinout firm will manage the three existing DLJ Merchant Banking funds on a sub-advisory role for CSFB.


Teachers Private Capital, the private equity arm of the Ontario Teachers’ Pension Plan, has agreed to purchase Alliance Landry Holdings LLC from Bain Capital and Bruckmann, Rosser, Sherrill & Co. for approximately $450 million. Alliance is a Ripon, Wis.-based provider of commercial laundry equipment. It filed for a $375 million IPO of income deposit securities (IDS) back in April, but yesterday withdrew its registration papers. Debevoise & Plimpton LLP is representing Teachers Private Capital on the deal.

Prospect Venture Partners, a Palo Alto, Calif.-based VC firm focused on medical technology and life sciences companies, has closed its third fund with $500 million in limited partner commitments. The firm’s previous fund was raised in 2001, and also was capped at $500 million.

Foundation Coal Holdings Inc., a Linthicum Heights, Md.-based coal producer, will begin trading on the NYSE under ticker symbol FCL. The company priced 23.61 million common shares at $22 per share, for a total IPO take of approximately $519.42 million. It originally filed to raise just $250 million, and busted even its amended offering price range of $19 to $21 per share. Foundation Coal was formed on July 30, when RAG Coal International AG sold its RAG American Coal Holding Inc. subsidiary for $975 million to First Reserve Corp., The Blackstone Group and American Metals & Coal International Inc.

Targacept Inc., a Winston Salem, N.C.-based drug company focused on the central nervous system, has raised $33 million. Noumra Phase4 Ventures led the deal. The company has received over $120 million in total VC funding since its 1997 inception, and currently is in registration for an $86.25 million IPO. Company shareholders include New Enterprise Associates, EuclidSR Partners, Nomura, Oxford Bioscience Partners, R.J. Reynolds Tobacco Holdings, Burrill & Co. and Advent International.

O21C Co. Ltd., a Santa Clara, Calif. and Seoul, South Korea-based fables semicondcutor company, has raised $8 million in new venture capital funding. Return backer Dragon Group was joined on the deal by KGIF LP, which is jointly managed by STIC Ventures, KDB Capital and SKFT (Israel). The company has raised $13 million in total VC funding.

IBSN Inc., a Denver, Colo.-based provider of order routing and integration solutions for the securities industry, has raised over $6.02 million in Series A funding. Vista Ventures led the deal, and was joined by OCA Ventures, Appian Ventures, SAP Ventures, and Grayhawk Venture Partners.Cascadia Capital advised IBSN on the transaction.

Personeta Inc., a Naperville, Ill.-based developer of network service controllers, has raised $9 million in Series C funding. Return backer Lightspeed Venture Partners led the deal, and was joined by new investor Duchossois Technology Partners. The company has raised $17 million in total funding since its 2000 inception.

Thomas H. Lee Partners and Texas Pacific Group have agreed to acquire a combined 25% position in Fidelity National Information Services Inc. (FNIS) for $500 million, as part of a leveraged recapitalization. Fidelity National Information Services is a subsidiary of Jacksonville, Fla.-based title insurer Fidelity National Financial Inc. The recap also includes FNIS issuing $2.8 billion in senior secured credit facilities, and is expected to close during the first quarter of 2005.

Ion Health Holdings Inc., an Erie, Pa.-based Medicaid managed healthcare company, has received a $200 million private equity commitment from new majority shareholder J.W. Childs Associates.

HgCapital has acquired the Wales, UK-based Tir Mostyn wind farm from Windjen Power Ltd. for approximately GBP 21.6 million. HgCapital said the deal represents just the first in a planned series of investments in Western European renewable energy projects.

IBM Corp. has agreed to sell its personal computer unit for $1.75 billion to China-based computer supplier Lenovo. Various press reports suggest that buyout firm Texas Pacific Group was Lenovo’s closest competitor for the deal.

The Blackstone Group has agreed to sell hotel chain AmeriSuites Inc. to Hyatt Corp. for an undisclosed amount. Once the transaction is closed in early January, Hyatt plans to invest more than $150 million in capital expenditures and related brand and marketing efforts for the company.

Electra Partners has acquired the automotive metal parts unit of ThyssenKrupp AG for 155 million euros. The Germany-based unit had sales of approximately 300 million euros in fiscal 2004, and is named ThyssenKrupp Fahrzeugguss.

Apptis Inc., a Chantilly, Va.-based IT services company, has received an additional $40 million in private equity funding from existing shareholder New Mountain Capital, according to The Deal. Part of the new funding will be used to finance Apptis’ pending acquisition of Seta Corp. Apptis has raised a total of $144 million from New Mountain Capital.

VenGrowth Capital Partners has sponsored a Cdn$5.4 million buyout of CIF Furniture Ltd., a manufacturer of customer laboratory furniture, from founder Hans Kamin.

TradeBeam Holdings Inc., a San Mateo, Calif.-based provider of global trade management software and content solutions, has acquired the assets of San Carlos, Calif.-based Open Harbor Inc. No financial terms were disclosed. TradeBeam has raised around 445 million in total VC funding since its 2000 inception, including an $18.25 million infusion last month from Carlyle Venture Partners, Sigma Partners, Enterprise Partners Venture Capital, Sprout Group and Silicon Valley Bancshares. Open Harbor had raised approximately $52 million since its 1999 inception, from investors like Alloy Ventures, New Enterprise Associates, Menlo Ventures, East river Ventures, Deutsche Post Ventures and W.R. Hambrecht & Co.

DSP Group Inc. (Nasdaq: DSPG) has acquired substantially all the assets of Bermai Inc., a Palo Alto, Calif.-based developer of WiFi technology, for approximately $5.42 million in DSP stock. Bermai had raised over $40 million in VC funding since its 2001 inception, from investors like Advanced Technology Ventures, Blueprint Ventures, Mobius Venture Capital, Brightstone Capital, STIC IT Venture Capital and Sherpa Partners.

Symmetry Medical Inc., a Warsaw, Ind.-based provider of equipment for orthopedic medical device manufacturers, will begin trading on the NYSE under ticker symbol SMA. The company priced eight million common shares at $15 per share, for a total IPO take of $120 million. It originally had filed to raise $172.5 million, although its only proposed IPO terms included the eight million shares at a range of $13 to $15 per share. Symmetry Medical was acquired in October 2000 by funds affiliated with Olympus Partners. Windjammer Capital Management also was listed as a significant shareholder.

Consolidated Communications Illinois Holdings Inc., a Mattoon, Ill.-based rural local exchange carrier in Illinois and Texas, has filed to raise $400 million via an IPO of common stock on the NYSE. The company is owned, in equal parts, by Central Illinois Telephone, Providence Equity Partners and Spectrum Equity Investors.

HouseValues Inc., a Bellevue, Wash.-based provider of online marketing solutions for residential real estate agents, has raised the its proposed IPO price range from $10 to $12 per common share, to $14 to $15 per common share. It still plans to sell 6.25 million common shares. The company has raised over $16 million in venture capital funding, with William Blair Capital Partners holding a 35% pre-IPO stake.

MTM Technologies Inc. (Nasdaq: MTMC), a Stamford, Conn.-based computer and communications technology management company, has raised $12.5 million in PIPE funding from Constellation Ventures and Pequot Ventures.

Intermix Media Inc. of Los Angeles has received a $4 million PIPE investment from Redpoint Ventures. The deal also includes a non-binding term sheet for Redpoint’s investment in a newly-organized independent subsidiary of Intermix Media, called

Shankar Narayanan has joined The Carlyle Group as a managing director in India, where he will focus on venture capital and growth capital deals. He started his career with Citibank, was Managing Director and CEO of Hathway Investments in India and was then based in Hong Kong covering India for Deutsche Bank Capital Partners.

Sanderling Ventures of San Mateo, Calif. is in the midst of raising two funds, with a combined target capitalization of $400 million. The $200 million early-stage vehicle already has closed on $130.47 million, according to regulatory filings, while the $200 million latter-stage vehicle has closed on approximately $97 million. Limited partners include Leland Stanford Junior University, Teachers Private Capital and the Caisse de Depot et Placement du Quebec.

   Wednesday, December 8

PE Players Get Smaller… oh, and some more CalPERS stuff 

Three huge stories in the private equity world yesterday, so let’s get to them:

1. CSFB has decided to spin out its leveraged buyout business, DLJ Merchant Banking Partners. The move will occur early next year, with CSFB retaining control of three existing DLJ Merchant Banking Funds, including a $5.4 billion vehicle that is approximately 90% committed. DLJ Merchant Banking already was in market with a fourth fund targeted at $3.5 billion to $4 billion, and will use that vehicle to anchor the spinout.

The interesting part of this decision isn’t simply that it’s happening, since similar moves have been made recently by fellow financial giants like Morgan Stanley and Deutsch Bank. Even CSFB was in on the action late last year, when it said that it would spin out the healthcare wing of its affiliated VC firm Sprout Group, while simultaneously bailing on the technology wing. No, what is interesting is the rationale given by CSFB: that the LBO business was coming into conflict too often with its investment banking business. For example, DLJ Merchant Banking might bid on a deal against LBO Firm X, which would have hired CSFB to arrange to bid’s debt financing.

I have no doubt this is true, since its was the explicit reason given several months ago when a handful of DLJ Merchant Banking pros – including group head Larry Schloss – left CSFB to hang their own shingle as Diamond Castle Holdings. The guys over there wouldn’t talk about CSFB yesterday (seems they got religion after slamming their former employer n a WSJ article), but it’s impossible to ignore the irony. CSFB let some of its best people walk away because, in part, it refused to either accept strict firewalls or spin out its buyout group. Now, once those folks are gone and about to begin raising a new fund (PPMs will be sent out the first week in January), CSFB makes its move. If only it had gotten its act together a bit sooner.

2. A major player in the private equity law world is in big trouble, as virtually its entire fund formation group has decided to switch ships. At least seven private equity partners from Testa, Hurwitz & Thibeault LLP soon will sign on with Proskauer Rose LLP. Among those leaving are Robin Painter, Stephen Mears, Malcolm Nicholls and David Tegeler. This all follows the recent defection of Thomas Beaudoin for Wilmer Cutler Pickering Hale & Dorr, and leaves Testa Hurwitz without many folks to serve its many general partner and limited partner clients. One VC I spoke to this morning said that he would follow the defectors anywhere, and a rival attorney suggested that the competitive landscape has definitely shrunk. No noise yet about Testa trying to pry a fund formation team loose from another firm, but its only other remaining option might be to shutter the p! ractice. No one at Testa Hurwitz was talking on the record yesterday, but that is likely to change today.

3. The CalPERS story continues to build some steam, and all of the info is now readily available at So many apologies for the linking problems yesterday. Lots of good blogging on this topic by Matt Marshall at, which makes sense since he was the first person to report that a settlement had been reached. From my perspective: CFAC executive director Peter Scheer tells me that his group has done some long division, and discovered that CalPERS is paying an averaged carried interest of 20 percent. He also called this the “industry average.” Maybe this is true, but I doubt it. I don’t know of any firms that charge less than 20%, and lots of them that charge 25% or 30 percent. So either CalPERs is getting a great deal, or these numbers are general enough to prevent a conclusive analysis. I’d go with the latter, but will do some further research to back up that assertion.


  Credit Suisse First Boston has decided to spin out its leveraged buyout business, citing conflicts with investment banking clients. The move will occur gradually, with CSFB retaining management control of the three existing DLJ Merchant Banking funds, and the unnamed spinout managing a new fund that currently is in the process of being raised. CSFB will maintain its mezzanine and private equity secondary groups.

Testa, Hurwitz & Thibeault LLP is about to lose most, if not all, of its private equity fund formation team. The group, including Robin Painter, will be headed to Proskauer Rose LLP.

Onset Ventures of Menlo Park, Calif. has closed its seventh fund – named Onset V — with $200 million in limited partner commitments. Its previous general fund was capped at approximately $290 million.

Amphora Discovery Corp., a Durham, N.C.-based drug discovery company, has raised $20 million in Series C funding. 3i Group led the deal, and was joined by fellow new investors Novartis Venture Fund and Aventis Capital. Return backers included ARCH Venture Partners, MPM Capital, Venrock Associates and Versant Ventures. The company has raised $68 million in total VC funding since its 2001 inception, including a $23 million Series B round in 2002.

Sequoia Communications, a San Diego-based RF semiconductor company, has raised $15 million in Series D funding. Gabriel Venture Partners led the deal, and was joined by return backers Nokia Venture Partners, Tallwood Venture Capital, Cadence Design Systems and Huntington Ventures. Tim Chang, a principal with Gabriel Venture Partners, will join the Sequoia board of directors, in conjunction with the funding, which officially closed back in September.

Blingo Inc., a San Francisco-based Internet search engine operator, emerged from stealth mode today. The company is hoping to differentiate itself by offering users the possibility of instantly winning prizes. It has received an undisclosed amount of venture capital funding from Athlon Ventures.

H2Scan Corp., a Valencia, Calif.-based provider of hydrogen leak detection and process monitoring systems, has raised $2.54 million in Series B funding. Investors include Chrysalix Energy LP, Pasadena Angels, Tech Coast Angels and company founder and CEO Dennis Reid.

Ittiam Systems Technologies Ltd., a Bangalore, India-based provider of digital signal processing (DSP) systems in media and communications, has raised $6.5 million in second-round funding from Banc of America Equity Partners-Asia.

Endforce Inc. (f.k.a. SmartPipes), a Dublin Ohio-based provider of interoperable endpoint security policy enforcement, has raised $7.5 million in VC funding. The deal was co-led by Kleiner Perkins Caufield & Byers and Invesco Private Capital.

Inimex Pharmaceuticals Inc., a Vancouver-based drug company focused on nosocomial pneumonia, has raised Cdn$2 million in additional Series A funding, to close out the round at Cdn$8 million. British Columbia Discovery Fund and the B.C. Medical Innovations Fund participated on the final tranche. Earlier buyers included BDC Venture Capital, Canadian Medical Discoveries Fund advised by MDS Capital and the Working Opportunity Fund managed by Growthworks Capital.

WAY Systems Inc., a Woburn, Mass.-based provider of wireless POS solutions, has raised $8.1 million in Series B funding. Investors included Visa International, Transaction Network Services, Bill Melton (founder of Verifone) and George Wallner (founder of Hypercom).

GTCR Golder-Rauner has partnered with veteran healthcare executive Robert Moccia to form Chester Valley Pharmaceuticals Inc. The Malvern, Pa.-based company will acquire, in-license and developer branded prescription dermatological products for sale within the United states. GTCR will invest up to $75 million in the company, with Moccia serving as CEO.

Jacobson Partners has agreed to acquire substantially all the assets of the Marietta, Ga.-based Airline Products business of Stewart & Stevenson Services Inc. The deal is valued at $60 million in cash, plus certain deferred compensation and the assumption of certain liabilities.

Huron Capital Partners has launched a healthcare industry initiative that will search for, and acquire, a medical device of healthcare services platform company. It will be led by Mark Smith, who most recently served as CEO of Huron portfolio company Prism Enterprises Inc.

Adobe Systems Inc. (Nasdaq: ADBE) has acquired Okyz SA, a France-based maker of 3D collaboration software. No financial terms were disclosed. Okyz raised VC funding in 2003 from Viventures.

Seabright Insurance Holdings Ltd., a Seattle-based provider of worker compensation insurance, has set its proposed IPO terms to 7.5 million common shares being offered at between $9 and $11 per share. The company is majority-owned by Summit Partners.

JVP (a.k.a. Jerusalem Venture Partners) has promoted principals Allon Bloch and Adam Fisher to the position of general partner. Bloch joined the firm in 2000, and focuses on enterprise software and media technology. Fisher was hired in JVP’s Israeli office in 1996 as an analyst, and specializes in semiconductor networking and storage companies.

David Gilroy has joined Hyde Park Capital Advisors, where he will serve as managing director of I-banking, and be responsible for opening an office in Charlotte, N.C. He most recently served as a partner with Wakefield Group.

Brad Hoffman has joined Galen Capital Group as a managing director. He most recently co-founded Surgifund Inc. and, before that, worked with venture firm Ashford Capital.

Terry Daniels, president of private equity firm Quad-C Management, has resigned from the board of Red Robin Gourmet Burgers Inc. (Nasdaq: RRGB). The move was made following Quad-C’s recent divestiture of its remaining Red Robin shares.

   Tuesday, December 7

CalPERS Discloses Management Fees (Sort Of) 

The California State Employees’ Retirement System (CalPERS) has agreed to disclose the amount of management fees it pays its private equity and venture capital fund managers, following a September lawsuit by the California Free Press Coalition (see story here). No judicial ruling needed, which means that everyone soon will have access to individual management fees paid over the past several years to firms like Blackstone Group, Carlyle Group, MPM Capital and U.S. Venture Partners. CFAC has put a copy of the settlement on its website, plus management fee and related payments for all funds invested in by CalPERS between 2001 and 2003 (both in PDF format). It also has posted the ridiculous Wall Street Journal editorial from October, which explicitly ! suggested cronyism at CalPERS and ignorantly dismissed the J-curve.

I’ve only had about 15 minutes to read over the relevant documentation, but that’s probably enough to make the following initial observations:

1. CalPERS has not yet released a statement – that apparently comes this afternoon (or this morning, for you Pacific timekeepers) – but my guess is that it will claim partial victory. Maybe even more than partial. Why? Because the disclosed management fee information only includes the dollar amounts paid to specific firms, and not the percentage of committed or called-down capital that those fees represent. Moreover, CalPERS does not distinguish management fees from transactional fees, or other such ancillary costs. It may be possible for folks like me to figure out the management fees based on some long division – given that CalPERS already has been disclosing committed and called-down capital data – but it will be tough. At best, we’ll get a rough percentage. My gut reaction to this lack of speci! ficity means that groups like CFAC will have a very tough time uncovering any cronyism or overpayments, unless it is particularly egregious. As such, I’m not sure what they’ve gained, save for the prevention of egregious actions.

2. Also not included in the disclosed information is the amount of carried interest paid to general partners. The settlement agreement suggests that CalPERS simply did not keep records of such things, which is a bit mind-numbing. How on earth did they not keep carried interest records as part of their distribution files? Isn’t this the LP equivalent of balancing the checkbook so that the bank doesn’t rip you off, intentionally or unintentionally? Hey other LPs: Is this common practice?

3. Included in this data are VC funds invested in by Grove Street Advisors on behalf of CalPERS. During an original disclosure settlement a few years back, this underlying data was exempted, although it later was disclosed. No such two-tiered system this time, as it’s all out in the open.

4. CalPERS paid CFAC’s legal bills. Just seems important, but I don’t know why.

5. Matt Marshall of the Mercury News looks at this settlement from a slightly different angle: the recent ouster of Sean Harrigan as CalPERS president. Take a look here.

More on this as I learn, and read, more. Your thoughts are, as always, encouraged.


Onex Partners, the private equity arm of Onex Corp. (TSX: OCX), has agreed to acquire two subsidiaries of Laidlaw International Inc. (NYSE: LI): American Medical Response Inc. (AMR) and EmCare Inc. The deal is valued at approximately $980 million, including $260 million of equity. Certain limited partners of Onex Partners and company management also will be invo