PE Week Wire: Thurs., July 12, 2007

AllianceBernstein, a $742 billion asset manager based in New York, has edged its way into late-stage VC deals this year, quietly making its presence felt in a slew of big deals.

The firm has been ramping up its venture capital operations with new hires and nine direct private equity investments this year, up from just one last year. The group is aiming to launch a $1 billion venture fund one source told PE Week Wire.

Having a big kid on the block can be both a blessing and a curse to traditional venture capitalists. So far, AllianceBernstein seems to have contented itself syndicating with other firms to provide swaths of growth capital.

But imagine what it could do.

Entrepreneurs are increasingly turning to asset managers and hedge funds for growth capital, and not just at the later stages. One founder who recently chose a hedge fund to finance the first round of his startup told me he picked it over a traditional VC for three reasons: the hedge fund was able to move fast, it could offer big bucks for rapid acquisition and consolidation and it had reach into critical corporations that a VC firm could never swing.

The speed benefits may be obvious. A $10 million check is a small investment to cut for an asset manager with billions under management.

Asset managers and hedge funds can have a broader perspective on a market or industry than a venture capitalist does. Imagine looking not just at the most promising startups of an industry but also having a deep understanding of the operations of each public company. They are more likely to see the interconnections and the potential for synergies between companies. “You do your rounds and you’ve got your cash and the idea is that you stick to your knitting and build your company,” the entrepreneur told me. “But if you think there’s a sector that is very interesting and might be consolidated, that’s not a conversation you can have with VCs. They think it means you’re taking the eye off the ball instead of getting the ball to be bigger and come faster.”

Then there’s the issue of reach. An asset manager who owns $200 million worth of stock in a public company can expect to have a direct line to management that few VCs can boast. VCs have connections, to be sure, but that’s that different than a direct fiscal relationship.

Of course going with a huge hedge fund or asset manager won’t be right for most startups. It’s hard to beat an early stage expert for getting most companies off the ground. But as AllianceBernstein ramps up, it may become a formative competitor across stages.

Here are the nine deals it has been involved in AllianceBernstein has been involved in this year:

*September 6, 2006: $12 million Series B for Exeros Inc., a Santa Clara, Calif.-based provider of data mapping and automated data relationship discovery software.

*January 18, 2007: $59.5 million Series C for Brightcove Inc., a Cambridge, Mass.-based Internet TV company.

*February 9, 2007: $22.3 million Series D for Targeted Growth Inc., a Seattle-based company focused on improving the efficacy of biofuel feed stock.

*March 6, 2007: $27 million Series C for Vette Corp., a Manchester, N.H.-based provider of thermal management solutions.

*March 7, 2007: $19 million Series E for Impinj Inc., a Seattle–based provider of semiconductor and RFID technology.

*April 20, 2007: $32 million Series D for Metabolex Inc., a Hayward, Calif.–based drug company focused on diabetes and other metabolic disorders.

*May 1, 2007: $40 million Series F for Pure Digital Technologies Inc., a San Francisco-based maker of low-cost digital camcorders.

*May 8, 2007: $70 million Series C for Portola Pharmaceuticals Inc., a South San Francisco-based drug company focused on thrombosis and related cardiovascular diseases.

*May 9, 2007: $26 million Series C for Avid Radiopharmaceuticals Inc., a Philadelphia-based molecular imaging company.

*June 6, 2007: $20 million Series B for Artificial Muscle Inc., a Menlo Park, Calif.-based maker of actuator components based on electroactive polymer artificial muscle technology.

Today’s blog is by Alex Haislip, senior writer on the San Francisco based Venture Capital Journal. www.vcjnews.com.

Please send press releases to the PE Week Wire’s guest editor Amanda Palmer, editor of EVCJ in London to Amanda.palmer@thomson.com. www.evcj.com

Top Three

It is official; the private equity industry is under regulatory scrutiny in a way it has never witnessed before. The US Congress’s inquiry into whether to raise taxes on hedge funds, venture capitalists and private-equity firms began in earnest yesterday. The Senate Finance Committee chairman, Max Baucus, said he wants to find out “whether some people who are earning great wealth are also avoiding their full and proper share of the burden of taxation.” He referred to the Blackstone Group and said there is “a good argument that the fund managers who are becoming publicly traded partnerships are stretching the law.” The US congress isn’t the only lawmaker investigating private equity at the moment. Last night! the European Parliaments Financial Services Forum began interviewing witnesses too. In an assertive speech, EVCA Secretary General, Javier Echarri, strongly defended the role and wider function of Private Equity. “Those who demonize private equity should consider the unintended consequences towards Europe’s growth companies before attacking an industry that has a much better track record than most in making companies competitive, increasing productivity and facilitating employment growth,” Echarri told Members of the European Parliament and financial services industry representatives in Strasbourg. The UK’s lower house of parliament, the House of Commons, has delayed its report on private equity until October as the Treasury Select Committee wants to hold more hearings. The report was originally expected to be published this month.

The Netherlands-based, €1.5bn private equity firm Gilde reached an agreement on the acquisition of Tilurg-based, caramel waffles and caramel biscuits bakery Van der Breggen. The intended acquisition will result in a joining of forces between Van der Breggen and Bakkersland Banket, a company recently acquired by Gilde. Bakkersland Banket is also a major player in the Dutch caramel waffles market (Is this a joke? Ed.). A request for advice on the intended joining of forces has been submitted to the Works Council. The trade unions have been informed. Financial details have not been disclosed. http://www.gilde.nl/

The buyout of US student loan company Sallie Mae could be under threat from legislative proposals pending in Congress, according to a statement from the business. A JC Flowers led consortium agreed to acquired holding company SLM Corp for $25 billion, making it the second largest buyout in the US financial sector, but a bill introduced this week by the Democrats seeks to cut subsidies paid by the government to student loan companies. www.salliemae.com

VC Deals

Thirty nine members of Hotbed, the UK’s largest syndicator of private investors, have invested £1.55m in fast growing software company Mtivity. Mtivity is a web based software system which manages companies’ marketing functions, delivering significant cost savings to end users compared with traditional methods of executing marketing activities.Hotbed has invested £1.55m in a total fundraise of £3.49m, alongside other venture capitalists, including Albany Ventures and YFM Group. The investment was introduced to Hotbed by Albany! , a specialist VC investing in early stage technology companies.

SWE-DISH Satellite Systems, a Swedish designer and manufacturer of portable and transportable satellite communications systems, has been acquired by DataPath, a Georgia-based provider of satellite and wireless communications networks. SWE-DISH was formed in 1994 and received its first venture investment in 2000 from Litorina Kapital. Subsequent rounds saw participations from 3i Nordic and Nordic Wireless. www.swe-dish.se

Bain Capital Ventures, the early stage arm of Bain Capital, has led a $15 million in TheFind, reports. TheFind, a Mountain View, California-based company, is a search engine for shoppers. www.thefind.com

Adap.tv, a San Mateo, California-based video advertising system, has secured a $10 million Series A round from new investor Redpoint Ventures and existing investor Gemini Israel Funds. hwww.adap.tv

Moka5 Inc, a Stanford University spin-out based in Redwood City, California, has raised $15 million in a Series B round led by investor Highland Capital Partners, with Khosla Ventures returning from the Series A. The company, founded in 2005, is a virtual computing company. www.moka5.com

SNTech Inc, a Seoul-based cleantech company, has received a $1.2 million investment from SAIL Venture Partners, which takes a 25% stake in the business. www.sntech.net

MWOE Solar, a Toledo, Ohio-based maker of thin-film solar panels, has raised $7 million in a Series A round from Emerald Technology Ventures and NGP Energy Technology Partners. www.mwoesolar.com

Micell Technologies, a North Carolina-based biomedical company, has secured $7 million from Invemed Catalyst Fund and the GE Pension Plan, Venture Wire (vw) reports. www.micell.com

Entrigue Surgical, a developer of ear, nose and throat surgery devices, has raised $6.3 million in a Series A round from Vertical Group and Prism VentureWorks, reports vw. www.entriguesurgical.com

Starfire Systems, a nanotech company based in Malta, New York, has received $10 million in growth capital from New York-based private equity firm Palladium Equity Partners. Starfire Systems develops and manufactures performance materials and products for electronics, transportation, aerospace, and other key industries. www.starfiresystems.com

CODA Genomics, a biotech company headquartered in California, has secured $7 million in Series C financing. The round was led by OVP Venture Partners, with current investors including Monitor Ventures, Tech Coast Angels, and Life Science Angels also participating. www.codagenomics.com

VersionOne, an Alpharetta, Georgia-based developer of project planning software, has completed a $6.5 million funding round from Boston-based OpenView Venture Partners. www.versionone.com

Semprius, a semiconductor technology company located in Research Triangle Park, North Carolina, has received an undisclosed investment from Applied Ventures, the venture capital arm of Applied Materials. In April 2007, Semprius raised $4.7 million in Series A funding from Arch Venture Partners, Intersouth Partners and Illinois Ventures to continue its process development. www.semprius.com

Hercules Technology Growth Capital has provided $3 million of venture debt funding to Prism Education Group, a Philadelphia-based provider of associate degree and diploma -level career training programs. www.prismcareerinstitute.com

Thinglefin, a Washington-based developer of multi-player online video games, has completed a Series A financing round led by California Technology Ventures. http://thinglefin.com

Keiretsu Forum, the angel investment community, has invested in Idaho-based PakSense, a company that offers a temperature sensing label product line. PakSense closed its Series A angel round, raising $4.16 million of equity funding. Keiretsu Forum members from the Northern California, Seattle, and Denver chapters staked the round with $1.27 million in angel funding. www.paksense.com

Buyout Deals

A private-equity consortium led by Bain Capital Partners and Thomas H. Lee Partners received antitrust clearance to acquire Clear Channel Communications for $19.4 billion.

The Federal Trade Commission granted early termination on the waiting period required under the Hart-Scott-Rodino antitrust law.

Flexpoint Partners bought a majority stake in Texas home health company IntegraCare. Financial details were not disclosed.

Hickory Farms, a retailer of meats and cheeses, has been acquired by turnaround specialist Sun Capital Partners. In related news, Sun Capital Partners will pay $43 million for Pemco Aviation Group, an aircraft maintenance firm.

Abry Partners has acquired a stake in CyrusOne, a Houston-based provider of managed data center services. Terms of the deal were not disclosed.

US private equity giant TPG has signalled to the Italian government it is still interested in buying air line Alitalia, but only if the rules surrounding the auction are changed. Several bidders have walked away from the deal, including the most recent favourite, Air One. This leaves TPG and Matlan Patterson as the only remaining parties, but TPG is insisting on meeting with trade union officials and wants to be able to bring in more shareholders following completion, as well as requesting that they are given the power to change the airline’s routes. Alitalia has a market capitalisation of $1.5bn.

Private equity group PAI Partners submitted plans for a €50.17 per share buyout offer to minority shareholders in Kaufman et Broad in the wake of its acquisition of a 50.28 pct stake in the French homebuilder, according to a notification released by bourse regulator AMF. A timetable will be set once the AMF has given its approval. The offer price per share is the same at PAI paid for its purchase of the whole of the stake held by US parent KB Home and part of the shareholding of Guy Nafilyan, Kaufman et Broad’s chairman. Kaufman et Broad shares will remain suspended, the AMF said. They closed on Monday at €57.40, giving the company a market valuation of €1.279bn. Kaufman et Broad said last week it will pay an interim. www.thomsonmergernews.com!

August Equity, a London-based PE house, has completed a management buy-out of Lifeways Community, a provider of supported living for people with complex needs. August Equity will support the management team in continuing to develop the business. Richard Clough, CEO of August Equity portfolio company Healthcare Homes Group, will be appointed as chairman to work alongside Paul Marriner, chief executive, and Jerry Bereika, non-executive director and founder. Clough has a long track record in the healthcare industry, having led the development of Care UK and Healthcare Homes Group.

Siamons International, the maker of Concrobium Mold Control, a 100% natural antimicrobial product that eliminates and prevents mold has closed a private placement of preferred shares led by Avrio Ventures a private equity firm that supports the development of Canadian companies. Financial details were withheld.

HM Capital Partners, a Dallas-based private equity firm, completed the previously announced sale of Swift & Company, the world’s third-largest processor of fresh beef and pork products, to Brazil’s JBS, Latin America’s largest beef processor, in an all-cash transaction valued at approximately $1.5 billion.

Convio Inc., an Austin, Texas-based provider of online constituent relationship management solutions for nonprofit organizations, has acquired competitor GetActive Software Inc. of Berkeley, Calif. in an all-stock deal. No pricing terms were disclosed. Convio has raised over $36 million in VC funding from firms like Austin Ventures, Adams Street Partners, Granite Ventures, Silverton Partners and Windspeed Ventures. GetActive had raised around $10.5 million from Band of Angels, El Dorado Ventures, Pacific Partners and Rembrandt Venture Partners. www.convio.com www.getactive.com

PE-Backed IPOs

Dolan Media, a Minnesota-based provider of professional services to the legal, financial and real estate sectors, is to raise around $152.3 million from its IPO of 10.5 million shares with an indicative price range of $13.50 to $15.50 per share. It will have a market cap of around $364 million at the mid-point of this range. ABS Capital Partners, and Cherry Tree Investments have backed the firm since 1997, ABRY Partners got involved in 2004. http://www.dolanmedia.com

NBGI Private Equity has sold its 50.9% stake in Superglass, a UK-based manufacturer of glass mineral fibre insulation products, as part of the Company’s IPO on the official list of the London Stock Exchange. The listing values Superglass at approximately £135m. NBGIPE achieved a 10.7x re! turn on its original investment which was made less than 2 years ago. The IRR is 244% p.a. This is the sixth exit from NBGIPE’s first Fund, with an IRR on exited investments to date of 76% p.a. and a cumulative money multiple of 6.9x. Investec Growth & Acquisition Finance also exited its mezzanine and preferred equity positions in Superglass. In August 2005, NBGI Private Equity led the £40 million management buyout of Superglass Insulation, backing the existing management team. Investec provided a mezzanine loan of £4 million in support of their bid, and post-transaction provided a £2.5 million preferred equity strip to NBGI as an alternative to syndication.

PE Exits

SWE-DISH Satellite Systems, a Swedish designer and manufacturer of portable and transportable satellite communications systems, has been acquired by DataPath, Inc., a Georgia-based provider of satellite and wireless communications networks. SWE-DISH was formed in 1994 and received its first venture investment in 2000 from Litorina Kapital. Subsequent rounds saw participations from 3i Nordic and Nordic Wireless.

www.swe-dish.se

Firms & Funds

Leveraged buyout firms paid investment banks $8.4 billion during the first half of 2007, according to data compiled by Freeman & Company and PE Week Wire’s parent company Thomson Financial. Blackstone Group led the pack of folks paying huge sums to Wall Street with $685.4 million in the first six months of 2007. The current figure puts the buyout industry on pace to exceed last year’s $12.8 billion total.

JPMorgan and Goldman Sachs have been hired by Apollo Management to advise on its expected initial public offering.

Buyout funds continued to be wildly popular in the US as the fund raising market set a first-half record, with 199 funds raising $137.2 billion, according to figures from The Private Equity Analyst. That’s more than half of the way to last year’s full-year record, which now stands at $260.8 billion.

The European Private Equity & Venture Capital Association (EVCA) has moved its office across town to the EU part of Brussels. Its new address will be Bastion Tower, Place du Champ de Mars, 5, 1050 BRUSSELS. The organization’s telephone number remains unchanged: +32 2 715 0020. www.evca.com

Trinity Venture Capital, the Irish VC, has listed on the Irish Stock Exchange’s IEX market and London’s AIM. The company, trading as TVC Holdings, has raised €50m. www.trinity-vc.ie

Swarraton Partners, a London-based venture firm, is raising its maiden fund with a target of almost $100 million, according to vw. The firm held a first closing in January, with the money coming from British and Swiss investors, and is looking to target on Series A rounds. www.swarraton.com

Saratoga Ventures, an early-stage VC specialising in medical devises has raised $3 million as part of its fundraising for a $25 million sixth fund. www.saratogaventureslp.com

Human Resources

CDC Group, the UK Government-backed emerging market private equity fund of funds, appointed three senior directors, Hywel Rees-Jones, Investments Director; and two portfolio directors focused on Asia, Anubha Shrivastava and Veronica John. Hywel Rees-Jones formerly spent two years as head of West Africa for Actis, the emerging markets private equity firm and had previously worked for CDC. Hywel is responsible for CDC’s co-investment programme, global sector funds and microfinance across all of CDC’s core geographies. He will also explore ways in which CDC can deploy its capital in markets, potentially through secondaries or debt funds, where private equity may not be the most appropriate investment vehicle. Anubha Shrivastava has been appointed portfolio director responsible for South a! nd South East Asia. Anubha previously worked for Performance Equity Management, a global private equity investment firm providing partnership and direct investment services. Prior to that, she worked at Hambrecht and Quist, a private equity firm focused on investments in healthcare and biotechnology. Veronica John has been appointed portfolio director, Asia. She was previously with the Asian Development Bank, where she headed up the private equity investment funds team. She has over 15 years experience in international business and investment banking with a regional focus on Asia and the CIS. She will be responsible for CDC’s private equity fund of funds portfolio across all of Asia and the CIS.These appointments take CDC’s team of investment professionals and directors to 14 based in London.

Paul Capital Investments, the private equity fund of funds manager, has appointed Dan Townsend as a principal of the firm in the New York office. He will be part of the firm’s co-investment team, headed by Dana O’Brien.Townsend arrives at Paul Capital with nine years at GE Asset Management under his belt, where he was vice president in the international private equity group. While there, he was responsible for a $500+ million portfolio of both limited partnership investments and co-investments. Prior to this he spent four years at GE Trading supporting General Electric’s international industrial sales through offset and barter programs and two years as part of the GE manufacturing leadership program. www.paulcap.com

Two partners, Daniel Lonergan and Scott Pressly, have left Roark Capital Group in the past month. The firm is currently trying to raise a $1 billion second fund.