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    PE Week Wire -- Wednesday, July 27

Random Ramblings

My keynote address yesterday to the Private Equity CFO conference discussed how private equity firms – and their CFOs, in particular – should handle journalists who come looking for information on fund-raising and personnel changes (from the perspective of a firm’s best interest, not that of journalists). The talk was fairly long given how fast I generally speak, but the gist of the fund-raising piece was as follows:

Almost every fund formation attorney currently tells his or her clients to avoid all fund-raising discussions with the media until a final close. It’s kind of like an informal quiet period, designed to protect safe harbor exemptions under Regulation D. This is fine, except that talking to the press during fund-raising can produce certain benefits. For example, if a new fund-raising effort is mentioned in this space (typically for a non-brand-name firm), it could spark the interest of a pension fund manager who hadn’t yet seen the book, and possibly wouldn’t have seen the book (this has happened on numerous occasions).

Moreover, safe harbor under Reg D means that you have to put together an actual Reg D filing, which folks like me read. Why does this matter? Because to save the time and cost of multiple filings, many firms fill out Reg Ds with fund max caps, not fund targets. If you decline to comment when a reporter calls about the filing, he’ll have little choice but to assume that the “offering price” listed on the Reg D is a target, when it really may be a max cap. So imagine you’ve got a book price of $150m and a cap of $200m. You close on an oversubscribed $175m, but there is now a report out there saying that you had a $200m target. The result can be artificial fund-raising failure, when the reality is fund-raising success. Lots of firms have been known to retroactively reduce fund-raising targets for PR purposes, so few journalists will buy the “We were only looking for $150m” statement following a final close.

So what to do? My best advice is to split the difference. Talk to reporters (ones you trust) about your fund-raising if asked, but only on a condition of background that can’t be directly linked to you or your firm. This tact won’t wake the SEC, will prevent LPs from potentially complaining about pre-close publicity, could attract new sources of capital and prevent the dissemination of misinformation.

*** In last week’s column on Seattle Biodiesel, I mentioned that the company’s first institutional round of funding could, in part, take the form of a project finance deal. For guidance on how this might look, New Energy Capital (backed by VantagePoint Venture Partners) has led a $10 million financing deal for Mid-Atlantic Biodiesel Co., which just broke ground on a new facility in Delaware. Lots of talk with folks yesterday about the clean-tech/energy-tech space, particularly with how it looks like CalPERS is finally ready to make good on its promise to support funds focused on the space.

*** Charity Auction update: I am still working out the tech angles, but am pleased to announce the two non-profits that will split the auction's proceeds: Third Street Community Center in San Jose, Calif., and YouthBuild Boston in Boston. Each organization has a program focused on digital divide issues, providing basic computer training courses and refurbished computers to lower-income residents of their respective communities. Please check out their websites for more info (look at the DECLA program for Third St., and the Tech & Training Program for YouthBuild Boston), and please keep the donations rolling in.



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    Top Three


Cendant Corp. (NYSE: CD) has agreed to sell its marketing services division to an affiliate of Apollo Management for approximately $1.83 billion.


Macrovision Corp. (Nasdaq: MVSN) has agreed to acquire Trymedia Systems Inc., a San Francisco-based provider of secure digital distribution products and services for the video gaming industry. The deal is valued at $34 million in cash, and is expected to close this week. Trymedia has raised around $5.6 million in VC funding from such sources as Intel Capital and Dot Edu Ventures.

France Telecom has won the auction for an 80% stake in Spanish mobile phone company Amena from Auna SA, with a bid of 6.4 billion euros. The victory signals a loss for a pair of private equity consortia. The first was led by KKR (which dropped out late last week), while the other was led by Providence Equity Partners.

    VC Deals

Revenue Cycle Solutions Inc., a Westchester, Ill.-based provider of outsourced receivable management services to hospitals, has raised $12.4 million in venture funding from Austin Ventures and InvestRx. The company also secured a $4 million credit facility from Silicon Valley Bank.

Knovel Corp., a Binghamton, N.Y.-based provider of Web-based information services, has raised around $3.23 million in Series C funding, plus another $1.25 million in convertible note financing. Credit Suisse First Boston led the deal on behalf of the New York State Common Retirement Fund. Other participants included Himalaya Capital Venture Partners, New York Small Business Technology Investment Fund, Silicon Alley Venture Partners, Milestone Venture Partners and Stonehenge Capital.

Salis Inc., a Roswell, Ga.-based provider of state and local tax management services, has raised around $3.5 million in funding from Baird Venture Partners and existing shareholder Austin Ventures. Inc., a San Francisco-based provider of hotel reviews and travel journals, has raised more than $1 million in need funding from firms like Amicus Capital and Arba Seed Inv*stment Group.

Fluid Logic LLC, a Portland, Ore.-based specialty chemicals company focused on colloidal silicas, has received a “significant inv*stment” from Riverlake Partners. No additional terms were disclosed.

PeerMe Inc., a Mountain View, Calif.-based P2P communications technology company focused on enabling secure Internet connections, has raised $1.5 million in new venture funding.

    Buyout Deals

Blacksand Energy LLC, a Houston-based oil and gas company, has completed a financial recap that includes up to $50 million in equity commitments from Kayne Anderson Capital Advisors, Jefferies Capital Partners and Wells Fargo Energy Capital. Blacksand also received a loan commitment from Wells Fargo.

CrimStone Partners has acquired AAA Pallet for an undisclosed amount. AAA Pallet is an Irving, Texas-based maker of wood pallets, and was advised on the deal by RSM EquiCo Capital Markets. No financial terms were disclosed.

The Carlyle Group and Caterpillar Inc. (NYSE: CAT) are in talks to acquire a 51% stake in China-based Xugong Machinery from Xuzhou Construction Machinery Group, according to The South China Post.

Texas Pacific Group is in talks to sell its 35% stake in Ducati Motor Holdings SpA, according to Italian press reports. Multiple groups are said to be interested in the deal.

AlpInv*st Partners reportedly has bought a 50% stake in Dutch travel agency Sunweb Vliegreizen for an undisclosed amount.

    PE-Backed IPOs

Pike Electric Corp., a Mt. Airy, N.C.-based provider of outsourced electric distribution and transmission services, priced 13.5 million common shares at $16 per share (high end of $14-$16 range), for an IPO take of approximately $216 million. It plans to trade on the NYSE under ticker symbol PEC, while Citigroup and JPMorgan served as lead underwriters. Pike Electric was acquired in 2002 by Lindsay Goldberg & Bessemer, which planned to sell over 3 million shares in the IPO. Lindsay Goldberg & Bessemer also was to receive a $4 million management agreement termination fee once the company went public.

LifeCycle Pharma, a Danish biotech company focused on cardiovascular disease and immunosuppression, has hired Morgan Stanley to manage an IPO, according to Reuters. Shareholders include Alta Partners, Novo AS, Nordic Biotech Advisors and Lacuna Apo BioTech Fonds.

    PE-Backed M&A

AXIA Health Management, a portfolio company of Nautic Partners, has acquired American WholeHealth Networks Inc., a Sterling, Va.-based provider of integrative medicine services and a network of complementary and alternative medicine practitioners for managed care organizations and health plans. No financial terms were disclosed. American WholeHealth had raised VC funding from such firms as Essex Woodlands Health Ventures, DLJ Merchant Banking, Frazier Healthcare Ventures, HLM Venture Partners, Kline Hawkes & Co., Prism Venture Partners and Sprout Group.

Atlantic Tele-Network Inc. (AMEX: ANK) has agreed to acquire a 95% stake in Commnet Wireless LLC, an Atlanta-based provider of wireless voice and data roaming networks in rural markets. The deal is valued at approximately $59 million (including repayment of $5.4 million in Commnet debt) in cash. Commnet is backed by such private equity firms as Summit Partners.

Various Inc., the parent company of dating website company FriendFinder, has acquired Spring Street Networks Inc., a New York-based provider of online dating personals. No financial terms were disclosed. Spring Street has raised over $7 million in VC funding, with Battery Ventures serving as its primary backer.

    Firm & Fund News

Viscogliosi Brothers LLC, a New York-based merchant bank focused on VC and private equity opportunities in the musculoskeletal and orthopedic sectors of the healthcare industry, has formed an I-banking subsidiary named Viscogliosi & Co.

Edwards & Angell and Palmer & Dodge, a pair of corporate law firms, are in merger talks, according to The Boston Globe.

Industry Ventures of San Francisco is looking to raise upwards of $150 million for its fourth fund, according to a regulatory filing.

    Human Resources

Battery Ventures has made two promotions: Roger Lee from partner to general partner, and Sunil Dhaliwal from principal to partner. Lee is based in Menlo Park, and is currently a board member at both Friendster and PrimeRevenue. Dhaliwal is based in Wellesley, Mass., and sits on the board of Netezza and as a board observer with CipherTrust.

Ingrid Swenson has joined Mayfield as controller, after previously having worked with PricewaterhouseCoopers. Mayfield is soon expected to close its twelfth fund with between $300 million and $350 million, according to sources familiar with the process.

Lawrence Friend has been named an advisor to the board of directors at Hercules Technology Growth Capital. Friend served as chief accountant to the SEC’s Division of Inv*stment Management from 1978 to 1998, at which point he joined PricewaterhouseCoopers’ regulatory consulting group.

Jim Hoffman has joined The Pritzker Group, a merchant bank representing the Pritzker family interests, as a senior vice president. He previously served as a managing director in the M&A group at Robert W. Baird & Co.

Barry Lynn, a director with Shoreline Venture Management and CEO of Be eXel Management Inc., has joined the board of Alacritech Inc., a San Jose, Calif.–based provider of solutions enabling scalable networked systems.


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July 27, 2005


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