PE Week Wire: Tues., May 15, 2007

I spent an ungodly portion of yesterday discussing the Chryslerus deal with various reporters — the majority of whom know fairly little about private equity. This is not a knock on them, as it isn’t their area of expertise, but the result was incessant querying about how many people Cerberus plans to layoff (answer: best guess is to check the existing Chrysler restructuring plan) or if it will cash out within a few months via a dividend recap (answer: maybe a little, but the term “cashing out” is a BIG oversimplification).

The question everyone should be asking is this: What does Cerberus know that the rest of us don’t?

Specifically,does it have some handshake agreement with the UAW in regards to the upcoming contract negotiations? UAW gave the thumbs-up yesterday (which means the buyout will almost certainly get done), but that’s the easy part. The hard part comes when the two sides have to sit across a bargaining table that also includes Ford and GM. Two is still more than one (among the Big 3), which means that any tacit Chryslerus agreement could be rendered moot.

There’s probably a good answer out there, but I’m sure glad I’ve been getting asked different questions.

*** Speaking of Chryslerus, it was the lead story on yesterday’s NBC Nightly News. The lead by CNBC’s Phil LeBeau was an accurate representation of private equity, whereby he said that most PE firms are aggressive with their investments, andsometimes break up companies. But then they played this brief and bewildering comment from Casaba Csere, editor-in-chief of Car & Driver:

“You worry about a private equity group coming in, because this is not a simple business. The amount of money you need to invest in the car business is enormous, the lead time is long.”

My wife then turned to me and remarked sarcastically: “Yeah, because private equity only invests in the simple companies.” If my wife – a woman who proudly pays little attention to what I cover — could immediately spot the absurdity of Csere’s statement, why couldn’t some editor at NBC?

*** I reported in January that Golden Gate Capital was raising an annex fund to its second fund raised in 2004, and that it would then employ an evergreen structure for its third official vehicle. Well, GGC has quietly closed the annex fund with $614 million, and is indeed making evergreen plans. Details at peHUB.

*** The Canada Venture Capital Association will release Q1 venture capital and buyout data at 10:30am ET. I’ve got it, and will post to peHUB once the embargo lifts.

*** I’ve been considering a piece on Elevation Partners, which has only closed three deals since closing its $1.8 billion debut fund in 2004. The working title is What the Hellevation? My basic interest isn’t why a firm with so little activity has received so much press attention (over 1,000 print mentions to date), as the obvious answer is Bono. Instead, I was more interested if LPs were getting nervous about the seemingly-slow pace.

The results so far have been inconclusive, for two reasons. First, the nascent portfolio actually represents a significant portion of Elevation’s capital under management – in part because two of the deals are platform companies. Specifically, it committed an estimated $300 million to a joint media venture with Forbes (in exchange for a minority stake in the publisher), and made a $300 million commitment to video game publisher BioWare/Pandemic Studios. It’s first deal was a $100 million PIPE deal for Move (Nasdaq: MOVE). All together, that’s $700 million of a $1.8 billion fund, or around 39 percent. Kind of like the heavy-concentration strategy employed by Garnett & Helfrich Capital.

Oh, reason number two: LPs usually give new partnerships at least three years to get things together. Those who did express some mild concern with Elevation’s pace – particularly given its inconsistency with the market-at-large – said that it was still a bit too early to bring issues to the fore…

*** Fred Wilson is not commenting on reports that CBS is buying Wallstrip, except to say that the reporters got his involvement way wrong. Oh, and if you haven’t already, read Fred’s Anti-VC post (particularly the comments section).

*** Yes, my corporate overlords have agreed to buy Reuters. No, I have no idea what it means for me or this product. Fingers crossed for a net positive.

*** Not only is there rampant insider trading prior to public M&A deals, but it’s far more pronounced when a private equity firm is the buyer.

Top Three

Welsh, Carson, Anderson & Stowe has agreed to acquire TransFirst from GTCR for $683 million. Financing for the transaction is being led by Merrill Lynch and Deutsche Bank Securities, both of whom acted as M&A advisors to WCAS. TransFirst is a Dallas–based provider of transaction processing services and payment enabling technologies. It was founded as ACS Merchant Services in 1995, with GTCR sponsoring a recapitalization in 2000.

Nuance Communications Inc. (Nasdaq: NUAN) has agreed to acquire VoiceSignal Technologies Inc., a Woburn, Mass.-based developer of mobile voice technology. The deal is valued at approximately $293 million, including a $204 million cash payment and 5.8 million shares of Nuance common stock. VoiceSignal has raised over $21 million in VC funding since 2000, from firms like Stata Venture Partners and Argonaut Private Equity. Nuance was represented by Lehman Brothers on the transaction, while VoiceSignal was represented by Goldman Sachs.

Golub Capital Partners, a New York-based provider of debt financing to private equity sponsors, has filed for a $150 million IPO. It plans to trade on the Nasdaq under ticker symbol GCAP, with Wachovia Securities serving as lead underwriter. The publicly-traded entity will serve as a holding company for Golub’s funds, including the $1 billion Fund V closed earlier this year.

VC Deals

Intrexon Corp., a Blacksburg, Va.-based developer of transcriptional therapeutics, has raised $25 million in Series C funding from New River Management (managed by Third Security).

Avail Media Inc., a Reston, Va.-based provider of IPTV and other media services to broadband operators, has raised $17 million in Series B funding. Novak Biddle Venture Partners and Columbia Capital co-led the deal, and were joined by return backers like Pioneer Investors and the Benaroya Companies. VentureWire pegs the post-money valuation in excess of $33 million.

Fanfare, a Mountain View, Calif.-based provider of testing solutions for companies developing high-tech equipment, has raised $12 million in Series C funding at a $54 million post-money valuation. Focus Ventures led the deal, and was joined by return backers Matrix Partners and Redpoint Vetures. Fanfare previously had raised around $13.2 million in VC funding since its 2004 inception.

Arch Rock Corp., a San Francisco-based developer of wireless sensing and control products, has raised $10 million in Series B funding. New Enterprise Associates led the deal, and was joined by fellow return backers Intel Capital and Shasta Ventures. Arch Rock had raised a $5 million Series A round in late 2005.

MySupermarket Ltd., a London-based price comparison website for groceries, has raised $6 million in venture funding from Greylock and Pitango Venture Capital.

Quanlight Inc., a San Diego-based LED startup, has raised $3 million in Series B funding from Blackbird Ventures, (SHW)2 Enterprises and individual angels, a San Francisco-based provider of interactive television technology, has raised an undisclosed amount of second-round funding co-led by Swisscom and Holtzbrinck Ventures. The deal also includes European angels Klaus Hommels, Oliver Jung, and Peter Schupbach. previously had raised funding from Atomico, Draper Fisher Jurvetson and Ron Conway.

Buyout Deals

Charterhouse Capital Partners has acquired TSL Education from Exponent Private Equity for an undisclosed amount. TSL is a UK-based educational publisher that Exponent acquired from News Corp. in 2005, for approximately £235 million.

Texas Pacific Group could ditch its $4.6 billion bid for Spanish airline Iberia, after partner British Airways reportedly pushed it to join forces with rival private equity bidder Apax Partners. BA, which owns a 10% stake in Iberia, is understood to have met with TPG and Apax to discuss its potential involvement in their respective bids.

Bertram Capital has acquired a majority interest in Physicians Management Group LLC, a Los Angeles-based provider of revenue cycle management services to the healthcare industry.No financial terms were disclosed.

PE-Backed IPOs

Skilled Healthcare Group Inc., a Foothill Ranch, Calif.-based provider of nursing facilities and rehabilitation therapy centers, priced around 16.67 million shares at $15.50 per share ($14-$16 range), for an IPO take of approximately $258 million. It will trade on the NYSE under ticker symbol SKH, while Credit Suisse served as lead underwriter. Onex Partners bought the company from Heritage Partners in 2005 for around $640 million.

Akrion Inc., an Allentown, Pa.-based provider of batch-immersion and single-wafer wet cleaning systems for the semiconductor industry, has filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker symbol AKRI, with Credit Suisse and Deutsche Bank serving as co-lead underwriters. Sunrise Capital Partners holds a 97.7% pre-IPO position. Akrion had originally filed for a $50 million IPO in 2004, but withdrew registration last December, citing “current market conditions.”

Power Medical Interventions Inc., a Langhorne, Pa.-based developer of computer-assisted surgical instruments, has filed for a $100 million IPO. It plans to trade on the Nasdaq under ticker symbol PMII, with Jefferies & Co. and Lazard Capital Markets serving as co-lead underwriters. Listed shareholders include Boston Scientific Corp. (17.5% pre-IPO position) and NGN Capital (9.1%) and Robin Hood Ventures.

UPEK Inc., a Berkeley, Calif.-based developer of silicon-based fingerprint security solutions, has filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker symbol UPEK, with Deutsche Bank Securities serving as lead underwriter. UPEK has raised over $38 million in VC funding since being spun out of STMicroelectronics NV (NYSE: STM) in 2004. Shareholders include Sofinnova Ventures (17.6% pre-IPO position), Sofinnova Partners (17.6%), Diamondhead Ventures (16.6%), Earlybird Venture Capital (12.4%), Partners Group (10.4%) and EDBV Management (5.9%).

PE-Backed M&A

PlantCML, a Temecula, Calif.–based provider of mission-critical communications systems for emergency contact centers, has acquired Sigma Communications LLC, creator of the Reverse 911 emergency notification technology for management agencies, law enforcement, and other public safety agencies. No financial terms were disclosed. PlantCML is a portfolio company of Golden Gate Capital.

Winchester Electronics Corp., a Wallingford, Conn.–based designer and manufacturer of electronic connectors and interconnect solutions, has acquired the assets of both Advanced Interconnect Inc. and Kings Electronics Company. No financial terms were disclosed, except that the combined business expects annual sales in excess of $100 million. Winchester Electronics is a portfolio company of Audax Group.

PE Exits

Saratoga Partners has agreed to sell Data Return LLC to Terremark Worldwide Inc. (Nasdaq: TMRK) for $85 million. Saratoga Partners had acquired Data Return in June 2003 from Divine Inc. for $28 million, in a bankruptcy auction. Data Return is an Irving, Texas-based provider of managed services for large and complex websites. Lane Berry advised Saratoga on the sale.

Arsenal Capital has retained JPMorgan to help it sell specialty chemical company Vertellus Specialties Inc., according to LBO Wire. Arsenal formed Indianapolis-based Vertellus last July via the merger of Reilly Industries and Rutherford Chemicals, and has since recovered around 890% of its equity investment via a dividend recapitalization.

Verizon Business has agreed to acquire CyberTrust Inc., a Herndon, Va.-based IT security company that was formed via the 2004 merger of TruSecure Corp. and Betrusted Holdings. No financial terms were disclosed. One Equity Partners is CyberTrust’s largest shareholder, while others include JPMorgan Partners, Greylock, J&W Seligman, Saints Ventures, SI Ventures, WaldenVC, Walden International, Rustic Canyon Ventures, Weston Presidio and Gartner Group Inc.

Parallax Capital Partners has completed its sale of MultiGen Paradigm Inc. to CAE (NYSE: CGT) for $16 million. MultiGen is a Richardson, Texas-based provider of real-time, commercial-off-the-shelf software for creating and visualizing simulation solutions.

Bare Escentuals Inc. (Nasdaq: BARE), a San Francisco-based cosmetics company, announced a secondary public offering of 10 million common shares. Selling shareholders include Berkshire Partners (approx. 4.94m shares) and JH Partners (2.29m), which will see their ownership stakes drop to 24% and 11.4%, respectively. Bare Escentuals priced a $352 million IPO last September.

Firms & Funds

The Carlyle Group confirmed reports that it will list its first publicly-traded fund on the Euronext Amsterdam, either in the second or third quarter of this year. It will be a $1 billion leveraged finance vehicle mostly made up of mortgage-backed securities, with a target raise of $400 million.

Asia Alternatives of Hong Kong has closed its debut fund-of-funds targeting the Asia market, with $515 million in capital commitments. It had originally targeted $350 million. Limited partners include CalTech, CalPERS, Comprehensive Financial Management, Mass Mutual Asia, Mass Mutual Japan, Massachusetts Mutual Life Insurance Company, OHIM Asia Investors (affiliate of Oak Hill Investment Management), OMERS, PSERS, Warren Hellman and Arthur Rock. C.P. Eaton Partners served as placement agent.

Park Square Capital of London has closed a new Credit Opportunities Fund with €315 million in equity commitments, from limited partners like Caisse de depot et placement and the Ontario Teachers Fund. The fund will be leveraged, which is expected to give it €1.25 billion in investment capacity.

Milestone Venture Partners has received a $15 million commitment for its third fund from The New York State Common Retirement Fund. This brings the fund total up to $50 million, with a third and final close expected for later this year. Milestone focuses on tech-enhanced services companies in the greater New York metropolitan area.

Human Resources

Shusaku Minoda has joined Kohlberg Kravis Roberts & Co. as a managing director and co-CEO of the firm’s Japan operations, effective July 1. He previously was with Mizhou Corporate Bank as managing executive officer in charge of global investment banking.

Thomas Weisel Partners has promoted Robert Kitts to CEO of I-banking, and both William McLeod and Brad Raymond co-directors of I-banking. Both moves were made in connection to TWP co-founder Blake Jorgensen’s announcement that he is leaving the firm to become CFO of Yahoo.

Jeffrey Branman has joined Hilco Consumer Capital as a managing director, in charge of the business acquisitions team. He previously was president and founder of Interactive Technology Partners, a joint venture capital effort of Comcast Corp. and QVC.

David Sopp has joined Kamylon Capital as a principal. He previously was a principal with Capital Resource Partners.

Craig Lawson and Jim Reinhart have joined the San Francisco office of Harris Williams & Co., while Tim Alexander has joined in Minneapolis. Lawson, director, previously was a principal in the M&A group of Banc of America Securities. Reinhart, vice president, previously was a VP in Goldman Sachs’ tech/media/telecom group. Alexander, director, comes from Lehman Brothers, where he was a senior VP in the M&A department.


Yesterday’s issue listed an incorrect website address for Arbor Investments, which acquired Sam’s Wines & Spirits. The correct URL is Also, last week we omitted Panorma Capital as the lead investors for LV Sensors’ $15 million Series B round.