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    PE Week Wire -- Monday, June 12

Forum Notes

Last Thursday, Thomson Financial and Goodwin Procter co-hosted an afternoon forum titled Energy Investing in a Carbon-Constrained World. The standing-room only crowd included a large number of Wire readers, who heard a wide-ranging discussion that touched on everything from carbon credit trading to box office results for the Al Gore movie (or, more specifically, for the only Al Gore movie). Anyway, what follows are a few notes I scribbled down while waiting for after-forum cocktails to commence…

*** During his keynote presentation, environmentalist Jonathan Lash suggested that we already have adequate technology to successfully combat global warming. The problem, he argued, was that such innovations – solar, wind, nuclear, etc. – have not been widely-enough adopted by American government (and, secondarily, by American enterprise and society-at-large).

This point was reiterated during a later Q&A, when panelists were asked to identify the “one technology bottleneck” that they would solve in the next five years, as related to global warming. Rather than saying something related to the intricacies of photovoltaic cells or biodiesel production, the panel responded that the most pressing bottleneck was regulatory, not technological. Specifically, the failure of government to impose greenhouse gas caps or a regulated framework for trading carbon credits (rather than the unregulated system which currently exists).

None of this was to suggest that technological innovation should stop, as pioneers like Toyota and General Electric were singled out for praise. But it is to wonder about the ROI potential of massive VC disbursements into the alternative energy space, particularly when one considers the VC market’s relatively short time horizon. Vinod Khosla, for example, can wait 20 years for his personal ethanol plays to pay off, whereas his former firm (like any GP/LP structure) cannot. Maybe the bet is that regulators will wake up sooner rather than later – Lash believes it will happen within five years – but VCs historically have avoided sectors that are highly-dependent on the prospective implementation of regulatory changes.

In other words, how does one invest in a better mousetrap when there is not yet a belief that mice must be trapped?

*** Jonathan Meeks of TA Associates asked the day’s best rhetorical question: “What happens when three billion people come online to middle-class living?”

*** Lash put up a quadrant chart showing where major auto manufacturers were in terms of both alternative energy innovation and ability to implement said innovation. Toyota and Honda were the best, while BMW and Volkswagon were the worst.

*** There was precious little optimism that new Treasury Secretary Hank Paulsen’s environmental evangelism would have much impact on Bush Administration policy. In talking with folks after the forum, however, there was a lot of concern about what Paulsen's new gig could mean for the future green-ness of Goldman Sachs.

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    Top Three

CoGenesys Inc., a Rockville, Md.-based drug company, has raised $55 million in Series A funding. New Enterprise Associates led the deal, and was joined by OrbiMed Advisors, Red Abbey Venture Partners and former parent company Human Genome Sciences Inc.

Reuters (Nasdaq: RTRSY) has acquired Application Networks Inc., a Palo Alto, Calif.-based provider of risk management software, for $41 million in cash. Application Networks had raised over $12 million in VC funding from firms like Advanced Technology Ventures and Gilde Investment Management.

Warner Chilcott, a Rockaway, N.J.-based drug company focused on women’s healthcare and dermatology, has filed to raise $1 billion via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol WCRX, with Goldman Sachs serving as lead underwriter. The company was taken private in early 2005 for $3.1 billion by a private equity consortium that included Bain Capital, DLJ Merchant Banking Partners, JPMorgan Partners and Thomas H. Lee Partners.

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    VC Deals

TetraLogic Pharmaceuticals Inc., a Malvern, Pa.–based oncology drug company, has raised $36 million in Series B funding. Latterell Venture Partners led the deal, and was joined by Quaker BioVentures, the Vertical Group, Amgen Ventures and return backers HealthCare Ventures, PA Early Stage Partners and Kammerer Associates.

SOA Software Inc., a Los Angeles-based provider of SOA and Web services management, security and governance solutions, has raised $11 million in new VC funding. Draper Fisher Jurvetson led the deal, and was joined by return backers Redpoint Ventures, Mellon Ventures, Paladin Capital Group and Palisades Ventures. The company has raised over $40 million since its 1998 inception.

SpecificMedia Inc., an Irvine, Calif.-based provider of targeted online marketing solutions, has raised $10 million in Series A funding. Enterprise Partners led the deal, and was joined by Shepherd Ventures.

Impulse Monitoring Inc., a Columbia, Md.-based provider of neurophysiological monitoring during invasive surgical procedures, has raised $9 million in new VC funding led by Tullis-Dickerson.

Palamida Inc., a San Francisco–based provider of software IP management and compliance solutions, has raised $8 million in Series B funding. Mitsui & Co. Venture Partners led the deal, and was joined by return backers Hummer Winblad Venture Partners and WaldenVC.

One True Media Inc., a Redwood City, Calif.-based provider of online editing and sharing tools for videos and photos, has raised $5 million in Series A funding from Kleiner Perkins Caufield & Byers. The company also signed a partnership agreement with, whereby One True Media will provide its video editing tools to members.

Friction Control Solutions Ltd., a Farmington Hills, Mich.-based developer of technology to minimize friction between moving parts in engines, has raised $5 million in second-round funding led by Aviv Venture Capital.

Edgeware, a Stockholm, Sweden-based provider of network server equipment, has raised arounde $2.23 million in second-round funding. Amadeus Capital Partners led the deal, and was joined by return backer Creandum.

Visitar, a Raleigh, N.C.-based provider of customer relationship management solutions for small and mid-sized businesses, has raised $1 million in additional VC funding from The Aurora Funds and NC IDEA.

    Buyout Deals

TAC Acquisition Corp. (OTC BB: TACA) has agreed to acquire Aviel Systems Inc., a McLean, Va.-based provider of IT services to the federal government in the areas of national security, defense and transportation. The deal is valued at approximately $60 million ($35m cash/$25m stock), plus the assumption of around $40 million in Aviel debt. TAC is a blank check acquisition company formed last year by a management team that includes Saul Rosenthal, co-founder of SoundView’s private equity group.

Admiralty Partners of Los Angeles has acquired a 25% equity stake in Pankl Racing Systems AG, as part of a strategic agreement related to Pankl’s aerospace and defense product facilities in Cerritos, Calif. and Kapfenberg, Austria. No financial terms were disclosed.

Acosta Sales & Marketing Co. has agreed to receive an undisclosed amount of private equity funding from AEA Inv*stors, which will partially be used to redeem a 2003 inv*stment from Berkshire Partners. Acosta is a Jacksonville, Fla.-based provider of outsourced sales, merchandising, marketing and promotional services to manufacturers in the consumer packaged goods industry. Goldman Sachs advised Acosta on the AEA deal.

Texas Pacific Group could have interest in airline company Alitalia, if the Italian government opts for privatization, according to an Il Sole 24 Ore interview with TPG co-founder David Bonderman. TPG has a long history with airlines, with its first deal ever having been for Continental.

Permira and Barclays Capital have offered to acquire UK retirement homebuilder McCarthy & Stone for approximately Gbp900 million, according to The Financial Times. An alternate bid also is expected from Augusta Capital, which is backed by Simon and David Reuben.

    PE-Backed IPOs

Wintegra Inc., an Austin, Texas-based provider of access processing semiconductors, has lowered its proposed IPO price range from $14-$16 per share to $12-$14 per share. It still plans to sell five million shares, and to trade on the Nasdaq under ticker symbol WNTG. Goldman Sachs and JPMorgan are serving as co-lead underwriters. Wintegra has raised around $26 million in VC funding from firms like Magnum Communications Fund, Concord Ventures, Texas Instruments, Genesis Partners and China Development Industrial Bank.

    PE Exits

Intersections Inc. (Nasdaq:INTX) has agreed to acquire Chartered Marketing Services Inc. from Spectrum Equity Investors and TA Associates for an undisclosed amount. CMSI is an Arlington Heights, Ill.-based direct marketer of consumer-oriented insurance and membership products.

Cisco Systems Inc. (Nasdaq: CSCO) has agreed to acquire Metreos Corp., an Austin, Texas-based provider of IP communication application development and management environments. The deal is valued at approximately $28 million in cash, and is expected to close by the end of July. Metreos had raised over $4 million in VC funding since its 2001 inception, from firms like StarTech Early Ventures, Gefinor Ventures and Hunt Ventures.

Cisco Systems Inc. (Nasdaq: CSCO) has agreed to acquire Audium Corp., a New York-based provider of VoiceXML speech self-service application development and management environments. The deal is valued at approximately $19.8 million in cash, and is expected to close by the end of July. Audium raised around $4.3 million in a 2001 Series A round from Chelsea Capital Partners and BlueHill Ventures, according to VentureWire.

    PE-Backed M&A

SocialText Inc., a Palo Alto, Calif.-based wiki company, has acquired wikiCalc, a social spreadsheet solution developed by Dan Bricklin. No financial terms were disclosed. SocialText has raised over $3 million in VC funding from groups like Draper fisher Jurvetson and the Omidyar Network.

    Other Deals

Adept Technology Inc. (Nasdaq: ADEP) has agreed to sell $10 million worth of common stock to Crosslink Capital. The shares are being sold at around $13.68 each, and represent approximately 11% of the company's outstanding shares pre-financing.

    Firm & Fund News

The Blackstone Group may raise a $500 million fund dedicated to India, according to Bloomberg.

Bedminster Capital Management has held a first close on Southeast Europe Equity Fund II, from LPs that include the European Bank for Reconstruction and Development, BankAustria Creditanstalt, and an account associated with George Soros and OPIC. The overall fund target is $200 million. In related news, Thomas Kofler has joined Bedminster Capital as a managing director. He previously was a management board member of CA-IB.

NexBank Capital has acquired Barrier Advisors, a Dallas, Texas-based firm specializing in middle-market turnarounds and restructurings. No financial terms were disclosed.

    Human Resources

William Johnston has joined The Carlyle Group as a Nashville-based senior advisor to the firm’s healthcare team. He is previously served as chairman of Renal Care Group Inc., a publicly-traded provider of dialysis services that was acquired this past June by Fresenius Medical Care for $4.2 billion.

Chris Lawless has left Intel Capital, where he led enterprise and Internet security technology inv*sting, in order to join Intel Capital portfolio company SignaCert Inc. as senior vice president of corporate development and marketing. SignaCert is a Portland, Ore.-based service provider of trust management for enterprise IT systems.

John Thornton has joined Pacific Community Ventures as a managing director. He previously served as a principal with American Capital Strategies.

Correction: PTV Sciences has held a $110.04 million first close on its second fund, not a final close. The Houston, Texas-based VC firm focuses on seed and early-stage growth opportunities in the life sciences and materials science markets.

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June 12, 2006

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