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    PE Week Wire - Tuesday, November 9

Reasons? We Don't Need No Stinking Reasons!

One pitfall of writing a daily column is the inevitable beating of dead horses. Today, however, the deceased really do deserve a few more whacks.

So again we tackle the issue of private equity disclosure by public limited partners, which is back in the news thanks to the notable lack of such LPs in a new fund from U.S. Venture Partners. In particular, we will discuss Texas, since it is there that a local AG is unleashing his fire hose on the slippery slope. For a quick summary of all things disclosure, pick up today's Wall St. Journal and read Ann Grimes' story on C-1 (or go here). For those who have been following this space faithfully, simply continue.

One of the key tenets of Texas AG Greg Abbott's disclosure position - which would include the release of underlying asset information like portfolio company valuations and revenue - is that it would not result in public investment groups like UTIMCO and TRST being denied access into any significant number of private equity and/or venture capital funds. I've personally tried to ask Abbott about the basis for this belief, but repeated requests for comment or clarification have gone unanswered. I also hear that certain public pension execs in Texas have received a similar silence from the AG's office on such matters, but I'll graciously chalk that up to an antiquated voice mail system.

In truth, perhaps Abbott simply feels that discussing the matter would muddy the media waters. Already, the Austin-American Statesman has bought his line (along with the hook and sinker), according to an October 22 editorial. It reads, in part: "[UT Regent Woody] Hunt argues that the venture capitalists salivating over UT's $16 billion endowment will look elsewhere if Texas requires transparency. But as Texas Attorney General Greg Abbott said recently, the state should have no trouble finding lucrative investments for its billions."

Upon first read, my immediate question was why the Statesman was taking Abbott's word over that of Woody Hunt. So I called up David Lowery, an editorial writer with the newspaper. Specifically, I asked if he knew of any private equity or venture capital firms that have said they would take Texas money if Abbott's disclosure plan is accepted by the courts. Lowery said he did not, and indicated that he hadn't really looked for any. When asked why he trusted Abbott's assertion, he answered that Abbott had some investment experience in a past career, and that what the AG said "seems to make sense." When pressed, Lowery said my questions were too "technical," and that the over-arching issue was one of increasing transparency. He did acknowledge that there could be information that should, indeed, remain private, but admitted that neither he nor his editorial board colleagues had given any substantial thought to what that information may be.

As an aside, the Statesman editorial also spent a lot of time parroting an earlier Wall Street Journal editorial that basically accused CalPERS of cronyism. That WSJ effort has been derided in this space for using selective examples of immature fund returns, but Lowery felt that the WSJ had met its burden. -

The reason I'm revisiting all of this today is because U.S. Venture Partners closed its ninth fund last week with $600 million in limited partner commitments. Among those NOT invited to participate were past USVP investors like CalPERS, the Washington State Investment Board and the Virginia Retirement System. Steve Krausz, a general partner with USVP, says that the exclusions were directly tied to the possible disclosure of sensitive fund data. Specifically, he said that USVP only considered admitting public LPs who either: (A) Operated in a state that had legislated against private equity disclosure (e.g. Michigan); or (B) Had established some sort of internal firewall that shielded the group from FOIA exposure. The rest, he said, were simply too risky for USVP to take a chance on in what currently is a cash-heavy fundraising market.

So USVP joins a growing list that also includes firms like Sequoia Capital and Charles River Ventures. Even Austin Ventures seems to be getting into the act, despite once saying that they couldn't imagine not taking money from their neighbors at UT. Seems that Abbott has helped change their minds.

So the question now for Abbott and the Statesman editorial board is why they are so convinced that underlying asset disclosure will not dissuade private equity and VC firms from taking Texas' money. There is not yet underlying asset disclosure in California, Washington or Virginia, but the very threat of it caused USVP to break off longstanding investment relationships. I know that two of those are blue states, Greg, but the money is still green. Either a reasoned answer or court intervention must come soon, or else groups like UTIMCO and TRST could be forced to stop investing in a particularly lucrative asset class.

Unrelated: Any firms participating in our Intern Resume Drive will be contacted later today with information. A full list of openings will appear in tomorrow's Wire.

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    Top Three

Sonim Technologies Inc., a San Mateo, Calif.-based provider of wireless communications solutions, has raised $16 million in new venture capital funding. Return backers include Accel Partners, Apax Partners, 3i Group and BV Capital. The company has raised nearly $70 million in total VC funding since its 1999 inception, including a $28 million Series C infusion earlier this year. www.sonimtech.com

Onex Partners, the private equity arm of Onex Corp. (TSX: OCX.SV), has agreed to acquire a 90% ownership position in BMP/CEI Holdings Inc., the parent company of Holmdel, N.J.-based Cosmetic Essence Inc. The deal is valued at approximately Cdn$300 million, including Cdn$135 million in equity from Onex Partners, in exchange for a 90% ownership interest. Senior management and certain financial institutions will hold the remaining 10 percent. The selling party is private equity firm Brockway Moran & Partners. www.cosmeticessence.com

Jeffrey Goldstein has joined San Francisco-based private equity firm Hellman & Friedman as a managing director. He previously served as managing director, chief financial officer and a member of the management committee of the World Bank. www.hf.com

    VC Deals

Teknovus Inc., a Petaluma, Calif.-based provider of broadband-access semiconductor chipsets, has raised $9 million in Series B funding. Samsung America Ventures and Mitsubishi Corp. co-led the deal, and were joined by fellow new investor SUIT Growth Fund. Return backers included Partech International, U.S. Venture Partners and Portview Communications Ltd. www.teknovus.com

IntelliReach Corp., a Dedham, Mass.-based provider of security and compliance management solutions for corporate messaging environments, has raised $7 million in Series A funding from M/C Venture Partners. www.intellireach.com

VistaPrint, a Lexington, Mass.-based graphic design and printing services provider, announced that it has closed its Series B funding round with $52 million. Highland Capital Partners and HarbourVest Partners co-led the deal, which included a $30 million tranche in August 2003, and a $22 million tranche called down this past August. The company now has raised around $76 million in total VC funding since its 1995 inception. www.vistaprint.com

Sling Media Inc., a San Mateo, Calif.-based provider of digital media solutions, has raised $10.5 million in Series A funding from DCM-Doll Capital Management, Mobius Venture Capital and undisclosed strategic investors. www.slingmedia.com

Netli Inc., a Palo Alto, Calif.-based provider of application delivery network services, has raised $8 million in Series C funding. Reed Elsevier Ventures led the deal, and was joined by return backers Morgenthaler Ventures, Bessemer Venture Partners, Alta Partners, Nokia Venture Partners and Leapfrog Ventures. The company has raised approximately $32 million in total VC funding since its 2000 inception. www.netli.com

Courion Corp., a Framingham, Mass.-based provider of identity management solutions, has raised $5 million in Series E funding. Paladin Capital Group led the deal, and was joined by return backers JMI Equity and Questmark Partners. Courion now has raised approximately $32 million in total VC funding since its 1996 inception. www.courion.com

Akoya Inc., a Peoria, Ill.-based provider of business intelligence software focused on the direct materials purchasing industry, has raised $800,000 in venture capital funding. Investors included ARCH Development Partners, Caterpillar Inc. (NYSE: CAT) and the Tri-County Venture Capital Fund. The company's core technology was developed by Caterpillar, and the company is being spun out in collaboration with Peoria NEXT. www.akoyainc.com

MDdatacor Inc., an Alpharetta, Ga.-based healthcare information services provider, has received an undisclosed amount of strategic funding from Siemens Venture Capital. MDdatacor has raised approximately $13 million in total VC funding since its 2001 inception. www.mddatacor.com

AccessMedical Provider Network, a Lafayette, Calif.-based PPO network, has raised $900,000 in venture capital funding from members of the Northern California Chapter of the Keiretsu Forum. www.accessmedicalcard.com

    Buyout Deals

The Neiman Marcus Group Inc. (NYSE: NMGA) has sold its Chef's Catalog direct marketing business to Pikes Peak Direct Marketing Inc., a newly-formed company controlled by private equity firm JH Partners LLC. No financial terms were disclosed. Neiman Marcus acquired Chef's Catalog in 1998, and was advised by Elixir Advisors on the sale to Pikes Peak. www.chefscatalog.com

Audax Group has completed its $210 million acquisition of concrete plant operator Southern Equipment Co. (a.k.a. Ready Mixed Concrete Co.). High-yield financing was led by J.P. Morgan Chase, with Jefferies & Co. also participating. www.audaxgroup.com

Centre Partners has sponsored a recapitalization of New York-based money management firm Munn, Bernhard & Associates. The deal includes a $50 million equity investment from Centre Partners affiliate Centre Pacific, and the re-launch of Munn Bernhard as MB Investment Partners. www.mbinvestmentpartners.com

U.S. Equity Partners, the buyout wing of private equity firm Wasserstein & Co., has sponsored a management recap of MasterCraft Boat Co., a Vonore, Tenn.-based maker of ski, wakeboard and luxury performance powerboats, according to The Deal. No financial terms were disclosed. www.mastercraft.com

Goldman Sachs Urban Investment Group and C.H. James Restaurant Holdings LLC have teamed up to acquire 37 Burger King restaurants in the greater Chicago area. Bank of America Restaurant Finance Group provided a bank facility. No pricing details were disclosed. www.chjamesco.com

Spheris, a Franklin, Tenn.-based provider of medical transcription technology and outsourcing services, has completed a recap transaction sponsored by Warburg Pincus and Soros Private Equity. Company management also participated on the deal, although no financial terms were disclosed. As part of the recap, Warburg Pincus replaces Parthenon Capital as Spheris' majority shareholder. www.spheris.com

    PE-Backed M&A

S1 Corp. (Nasdaq: SONE) has agreed to acquire Mosaic Software Holdings Ltd., a UK-based provider of electronic payment and ATM solutions. The deal is valued at $37 million in cash, plus the possibility of an additional $15 million earn-out at the end of 2005. Mosaic has raised venture capital funding from GE Equity and Comparex Holdings. www.mosiacsoftware.com

DHL Express (Singapore) Pte Ltd. has agreed to acquire a 68.21% stake in Blue Dart Express Ltd. from four company founders and VC backer Schroder Capital Partners. The deal is valued at approximately $168 million. Blue Dart is an India-based logistics company, and has had an operational relationship with DHL since late 2002. www.bluedart.com

    Firm & Fund News

Annex Capital and Coller Capital have completed their previously-announced acquisition of 22 North American private equity assets from the institutional restructuring unit of Dresdner Bank. Annex Capital is a new firm formed by the former Dresdner portfolio managers, and is led by Alexander Coleman, former managing investment partner of Dresdner Kleinwort Capital and a managing director of Dresdner Kleinwort Wasserstein. No financial terms were disclosed.

Accuitive Medical Ventures has held a final close on its inaugural fund with $55 million in limited partner commitments. www.amvpartners.com

Ropes & Gray LLP reportedly will acquire Fish & Neave LLP, a New York-based law firm focused on intellectual property matters. The combined company will feature approximately 740 attorneys, including 200 working in the IP practice. www.ropesgray.com www.fishneave.com

    Human Resources

Rich McGinn, a general partner with RRE Ventures, is one of three former Lucent Technologies Inc. (NYSE: LU) executives who may face federal charges for alleged violations of the Foreign Corrupt Practices Act. The information comes from an SEC report filed yesterday by Lucent, which says that the alleged violations include a bribery scheme connected to Lucent's Saudi Arabian operation between 1997 and 2000. During that time, McGinn served as Lucent's chairman and CEO. www.rre.com

Jeff Pierson has left his position as associate administrator for investment at the U.S. Small Business Administration (SBA), after 27 months on the job. He plans to return to the private side of the private equity market, although no specific plans have been disclosed.

Jane Swift has joined the WellCare Health Plans Inc. (NYSE: WCG) as a director. She currently serves as a general partner with Arcadia Partners, and is the former Governor of Massachusetts. www.wellcare.com

Worldview Technology Partners, a Palo Alto, Calif.-based VC firm, has promoted: Tim Weingarten to the position of partner; Jeb Miller to the position of principal and Pete Goettner to the position of venture partners. www.worldview.com

Laura Hom has joined the capital markets group of GE Commercial Finance as a senior vice president. She previously served as executive director of the media and telecom leveraged finance group with CIBC World Markets. www.ge.com

HarbourVest Partners has made the following promotions: Julie Eiermann, Diane Goodwin and Karin Lagerlund have been named senior vice presidents; Jeffrey Keay and Laura Thaxter have been named vice president; Kyle Bohannan has been named senior associate; and Carolina Espinal de Carulla and Olga Tater have been named associates. www.harbourvest.com

Sullivan & Worcester LLP has added four attorneys to its technology practice group. Each of them at one time worked with Testa, Hurwitz, & Thibeault. Alfred Brown, Edwin Miller and Miguel Vega join as partners, while Diana Steel joins as counsel. www.sandw.com


Corrections: Oak Hill Capital Partners is the proper name of the firm that teamed with General Atlantic Partners to acquire a majority interest in GE Capital International Services. Also, MarketAxess priced its IPO at $11 per share, and there were 86 VC-backed M&A events in Q2 2004.


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November 9, 2004


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