AIG Capital Partners Loses Its Head If you've been unable to reach people at AIG Capital Partners this week, there is a very good reason: The group is still in shock over Monday's surprise firings of CEO Peter Yu and managing director Bill Jarosz. AIG Capital Partners is one of many private equity-related groups within AIG, and is primarily focused on the emerging markets. Its initial fund -- Global Emerging Markets (GEM) -- was essentially a $1 billion-plus fund-of-funds that let third parties have access to a consortium of other, existing AIG emerging markets funds. More recently, the group closed on more than $800 million for GEM II, which permitted both direct and indirect deals within the emerging markets (AIG has other private equity groups focused on developed markets). In general, AIG Capital Partners has been seen as something of an anomaly inside of AIG, in that it traditionally has operated as a quasi-independent organization. In fact, sources say that AIG Capital Partners had reached an agreement late last year whereby it would eventually spin out on its own, with AIG maintaining a limited partner position. Not only would this give Yu and company more freedom/flexibility, but it also would facilitate future fund-raising drives, since many prospective LPs steer clear of institution-sponsored funds. It's important to note, however, that the spinout arrangement was approved by then-AIG chief Hank Greenberg, who was recently ousted after losing his battle with both the SEC and New York AG Elliot Spitzer. Moreover, the aforementioned quasi-independence was apparently a byproduct of Yu's ability to cozy up to Greenberg (Yu is an old political hand, having once served as a major White House advisor on economic matters). Post-Greenberg management disliked the spinout idea, and particularly disliked Yu and Jarosz's protestations. The chasm apparently became so vast that both men were handed pink slips on Monday, and then were escorted out the door by building security, without even being allowed to retrieve personal items from their desks. Limited partners were informed of the terminations yesterday via a short memo, which said that existing AIG staffer David Yeung would move into the Capital Partners group to replace Yu (Yeung is currently based in Hong Kong, but will soon relocate to New York). AIG declined to comment on the firings, except to say that neither Yu nor Jarosz still worked at AIG, that Yeung was now in charge and that AIG maintains a strong interest in the emerging markets. The dust hasn't quite settled on this matter, but there already are some serious questions worth asking, including whether or not Yu and Jarosz will sue AIG for wrongful termination. Most important, however, is how limited partners will react to the news. Both Yu and Jarosz were key-men on GEM II (although I don't know the exact structure, such as if Yu is a super key-man). As such, there could be the LPs that pull their essentially-unfunded commitments. After all, LPs always say that they invest in fund managers, not in funds. Making this possibility more likely is the atrocious way in which AIG has handled the situation. General business practice here would have been to have reached an amicable settlement with both Yu and Jarosz (i.e., buy them off), after which each man would officially leave for "personal reasons," and assure nervous LPs that the fund is in good hands. Instead, AIG basically marched the two guys out of the building (in view of many), which cannot engender much future cooperation from either of them. AIG also didn't seek LP permission prior to the decision. I've asked this before - and I'm sure I'll ask it again - but how can such a large institution have such a boneheaded HR strategy? So, so short-sighted...
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Whenu.com Inc., a New York-based provider of software-based contextual online advertising, has raised $20 million in Series A funding from ABS Capital Partners. www.whenu.com Juniper Networks Inc. (Nasdaq: JNPR) has agreed to acquire two companies: Peribit Networks Inc., a Santa Clara, Calif.-based provider of wide area network (WAN) optimization technology, and Redline Networks Inc., a Campbell, Calif.-based developer of application front end (AFE) technology. The Peribit deal is valued at approximately $337 million in cash, stock and assumed stock options, while the Redline deal is valued at approximately $132 million in cash and assumed stock options. Peribit has raised over $40 million in VC funding since its 2001 inception, including a $10 million Series D round in late 2003 at a post-money valuation of around $100 million. Participating VCs included Accel Partners, Foundation Capital, Mayfield and WK Associates. Redline has raised nearly $25 million since its 2000 inception, from firms like Advanced Technology Ventures, Charles River Ventures, Eschelon Ventures and OS Ventures. www.junipernetworks.com www.peribit.com www.redlinenetworks.com
InnerWireless Inc., a Richardson, Texas-based provider of a unified broadband distribution platform in hospitals and large commercial buildings, has raised $15 million in Series C funding. Centennial Ventures led the deal, and was joined by return backers Sevin Rosen Funds, Rho Ventures, Massey Burch Capital Corp., Technology Associates Management Co. and Genesis Campus. This deal is inclusive of an $11 million first close reported in February. www.innerwireless.com NanoString Technologies Inc., a Seattle-based nanotech company focused on single-molecule identification and digital quantification, has raised $3.8 million in second-round funding. Return backers included Draper Fisher Jurvetson and OVP Venture Partners. NanoString has raised $8.1 million in total VC funding. www.nanostring.com Bridgestream Inc., a San Francisco-based provider of business roles automation software, has raised $5 million in additional Series A funding, bringing the round total to $8.5 million. Hummer Winblad Venture Partners and Outlook Ventures participated. www.bridgestream.com Gentris Corp., a Morrisville, N.C.-based provider of pharma-genomic services and diagnostic product solutions, has raised $5 million in private funding from Mitsui & Co. www.gentris.com Mobitrac Inc., a Chicago-based supplier of transportation execution systems, has raised $8.3 million in new VC funding. BReturn ackers include U.S. Venture Partners, Frazier Technology Ventures, Arch Development Partners, Illinois Ventures, Illinois Finance Authority and Mentor Management. www.mobitrac.com Polychromix Inc., a Wilmington, Mass.-based developer of modular optical subsystem solutions for optical networking and molecular spectroscopy, has raised $3 million in venture capital funding from Lighthouse Capital Partners. The company has raised more than $18 million in total funding, with existing shareholders including Siemens Venture Capital, Seed Capital Partners and Vanguard Ventures. www.polychromix.com Brabeion Software, a McLean, Va.-based provider of IT security risk and compliance management software, has raised $5 million in Series A funding. TD Capital Ventures and Longworth Venture Partners co-led the deal. www.brabeion.com Ikaria Inc., a Seattle-based biotech company focused on metabolic engineering, has raised $10 million in VC funding. Backers include Arch Venture Partners, PayCycle Inc., a Palo Alto, Calif.-based provider of online self-service payroll solutions for small businesses, has raised $8.5 million in Series D funding. DCM-Doll Capital Management led the deal, and was joined by return backers August Capital, Conning Capital Partners, Total Technology Ventures and Irwin Ventures. New CEO Jim Heeger also participated. The company has raised nearly $30 million in total VC funding since its 1999 inception. www.paycycle.com Defywire Inc., a Herndon, Va.-based provider of wireless middleware and mobile applications, has raised $3.6 million in Series B funding. Intersouth Partners led the deal, and was joined by fellow return backers Anthem Capital Management, The Washington Dinner Club, Paul Opalack (Noblestar chairman) and Jill Stelfox (Defywire chairwoman and CEO). In other Defywire news, the company filed a $5 million lawsuit against webMethods Inc. (Nasdaq: WEBM), alleging breach of contract, fraud and violation of the Virginia Uniform Trade Secrets Act. www.defywire.com
Freeman Spogli & Co. has agreed to acquire Santa Ana, Calif.-based Bright Now Dental Inc. for $340 million from Gryphon Inv*stors, according to multiple press reports. The deal is expected to close next month. Allied Capital Corp. has sponsored a $39.8 million recapitalization of Service Champ Inc., a Chalfont, Pa.-based wholesale distributor of parts and equipment to the quick lube industry. www.servicechamp.com Crown Media Holdings Inc. (Nasdaq: CRWN) has completed the sale of its international business to Providence Equity Partners, 3i Group and Exel PLC has sold its Cory Environmental recycling and waste management unit to Montagu Private Equity. The involves an immediate cash payment of Gbp200 million, plus another Gbp5 million of deferred contingent compensation. www.exel.com
Website Pros Inc., a Jacksonville, Fla.-based, has filed to raise $70 million via an IPO of common stock. It plans to list on the Nasdaq under ticker symbol WSPI, with Friedman Billings Ramsey serving as lead book manager. The company has raised over $80 million in VC funding since its 1999 inception, with significant shareholders including Insight Venture Partners, Norwest Venture Partners and Crosspoint Venture Partners. www.websitepros.com China Techfaith Wireless Communication Technology Ltd., a
Quest Software Inc. (Nasdaq: QSFT) has agreed to acquire Imceda Inc., a Burlington, Mass.-based provider of database administration and development products for SQL Server databases. The deal is valued at $61 million, or which 80% will be paid in cash, with the remainder coming in the form of Quest Software common stock. Imceda has raised $9 million in VC funding from Insight Venture Partners. www.imceda.com www.questsoftware.com NetQoS Inc., an Austin, Texas-based provider of enterprise network performance analysis products and services, has acquired RedPoint Network Systems Inc., an Irving, Texas-based polling software company. No financial terms were disclosed. NetQoS is a portfolio company of Liberty Partners. www.netqos.com www.redpt.com Aegis Group PLC has acquired Watertown, Mass.-based tech consultancy Molecular Inc. for up to $31.5 million. Molecular raised $20 million in 2000 from CMGI @Ventures. www.molecular.com
3i Group has closed two regional
Stewart Gross has joined Lightyear Capital as a managing director and inv*stment committee member. He spent the past 17 years with Warburg Pincus, most recently as a managing director and member of the executive management group. www.lycap.com Peter Wilson has joined Warburg Pincus as a London-based managing director focused on later-stage private equity and LBOs in Rick Fratus has resigned as an associate with Pacific Corporate Group, PE Week has learned. www.pcgfunds.com Bain & Co. has named Tom Holland as the head of its David Jones Jr., chairman and founder of Chrysalis Ventures, has been named chairman of Humana Inc. (NYSE: HUM), where he has served as vice chairman since 1996. Jones' father co-founded the company in 1961, and retired as chairman yesterday. www.humana.com www.chrysalisventures.com
Meridian Automotive Systems Inc., a Dearborn, Mich.-based auto-parts maker, is planning to seek Chapter 11 bankruptcy protection, according to The Wall Street Journal. The company was formed via a 2001 roll-up of three auto parts companies, which was sponsored by Winward Capital Partners, and which also involved Bank of America and CSFB. www.meridianautosystems.com Venture capital disbursements by Dutch private equity firms increased by nearly 60% between 2003 and 2004 (1.1 billion euros to 1.7 billion euros), according to PricewaterhouseCoopers Corporate Finance, on behalf of the Dutch Private Equity and Venture Capital Association.
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April 27, 2005 
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