PE Week Wire: Thurs., July 19, 2007

Last month, I asked you to participate in the bi-annual DealMakers Survey compiled by the Association for Corporate Growth and Thomson Financial. We got about 1,000 total respondents, with the breakdown as follows: I-banker/intermediary (24%), Private equity pro (22%), Service provider (27%), Corporate executive (15%) and Lender (15%).

The top-line result was that most dealmakers believe that the current M&A environment is excellent (49%) or good (44%), which isn’t terribly surprising given that 2007 is on pace to obliterate 2006’s record volume. Also not surprising was expressed concern over a tightening in the debt markets, with 58% saying the debt markets would be a little less favorable in one year, and another 10% saying they’d be much less favorable. As a quick aside, it’s worth noting that some of the recent mega-deal debt troubles have yet to trickle down into the middle-markets. In fact, some middle-market sponsors I spoke with in DC said that terms were becoming even more favorable of late. Maybe it’s a lag… Or maybe bankers have more faith in less audacious deals…

I’ve posted all of the raw data for your perusal, but here are a few more quick hits:

• Healthcare got the most votes for the sector that will experience the most organic growth over the next six months. Tech won when asked for the sector that would experience the most M&A activity.

• When asked about M&A volume over the next six months, 46% said it would stay about the same, while 33% expected modest growth.

• The top reason for deal failure was poor follow-through on post-merger integration, while overpaying placed second.

• Private equity respondents reported that around 73% of their companies had higher EBITDA than during its prior fiscal year.

*** Our new Buyouts Magazine reporter Josh Payne rode the SEIU Buyout Bus yesterday.

*** CalSTRS chief investment officer Chris Ailman is not thrilled with the trend of buyout firm IPOs.

*** Ford is expecting opening bids today for its Jaguar and Land Rover units. Reports are that the automaker is putting some fairly tough restrictions on the bidders, and I was told last week that Ford would only allow offers that encompassed both brands (i.e., no Jaguar-only, or Land Rover-only).

*** Next Thursday, I’ll be moderating a panelduring the 14th Annual Private Equity CFO Conference in Redwood City, California.

This is the same event I keynoted a couple of years back (then in SF), during which I argued that private equity firms are not restricted from talking with reporters about current fundraising efforts – much to the chagrin of law firm sponsor Wilson Sonsini, accounting sponsor PwC and, in turn, my bosses at media sponsor Thomson Financial.

So I won’t be making that case again, no matter how strongly I believe it (within certain parameters, natch). Instead, the topic will be the few threads that still hold together the venture capital and buyout markets: Business structure, fundraising and carried interest tax treatment. In fact, those should probably be listed in reverse order, given the time spent on taxes during today’s pre-event conference call. My fellow panelists will be: Alan Austin, chief operating officer of Silver Lake Partners who once served in a similar role with Accel Partners, Alexis Lakes, chief financial officer of RWI Ventures and Matt Toole, a fellow Thomson guy who is my go-to source for any type of M&A or private equity data.

I’ll also be hanging out in Redwood City for most of next week (fly in Monday). Just look for me in the Sofitel bar…

Top Three

PPG Industries (NYSE: PPG) has offered to buy Dutch coatings company SigmaKalon Group from Bain Capital for €2.2 billion, including assumed debt. Bain has granted PPPG a period of exclusivity, and intends to respond to the offer after discussions with appropriate employee representative bodies. SigmaKalon was created in 1999 from the merger of Total’s Kalon Group and PetroFina’s Sigma Coatings, and was acquired by Bain in 2003. Sales have increased from approximately €1.7 billion in 2003 to approximately €2 billion in 2006.

Think Global AS, a Norwegian electric car maker, has raised $60 million in second-round funding. DFJ Element and Rockport Capital Partners co-led the deal, and were joined by British Hazel Capital and CG Capital. Think Global raised a $25 million first round earlier this year.

Kohlberg Kravis Roberts & Co. has hired former Republican National Committee chairman Ken Mehlman to lobby the federal government on its behalf. Mehlman currently serves as an attorney with Akin Gump Strauss Hauer & Feld. Read more…

VC Deals

Green Dimes Inc., a Palo Alto, Calif.-based provider of solutions for reducing postal junk mail, has raised $20.5 million in Series A round led by Tudor Investment Corporation.

Tervela Inc., a New York provider of appliance-based messaging technology, has called down $15.64 million of a $20 million Series C round, according to a regulatory filing. Backers include Goldman Sachs, North Hill Ventures and Sigma Partners.

Photoways Group, a France-based provider of online photo services, has raised €10 million in Series B funding. HarbourVest Partners led the deal, and was joined by return backers Index Ventures and Highland Capital Partners.

Simpler Networks Corp., a Dorval, Canada-based provider of technology for the automation of copper distribution frames for local service providers, has raised US$9 million in new Series C funding. This is a follow-on to a $25 million Series C close from last year, with return backers including Highland Capital Partners, Kodiak Venture Partners, Solidarity Fund QFL, BCE Capital and Lothian Partners. In other Simpler Networks news, the company has named Highland venture partner Jean-Luc Abaziou as its new CEO. Former CEO Harry Carr will become chairman.

Bandspeed Inc., an Austin, Texas-based provider of access point solutions for WiFi management, has secured $8 million of a $10 million Series D round, according to a regulatory filing. Return backers include JatoTech Ventures and CenterPoint Venture Partners. The company previously raised $36 million since 2001.

BuyVIP, a Madrid, Spain-based fashion and lifestyle ecommerce company, has raised €7 million in second-round funding. 3i Group led the round with a €5.75 million infusion, and was joined by the European Founders Fund, Molins Capital Inversion SCR and angel Michael Kleindl. Active Capital Partners advised BuyVIP on the deal.

NebuAd Inc., a Redwood City, Calif.-based provider of behavioral online advertising, has raised around $5.05 million in Series A-1 funding, according to a regulatory filing. Return backer Menlo Ventures participated. The company’s service is currently in beta.

OuroBoros Inc., a San Diego-based developer of treatments for spinal disorders, has secured $1.17 million of a $4 million Series A round, according to a regulatory filing. Ascent Biomedical Ventures led the deal.

Balihoo Inc., a Boise, Idaho-based search engine for online media advertisers, has raised $1.5 million in Series A funding, according to a regulatory filing. Shareholders include Lacuna Venture Fund and Blackfin Technology Inc.

Gevo Inc., a Pasadena, Calif.-based developer of advanced biofuels like butanol, has raised an undisclosed amount of Series B funding from Virgin Fuels and return backer Khosla Ventures. VentureWire pegs the round amount at $10 million.

Mochi Media, a San Francisco-based online gaming ad network, has raised an undisclosed amount of first-round funding led by Accel Partners, according to GigaOm.

Ujogo, a San Francisco–based provider of online poker and other games, has raised an undisclosed amount of Series A funding from individual angels.

Buyout Deals

Kohlberg Kravis Roberts & Co. is studying a bid to buy Macy’s for $52 a share, according to trade paper Women’s Wear Daily. Such an offer would value Macy’s at around $24 billion. Read more…

3i Group has taken an equity stake in Franklin Offshore, a Singapore-based service provider to the offshore and marine industries. No financial terms were disclosed for the deal, which also included mezzanine funding from Intermediate Capital Group.

Advent International has acquired a majority stake in Sophis, a provider of cross-asset, front-to-back portfolio and risk management software. No financial terms were disclosed for the deal, after which company founder and CEO Herve Vinciguerra will retain a “significant” equity stake. He will not remain as CEO, however – as that job will go to former Linedata Services executive Pascal Xatart.

Interpool Inc. (NYSE: IPX) shareholders have approved a $27.10 per share buyout offer from Fortress Investment Group. The total deal is valued at approximately $2.4 billion (including assumed debt). Interpool is a Princeton, N.J.-based suppliers of equipment and services to the transportation industry.

MidOcean Partners has agreed to acquire Bushnell Outdoor Products from Wind Point Partners. No financial terms were disclosed, except that Bushnell senior management would maintain its role and have a “significant” ownership position. GE Antares Capital has committed leveraged financing. Bushnell is an Overland Park, Kan.–based provider of sports optics, premium eyewear, and outdoor accessories.

Precision Dynamics Corp., a San Fernando, Calif.-based provider of medical patient identification wristband systems, has received a $75 million private equity infusion from Water Street Healthcare Partners.

PE-Backed IPOs

Netezza Corp., a Framingham, Mass.-based provider of enterprise-class data warehouse appliances, raised $108 million from its IPO. The company priced 9 million common shares at $12 per share ($9-$11 range), which gives it an initial market cap of around $668 million. It will trade on the NYSE Arca under ticker symbol NTZA, while Credit Suisse and Morgan Stanley served as co-lead underwriters. Netezza had raised approximately $83 million in VC funding since its 2000 inception, from firms like Matrix Partners (20.75% pre-IPO stake), Charles River Ventures (19.59%), Battery Ventures (16.82%), Sequoia Capital (15.2%), Meritech Capital Partners (6.8%) and Orange Ventures.

SemGroup Energy Partners LP, a Tulsa, Okla.-based , raised $275 million in its IPO. The company sold 12.5 million common units at $22 per unit ($19-$21 range), and ended its first day of trading up at $29.32 per unit. It is trading on the Nasdaq under ticker symbol SGLP, while Citi and Merrill Lynch served as co-led underwriters. Shareholders include Carlyle/Riverstone, which first invested in late 2004.

Paragon Shipping Inc., an Athens, Greece-based dry-bulk shipping company, has filed for a $201.25 million IPO. It plans to trade on the Nasdaq under ticker symbol PRGN, with UBS and Morgan Stanley serving as co-lead underwriters. Shareholders include Citigroup and Silver Point Capital.

NanoDynamics Inc., a Buffalo, N.Y.-based developer of solid-oxide fuel cells, water filters and other advanced materials, has set its IPO terms to 6.6 million common shares being offered at between $12 and $14 per share. It would be valued at around $371 million, if it were to price at the high end of its range. NanoDynamics plans to trade on the Nasdaq under ticker symbol NDMX, with Jefferies & Co. serving as lead underwriter. It has raised around $15.25 million in total private funding, with backers including the Convergent Private Equity Fund.

Virtusa Corp., a Westborough, Mass.-based provider of IT consulting, technology implementation and application outsourcing, has set its IPO terms to 4.4 million common shares being offered at between $14 and $16 per share. It would be valued at around $365 million, if it were to price at the high end of its range. Virtusa plans to trade on the Nasdaq under ticker symbol VRTU, with JPMorgan serving as lead underwriter. The company has raised around $72 million in total VC funding since 2000, from firms like Sigma Partners (24.6% pre-IPO position), Charles River Ventures (16.2%) and Globespan Capital Partners (15.6%).

PE Exits

Behrman Capital has sold WIL Research Holdings Co. to an undisclosed financial sponsor for $500 million. WIL is an interdisciplinary non-clinical contract research organizations, providing product safety and toxicological assessment research and services primarily to the pharmaceutical, biotechnology, chemical and agricultural industries. Behrman says that the deal generated 3.6x cash-on-cash return, and a 63% IRR.

Castanea Partners and Dorset Capital have sold Portland, Ore.-based children’s apparel company Hanna Andersson to Kellwood Co. (NYSE: KWD) for approximately $175 million. Castaena led

EV Energy Partners (Nasdaq: EVEP) has agreed to acquire oil and gas properties in the Permian basin from Plantation Petroleum Holdings III, a portfolio company of EnCap Investments. The deal is valued at $160 million, and is expected to close by September.

PE-Backed M&A

Avestha Gengraine Technologies Pvt. Ltd., a Bangalore, India-based biotech and bioinformatics company, has agreed to acquire Renaissance Herbs, a Chatsworth, Calif.-based maker of botanical healthcare products. No financial terms were disclosed. Avestha shareholders include ICICI Venture Funds, Tata Industries Ltd., Godrej Industries, Cipla, Fidelity International, Daninvest, Groupe Limagrain, The Times Group and New York Life Capital Partners.

Firms & Funds

Bessemer Venture Partners has closed its seventh fund with more than $1 billion in capital commitments. This includes $350 million earmarked for India, and the firm has added four members to its India team: Anil Sarin (former co-head of equities at Prudential ICICI Asset Management), Sridar Iyengar (former chairman and CEO of KPMG India), Mandeep Khaira (former senior executive of Dell India) and Yagnesh Sanghrajka (former global CFO for HTMT, a subsidiary of the Hinduja Group).

The Pennsylvania State Employees’ Retirement Board has made the following fund commitments: $30 million to Advent Latin American Private Equity Fund IV; $15 million to PNC Equity Partners II, €10 million to Alpha Private Equity Fund 5. PSERS also retained Cambridge Associates as its alternative investment consultant for the next five years, following an RFP process. Cambridge’s contract had been set to expire next year.

Velocity Financial Group, a recently-formed specialty finance company based in Chicago, has opened a satellite office in Wakefield, Mass. The shop will focus on serving venture-backed companies in the Boston area, and will be run by Velocity president and co-founder Jan Haas.

Zurich, a global property-casualty insurance company, has formed an M&A unit that will offer customized products and services to help companies manage M&A transaction-related risks. Its initial office is in New York, with London and Zurich offices expected to open by Q4.

Human Resources

Chris Solomon has joined Welsh Carson Anderson & Stowe as director of capital markets. In this newly-created position, Solomon will lead financing efforts for new investments, and work with existing WCAS portfolio companies to review and optimize their balance sheet obligations. He previously was with a member of the leveraged finance group at J.P. Morgan Securities.

Steven Becker has joined Hunton & Williams LLP as a New York-based partner within the firm’s asset securitization practice group and capital markets team. He previously was with Thacher Proffitt & Wood, as a member of its structured finance and corporate and financial institutions practice group.

Seth Friedman has joined the alternative investments group of MetLife as an associate director within the mezzanine group. He previously held positions at Brown Brothers Harriman & Co., Mesirow Financial and LaSalle Bank.

Dan Gladney has joined Norwest Equity Partners as an operating partner focused on the healthcare market. He currently serves as co-founder and part-time CEO of Heartleaflet Technologies, which is developing a percutaneous aortic heart valve system. He previously was president and CEO of Compex Technologies.

J.F. Lehman & Co. has hired: Victor Caruso as principal, after working in Houlihan Lokey’s Los Angeles office with a focus on aerospace defense; Troy Barratt as an associate, a former J.F. Lehman summer intern who recently received his MBA from Columbia; and Michael Friedman as a senior analyst, after spending two years as an I-banking analyst with Jefferies & Company.

Michael Tamulis has joined Alvarez & Marsal Transaction Advisory Group as a managing director and head of the group’s technical accounting activities.

Windjammer Capital Investors has promoted both Matthew Anderson and Caleb Clark to senior associate. The firm also has hired Chris Allen as an associate. Anderson joined Windjammer in October 2005 from GE Corporate Finance, while Clark joined in June 2006 after receiving his MBA from Columbia. Allen just received his MBA from Harvard, and before that worked in strategic business development for Home Depot.