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THURSDAY, MAY 5
Friday Feedback
The sun is shining, Labour is weakened and Vonage has raised the year’s largest venture capital deal (unless you were to count LiquidNet as VC). In other words, it’s time for Friday Feedback.
Just a few items of note this week, including the issue of whether or not Warburg Pincus and Texas Pacific Group overpaid for Neiman Marcus. Charles writes: “I think your cynicism on the Neiman Marcus purchase price is unwarranted. Yes, [$100 per share] was higher than the stock has been trading and, yes, the run-up in price may have been caused by the news of a coming buyout. But none of that means that Warburg and TPG can’t expand the brand enough to not only justify the price, but also to generate a low-multiple (but high cash) returns.” Julie sounds a similar theme: “Weren’t you the one who said the SunGard deal would act as a sort of return buffer for buyout funds, with it guaranteeing low, but positive, returns for a good chunk of the fund? Isn’t Neimen Marcus the same thing?” Maybe Julie, but the SunGard buyers aren’t paying nearly as high a premium as are the Neiman Marcus folks.
Scott jumps over to my preferred side of pessimism: “I think Neiman Marcus can certainly afford to grow quicker than it has, since I don’t think ‘customers’ perception of exclusivity’ is the issue. Instead, it’s that luxury sales are at a
Robin asks a question about Pacific Corporate Group: “Is the PCG saga going to become the PE Week Wire’s next Testa Hurwitz? I’m not sure I can handle it.” Well, I certainly hope not, but since you brought it up… Not only is PCG losing people at an extraordinary rate, but it’s also occasionally adding folks. Just this morning, for example, it hired four people for its Asset Management Group, led by onetime State Street Bank pro Michelle Davidson. The overall situation, however, is still one of contant flux, and it will be very interesting to see how certain pension systems — particularly
Finally, the vast majority of emails this week concerned the beloved Celtics. I won’t bore you with all the details, except to say that readers are split on Doc Rivers, and that some of them harbor deep resentment for Antoine Walker. This latter group is eating a giant slice of humble pie this morning, since ‘Toine saved the Celts’ season in Game 6. You have no idea how difficult it will be for me to be at a wedding in
Vonage Holdings Corp., and Edison, N.J.-based broadband phone company, has raised $200 million in Series E funding. Bain Capital Ventures led the deal, and was joined by return backers New Enterprise Associates, 3i group, Meritech Capital and Institutional Venture Partners. It is the largest pure VC transaction to date in 2005, and follows a $105 million Series D round last summer. All together, Vonage has raised over $490 million in venture capital since its 2001 inception. www.vonage.com
Charlesbank Capital Partners is looking to raise upwards of $900 million for its sixth private equity fund, according to a regulatory filing. To date, the filing reports that it has secured $675.74 million. www.charlesbank.com
Rajiv Ghatalia has agreed to join Warburg Pincus as a managing director in the firm’s
Turbine Inc., a Westwood, Mass.-based multiplayer online game publisher, has raised $30 million in Series B funding. Tudor Ventures and Columbia Capital co-led the deal, and were joined by return backers Highland Capital Partners and Polaris Venture Partners. Turbine has raised nearly $50 million in total VC funding since its 1994 inception, including a $15 million Series AA recap in 2003. The Series B round closed in February, with The Boston Globe reporting that it will be formally announced next week. www.turbine.com
AcuFocus Inc., a California-based provider of ophthalmic devices for presbyopia, has raised $27.5 million in Series C funding. Pequot Ventures led the deal, and was joined by return backers Versant Ventures, SV Life Sciences, Carlyle Ventures and Accuitive Medical Ventures. www.acufocus.com
Tazz Networks Inc., a Providence, R.I.-based provider of policy control solutions for the broadband market, has raised $6 million in Series C funding, according to a regulatory filing. Return backers included Lazard Technology Partners, BlueStream Ventures and Pilot House Ventures. www.tazznetworks.com
Software Innovation Inc., a Toronto-based provider of project collaboration solutions to large capital projects, has raised Cdn$6.4 million in second-round funding. Participants included Covington Capital, BDC Venture Capital, Verdexus and Software Innovation ASA. www.softinn.com
Ikano Communications Inc., a Salt Lake City-based provider of private-label Internet services, has received a $16.5 million credit facility from Hercules Technology Growth Capital, and has immediately drawn down $5 million on the line. Ikano is backed by Insight Venture Partners. www.ikano.com
Warburg Pincus has acquired UK-based heating company Caradon Plumbing Solutions from an ownership consortium led by Montagu Private Equity. The purchase price was approximately Gbp227 million. Montagu had acquired Caradon back in 2000 for Gbp496 million, although it has since divested certain assets.
Mando Corp., a South Korea-based car parts company, is being put up for sale by owners JPMorgan Partners and Affinity Capital, according to The Financial Times. The asking price is reported to be between $1.5 billion and $2 billion. www.mando.com
Tammac Holdings Corp., a Wilkes-Barre, Pa.-based specialty finance company focused on the manufactured housing market, has received an undisclosed amount of private equity funding commitments from existing shareholders LLR Partners and Greenhill Capital Partners. It also reached a similar agreement with lenders RBS Greenwich Capital and Textron Financial. www.tammaccredit.com
Apax Partners is the last bidder standing for UK-based children’s television producer HIT Entertainment PLC, after Lions Gate Entertainment said that it has dropped out of the running. www.apax.com
Zumiez Inc., an Everett, Wash.-based retailer of sports apparel, equipment, footwear and accessories, priced over 3.12 million common shares at $18 per share (above its $15-$17 range), for an IPO take of approximately $56.25 million. It plans to trade on the Nasdaq under ticker symbol ZUMZ, and had its IPO co-lead managed by Wachovia Securities and Piper Jaffray. In 2002, Brentwood Private Equity acquired an indirect minority interest in Zumiez (37.6% pre-IPO position). www.zumiez.com
EpiCept Corp., an Englewood Cliffs, N.J.-based drug company focused on pain management, has reduced its proposed IPO price range from $11-$13 per share, to $6-$7 per share. It still plans to sell 5.5 million common shares, with Wachovia Securities serving as lead underwriter. EpiCept has raised over $32 million in VC funding since its 1993 inception, with significant shareholders including TVM Techno Venture Management, Merlin Biosciences and GZ Paul Partners. www.epicept.com
Hemosense Inc., a San Jose, Calif.-based maker of blood coagulation monitoring systems for the management of warfarin medication, has set its proposed IPO terms to 2.6 million common shares being offered at between $9 and $13 per share. The offering will bne done via W.R. Hambrecht & Co.’s OpenIPO process. Hemosense has raised around $40 million in VC funding since its 1997 inception, and lists significant shareholders like MPM Capital, Vanguard Ventures, W Capital Partners and GC Technology Fund. www.hemosense.com
MindTree Consulting, an India-based provider of IT solutions via global software development, has acquired Linc Software Services Private Ltd., an India-based provider of application development and maintenance, ERP product support and Web development. No financial terms were disclosed. MindTree has raised nearly $25 million in VC funding from such firms as Walden International, Global Technology Ventures and Templeton Asset Management. Linc Software has raised less than $2 million from ICF Ventures and Infinity Technology Inv*stments. www.mindtree.com
3i Group is planning to open an office in
Apollo Management is looking to raise upwards of $6 billion for its sixth buyout fund, according to PrivateEquityOnline. It raised $3.8 billion for its fifth fund in 2001.
Beth Seidenberg has joined Kleiner Perkins Caufield & Byers as an executive-in-residence. She most recently served as senior VP of global development and chief medical officer of Amgen Inc., and previously held senior executive positions at Bristol-Myers Squibb Co. and Merck & Co. www.kpcb.com
Organized Living Inc., a Westerville, Ohio-based storage and organization goods retailer, filed for Chapter 11 bankruptcy protection on Wednesday. The company had raised around $40 million in VC funding, from backers like Kansas City Equity Partners, Kansas Venture Capital, Inv*stAmerica Venture Group, White Pines Management and Saunders Karp & Megrue. www.organized-living.com
Fillat To GrandBanks? Not So Fast…
GrandBanks Capital is in the market for a new partner. still.
The Newton, Mass.-based venture capital firm in run by Charley Lax, a gifted venture capitalist whose previous credits include co-founding Softbank Venture Capital (now known as Mobius Venture Capital) and Flatiron Partners (which since has been subsumed by JPMorgan Partners). He’s also led a slew of successful deals, such as E*Trade, Art Technology Group, GeoCities, Mainspring, Personalogic, TheStreet.com, 1800Flowers.com and Connected Corp.
Lax launched GrandBanks in 2000 with the support of Softbank, and can boast that it is one of the few bubble-era, early-stage venture firms without any real dogs in its portfolio. In fact, it would seem to be a prime landing spot for an enterprising VC looking to break free of the brand-name Rt. 128 crowd. With that selling pitch in mind, Lax began searching for a second partner in mid-to-late 2001, and has held informal conversations with at last a dozen folks, including serious negotiations with at least three big names (whose identities I can’t share, since they were told to me in confidence). The sticking point most often seems to be partnership structure, which probably is code for compensation and other goodies. As they say, some partnerships are more equal than others.
The latest in this long line of candidates is Andy Fillat, the former head of North American venture capital for Advent International. Fillat began phasing himself out of Advent in late 2003, after the firm decided to mostly abandon its early-stage investing practice. He formally left last December, and began sharing a bit of deal-flow with Lax. By February, Fillat and GrandBanks were in full-on courtship mode, with many Boston-area folks believing that the marriage had been consummated. In fact, Fillat is even listed as a GrandBanks employee here, and sent out a March 9 Plaxo email listing himself as a general partner with the firm.
It isn’t entirely clear what happened between March 9 and now (Fillat says any mention of GrandBanks on the Plaxo note was “a mistake”), but it is official that Fillat and GrandBanks are not to be. Lax says that the firm is continuing to look for its second partner (plus another associate), while Fillat said that he and Lax simply had different mindsets about how the relationship would work. Fillat also stressed that he and Charley remain friends, and that he remains in the market for a new gig.
*** In unrelated personnel news, Pacific Corporate Group has lost yet another professional. This time it’s Peter Martenson, a director with the firm for the past five years. That makes at least four resignations in calendar 2005, plus the whole Scott Vollmer situation. As one source points out, last week’s PCG reorganization was designed to better serve clients, but didn’t address the firm’s Achilles Heel: an ability to retain employees.
*** Finally, Robert Walsh has left the general partnership of Summit Partners, which is currently raising a pair of new funds. No idea where he’s headed…
Experian, a Costa Mesa, Calif.-based subsidiary of UK-based GUS PLC, has acquired LowerMyBills.com, a Santa Monica, Calif.-based online mortgage lead generator. The deal was valued at $330 million, plus up to an additional $50 million in performance-related earn-outs over the next two years. LowerMyBills has raised around $12 million in VC funding since its 1999 inception, from firms like Split Rock Partners (f.k.a. St. Paul Venture Capital) and eCompanies. www.experian.com www.lowermybills.com
Split Rock Partners has raised its first fund with $275 million in limited partner commitments. The Minneapolis-based venture firm was formed last year as part of the breakup of St. Paul Venture Capital. The other half of the split – Vesbridge Partners, — currently is marketing its own inaugural fund. www.splitrockpartners.com
Microsoft Corp. has launched a new program to license out hundreds of internally-developed technologies to entrepreneurs and small businesses. Microsoft IP Ventures, the program was developed, in part, with the help of venture capitalists. www.microsoft.com
Cytochroma Inc., a Markham, Canada-based specialty drug developer, has received the first tranche of a Cdn$15 million venture funding round. VenGrowth Private Equity Partners is leading the deal, with additional participation from fellow return backers CDP Capital, Business Development Bank of Canada, GeneChem Financial Corp. and Canadian Medical Discoveries. www.cytochroma.com
Akorri Networks Inc., a Littleton, Mass.-based technology startup, has raised $8.43 million in Series A funding. Backers include Matrix Partners, North Bridge Venture Partners and BlueStream Ventures. www.akorri.com
3F Therapeutics Inc., a
Xoft Microtube Inc., a Fremont, Calif.-based maker of micro x-ray catheter for radiation therapy, has raised $30 million in Series C funding, according to VentureWire. Maverick Capital led the deal, and was joined by return backers MPM Capital, Sutter Hill Ventures, Mosaix Ventures, Frantz Medical Ventures and Frazier Healthcare Ventures. www.xoftmicrotube.com
Placemark Inv*stments Inc., a Dallas-based overlay manager to financial services companies offering unified managed accounts (UMAs), has raised an undisclosed amount of venture capital funding. Participants included RBC Technology Ventures, Ascent Venture Partners and North Hill Ventures. www.placemark.com
GHN-Online Inc., a Dallas-based provider of revenue cycle management solutions for the healthcare industry, has raised $2 million in VC funding from Ballast Point Ventures, an affiliate of Raymond James Financial. www.ghnonline.com
Doppler SA, a Greek elevator maker, has sold a minority ownership position to Attica Ventures, according to Greek press reports. www.doppler.gr
GTCR Golder-Rauner has committed $200 million of equity capital to support the formation of Capella Healthcare Inc., a
Pets At Home, a UK-based pet supplies retailer acquired in July 2004 by Bridgepoint for Gbp230 million, has completed a refinancing of the original buyout transaction. Under terms of the revised arrangement, BNP Paribas and Royal Bank of
Hicks, Muse, Tate & Furst has agreed to acquire Sturm Foods Inc. from a Mason Wells-sponsored ownership group. Sturm is a Manawa, Wis.-based provider of nutritionally-focused drink mixes, hot cereals and other dry-mix products in the retail and foodservice markets. No financial terms were disclosed. www.sturmfoods.com
Rackable Systems Inc., a Milpitas, Calif.-based provider of high-density computer servers and high-capacity storage systems, has set its proposed IPO terms to 6.25 million common shares being offered at between $11 and $13 per share. It plans to trade on the Nasdaq under proposed ticker symbol RACK, with Thomas Weisel Partners serving as lead underwriter. Parthenon Capital holds a 61.2% pre-IPO stake in the company. www.rackable.com
Watchdata Technologies Ltd., a
Xerium Technologies Inc., a Westborough, Mass.-based supplier of two categories of consumable products used in the production of paper, has reduced its proposed IPO terms to 13.9 million common shares being offered at between $14 and $16 per share. It originally filed to raise $700 million via an IPO of income deposit securities (IDS), but later changed the offering to 16.4 million common shares at between $18 and $20 per share. The company is an indirect, wholly-owned subsidiary of Xerium SA, which is majority-owned by Apax Partners. www.xerium.com
Galapagos Genomics NV, a Belgium-based developer of genomics platforms for drug target discovery, has set its IPO price to 7 euros per share. It is expected to begin trading tomorrow on the Euronext Amsterdam and Euronext Brussels exchanges. Dutch biotech company
Spark Networks PLC, a
Selectica Inc. (Nasdaq: SLTC) has paid $1 million to acquire the software product assets of Determine Software Inc., a San Francisco-based provider of enterprise contract management solutions. Determine had raised over $35 million in VC funding, including a $12.25 million Series C round in early 2003 at a post-money valuation of approximately $22.25 million. Backers included New Enterprise Associates, Mohr, Davidow Ventures and JPMorgan Partners. www.selectica.com www.determine.com
WellPoint Inc. (NYSE: WLP) has agreed to acquire Lumenos Inc., an Alexandria, Va.-based provider of consumer-driven healthcare programs. The deal is valued at approximately $185 million in cash, and is expected to close later this quarter. Lumenos had raised over $110 million in VC funding since its 1999 inception, from firms like KBL Healthcare Ventures, Johnson & Johnson Development Corp., Draper Fisher Jurvetson, Liberty Partners, Novartis Corp., Allianz Private Equity Partners and AIG Horizon Partners. www.wellpoint.com www.lumenos.com
Small Bone Innovations LLC of
Western Inventory Service, a Toronto-based portfolio company on ONCAP LP, has acquired Washington Inventory Service, a San Diego-based portfolio company of
Envest Holdings LLC, a
Beth Seidenberg has joined Kleiner Perkins Caufield & Byers as an executive-in-residence. She most recently served as senior VP of global development and chief medical officer of Amgen Inc., and previously held senior executive positions at Bristol-Myers Squibb Co. and Merck & Co. www.kpcb.com
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Correction: Friend Skoler &
WEDNESDAY, MAY 4
Random Ramblings
Suffering a bit of misery-induced hangover from last night’s debacle at the Shawmut Center/Fleet Center/TD BankNorth Garden, so just a couple quick notes:
Lots of fund news today, including word that Benchmark Capital has closed its second venture capital fund focused on Israel-based technology companies. The final capitalization was $250 million, which is up slightly from the $240 million raised for Benchmark’s inaugural
The reason I’m mentioning this fund-raising in blue is to credit Benchmark for sticking in out in
*** VC-backed M&A data for Q1 2005 is now available at www.nvca.com, courtesy of Thomson Venture Economics and the NVCA. No surprise that the total dollar numbers are up, although M&A is always tricky since it involves disclosed deal valuations (ditto for LBO volume data). A bit intriguing that the total number of deals was down slightly from Q4 2004 (77 vs. 85), but the Q2 data could rebound thanks to a bunch of deals agreed-upon in Q1, which are expected to close in Q2.
*** Two Celtics gripes, since I’m so preoccupied and this column is read by certain minority owners: (1) It would not be unreasonable to fire Doc Rivers today. Not tomorrow. Not at season’s end, but today. After all, you demoted GM Chris Wallace in the middle of a playoff series two years ago (in favor of Danny Ainge). The man is simply lost with his substitutions, can’t design a late-game play that doesn’t involve Pierce vs. World and complains to officials so much that he has become a taller version of Chicken Little. (2) Giving a $75 restaurant gift certificate to season ticket holders – particularly those in the first few rows — always gets laughs from those of us in the cheap seats.
Bayhill Therapeutics Inc., a Palo Alto, Calif.-based drug developer focused on autoimmune diseases, has raised $35.4 million in Series B funding. De Novo Ventures and Lilly Ventures co-led the deal, and were joined by fellow new backers A.M. Pappas & Associates, Boston Life Science Venture Corp., Grand Cathay Venture Capital Co., Montreux Equity Partners, PAC-LINK Bio Management Corp, Prudence Venture Investment Corp. and Quintiles’ PharmaBio Development. Returning shareholders included CMEA Ventures, Latterell Venture Partners, Morgenthaler Ventures, U.S. Venture Partners and The Vertical Group. The company raised $11.55 million in Series A funding in 2002, at a post-money valuation of approximately $19.5 million. www.bayhilltherapeutics.com
Amos Barzilay has resigned from his managing director position with Walden International, in order to form a new early-stage venture firm with unnamed senior partners from other VC firms. He will continue to represent Walden on the boards of Business Signatures Corp., InQuira Inc. and Velosel Corp. Barzilay focuses on software and Internet services deals, while Walden recently disclosed its intentions to focus exclusively on the semiconductor space. www.waldenintl.com
CVC Capital Partners has closed its second Asia Pacific Fund with over $1.97 billion in limited partner commitments. The effort is a joint venture with Citigroup, and will be used to fund companies in the most developed Asia Pacific economies, including
Worksoft Inc., a Dallas-based provider of automated software quality solutions, has raised $12 million in Series D funding. Crescendo Ventures led the deal, and was joined by return backer Austin Ventures. www.worksoft.com
Prenova Inc., a Marietta, Ga.-based provider of energy process management solutions, has raised $2 million in new venture capital funding. Return backers include Frontenac Co., River Cities Capital Funds and Austin Ventures. The company has raised over $17.5 million in total VC funding since a 2003 recap. www.prenova.com
Infolink Systems Inc., the parent company of RFID supply chain solutions provider Savi Technology, has received a $2 million investment from private equity firm GlobeSecNine. www.globesecnine.com www.savi.com
Capri Engineering LLC, a
Tacit Networks Inc., a
Optimer Pharmaceuticals Inc., a San Diego-based biotech company, has agreed to sell a 16% ownership interest to Par Pharmaceutical Cos. Inc. (NYSE: PRX) for an undisclosed amount. The two companies also have entered into a joint development and collaboration agreement for a narrow-spectrum antibiotic focused on C. difficile. www.optimerpharma.com
Francisco Partners has closed its acquisition of the WebTrends web analytics business of NetIQ Corp. (Nasdaq: NETIQ) for approximately $94 million in cash. www.franciscopartners.com www.webtrends.com
Goldman Sachs Capital Partners and
Transportation Resource Partners has led a buyout of QEK Global Solutions, a Bloomfield Hills, Mich.–based provider of outsourced vehicle and asset management solutions. Other participants include UnitedAuto Group Inc. (NYSE: UAG) and Penske Truck Leasing. Global M&A, a global partnership of which Brown Gibbons Lang & Co. is the
Avalon Pharmaceuticals Inc., a Germantown, Md.-based developer of small-molecule therapeutics for cancer, has filed to raise $57.5 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol AVRX, with Legg Mason Wood Walker serving as lead underwriter. Avalon has raised over $82 million in VC funding since its 1999 inception, with significant shareholders including AIG Global Inv*stment Group, EuclidSR Partners, Forward Ventures, GIMV, OBP Management, CDP Capital, MDS Capital, H&Q Healthcare and Array Capital. www.avalonrx.com
Quintana Maritime Ltd., a Houston, Texas-based provider of dry-bulk marine transportation services, has filed to raise $300 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol QMAR, with Citigroup and Morgan Stanley serving as lead underwriters. Quintana was formed earlier this year by First Reserve Corp., American Metals & Coal International Inc. and chairman Corbin J. Robertson.
James River Group Inc., a
EZGov Inc., an Atlanta-based provider of government process automation software and services, has sold its
Benchmark Capital has raised its second fund focused on the Israeli high-tech market, with $250 million in limited partner commitments. The Menlo Park, Calif.-based firm’s original Israeli fund closed in March 2001 with $240 million. Benchmark maintains an office in
Littlejohn & Co., a Greenwich, Conn.-based private equity firm focused on the middle-markets, has closed its third fund with $650 million in limited partner commitments. www.littlejohnllc.com
Allied Capital Corp. has sold its portfolio of commercial mortgage-backed securities and collateralized d*bt obligation bonds and preferred shares to Caisse de depot et placement du
ESP Equity Partners announced its formation, as a new private equity firm focused on biotech and pharmaceutical opportunities in
Chris Temple has joined Saddle Brook, N.J.-based private equity firm Friend Skolar & Co. as a director. He previously served as a managing director with Thayer Capital Partners. www.friendskolar.com
Greg Jones has joined Newton, Mass.-based VC firm GrandBanks Capital as chief administrative officer. He previously was an attorney with Testa, Hurwitz & Thibeault LLP, representing venture capital firms. www.grandbankscapital.com
Steve Heinen has joined Minneapolis-based Marquette Capital Partners as a managing director charged with opening a new
Michael Glouchevitch has joined private equity firm Riordan, Lewis & Haden as a general partner. He previously was a managing director with Westar Capital. www.rlhinvestors.com
Dennis Barsema has joined Benchmark Capital as a venture partner. He currently serves as chairman of Blue Lane Technologies Inc., and previously was CEO and chairman of Onetta Inc., which recently was acquired by Bookham Technologies. He also is the former president and CEO of Redback Networks Inc. www.benchmark.com
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Correction: Jefferies &
The Real Neiman Marcus Winners
The $5.1 billion buyout of luxury retailer Neiman Marcus Group won’t be consummated until at least November, but certain market analysts already are asking how Texas Pacific Group and Warburg Pincus plan to generate positive returns with an offer price of $100 per share. Not only has NMG stock never traded at $100, but its recent sprint past $90 per share seems to have been largely driven by constant reports that deep-pocketed private equity firms were circling their wagons. Moreover, the 10.2x or 10.3x purchase price multiple (depending on who’s doing the math) is higher than that of the average mega-buyout (according to 2004 S&P data), and also is higher than the average retail market acquisition.
Since no major managerial changes are expected, the ROI equation seems to involve some serious expansion, including more brick-and-mortar stores in the
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