Random Ramblings: LBO Data, Vanguard Ventures & Apax

The buyouts market is expected to record its third-straight year of record-breaking deal volume, according to Q3 numbers released this week by Buyouts Magazine. The first three quarters of 2006 saw U.S. firms participate in a total of 770 control-stake deals valued at $181 billion in disclosed value (including leverage), compared to $198 billion for 840 such deals in all of 2005. Moreover, Buyouts reports that there is approximately $150 billion worth of agreed-upon deals that will close either this quarter or in Q1 2007. Included in this pipeline is HCA.

As for specific Q3 2006 data, U.S. firms participated in 259 control-stake transactions valued at $56 billion. The largest was the $12 billion TDC buyout, followed by the $9.7 billion VNU deal. Buyouts Magazine subscribers can read more either at www.buyoutsnews.com, or in the October 9 print edition.


*** Vanguard Ventures does not plan to shut down, despite yesterday’s news that general partner Don Wood is leaving to join DFJ. But that doesn’t mean that the future is terribly bright.


Vanguard entered 2005 with five general partners: Wood, Tom McConnell, Dan Eilers, Bob Ulrich and firm co-founder Jack Gill. Soon after, the firm began pre-marketing a $150 million-targeted eighth fund, but told LPs that neither Ulrich nor Gill would be listed as partners (although they would continue to be involved on a part-time basis). Once LPs began balking at the lack of substantial liquidity events, Vanguard’s remaining trio put the entire process on hold in order to squeeze additional value out of its existing portfolio.


Fast forward to yesterday, and Wood leaves for DFJ (although at least one other notable Valley firm was recruiting him). He will continue to work with his existing Vanguard portfolio companies, but it will be Eilers and McConnell who have to shoulder most of the load. Vanguard does have two companies in registration for IPOs – Asthmatx (on its road show) and Hansen Medical – but it will be a tough ride.


If successful, Vanguard will hire additional partners and resume fundraising in 2008. If not, it will join what is becoming a long list of dearly-departed firms.


*** Apax Partners is planning to close its Menlo Park, Calif. office at year-end. Some of the staffers are leaving – like partner Paul Vais – while others will relocate to New York.


The move is part of Apax’s continuing move away from venture capital investing, in favor of buyouts. There were some internal conversations about keeping a California presence in order to better participate in technology buyouts, but the ultimate decision was that such deals could be done by teams based in New York.


*** Remember all that talk in 2003 and 2004 about emerging VC fund managers? Well, LPs who backed such efforts are now facing an interesting dilemma: Do they also support successor funds, when the first one is not yet mature enough to have a demonstrable track record? It’s kind of like doubling down on a blind bet. Thoughts?