PE-Backed IPOs: The Strong and the Weak A few of you wrote in yesterday asking variations on the following question: “Why did buyout-backed IPO volume soar in the first half of 2005, while VC-backed IPO volume stalled?” I decided to tackle this question in Monday’s print edition of PEW, but here are a few quick thoughts: The most popular explanation for this discrepancy is that the public markets have been fearful of technology plays, which disproportionately affects VC-backed offerings. As with many popular explanations, this one rings false. From an anecdotal perspective, many of the second-quarter’s buyout-backed deals were from – you guessed it – the technology sector. Companies like Rackable Systems, New Skies Satellite Holdings and Kenexa. Oh, and the largest buyout-backed IPO of Q2 was a $605 million offering from NeuStar, which provides technology services to the telecom industry. The tech=misery argument also doesn’t work when you crunch the numbers. While it is true that there have only been 24 tech-focused IPOs (all inclusive) on A better industry culprit would be biotech, which remains anathema to most buyout firms. There only have been 16 biotech IPOs so far in 2005, compared to 49 in 2004 (almost all of which were VC-backed). In general, however, the answer seems to be that today’s public market buyers are most interested in basic company characteristics like size, profitability, maturity, etc. In each of these cases, the average buyout-backed company (turnarounds-in-process excluded) is preferable to a VC-backed company. The old paradigm of underlying assets vs. underlying vision. It also is worth noting that the LBO/VC-based IPO volume divergence isn’t just being prompted by mutual fund managers and I-bankers (i.e. buyers). VCs themselves (i.e. sellers) seem less interested in IPOs than do their buyout peers, since the typical VC-backed IPO doesn’t produce much shareholder liquidity until at least a few months down the line – and almost no one is terribly optimistic about the NYSE or Nasdaq’s short-term performance future. Thus the dual-track option many VCs have employed, whereby they explore M&A opportunities even while their company is in registration for an IPO. Buyout firms, on the other hand, have much more flexibility to sell shares in an IPO, since individual firms often hold a much higher percentage of pre-IPO shares. Plus, so many of the mega-LBO deals are simply financial engineering jobs, so even delayed liquidity is simply icing on a cake that already has returned its initial capital commitment. *** A couple of folks in *** Please indulge me joining the journalistic chorus hoping that Time Inc. changes its mind about revealing Matt Cooper's sources. Horrible precedent, with the future of national security-related investigative journalism hanging in the balance. *** Can you guess who is about to work for his fourth employer in less than a year? I’ll share that on Tuesday, when the PE Week Wire returns from its holiday weekend… Want to reach over 23,500 PE Week Wire subscribers? Learn How
Vestar Capital Partners is raising up to $3.5 billion for its fifth private equity fund, according to a regulatory filing. The Monument Group is serving as placement agent. www.vestarcapital.com
Sealy Corp., a Trinity, N.C.-based mattress maker, has filed to raise $402.5 million via an IPO of common stock. Citigroup and JPMorgan are serving as lead underwriters. Sealy is controlled by Kohlberg Kravis Roberts & Co., which bought the company last year in a $1.5 billion buyout from a consortium that included Bain Capital, Charlesbank Capital Partners, JPMorgan Partners, CIBC Argosy Merchant Fund and BancBoston Capital. Bain still holds a small minority position. Once priced, the IPO will trigger a $10.5 million management agreement termination fee. www.sealy.com Farrokh Billimoria has left the general partnership of Artiman Ventures, a Palo Alto, Calif.-based VC firm. The former Sprout Group GP did not return an email request for comment on his departure. www.artimanventures.com Everypoint Inc., a Boston-based studio for wireless infotainment applications, has raised $4 million in Series A funding. The deal was co-led by Prism Venture Partners and TD Capital Ventures. www.everypoint.com Teledvance Communications Inc., a Louisville, Ky.-based provider of IT communications solutions, has raised $15 million in new venture capital funding. MK Capital led the deal, and was joined by First Analysis Corp. and unnamed individuals. www.teledvance.com Nanoplex Technologies Inc., a Mountain View, Calif.-based developer of nanoparticle-based products, has raised over $2.5 million in Series B funding, according to a regulatory filing. No participating VC firms are listed, although Sam Colella, a managing director with Versant Ventures, is listed as a director. www.nanoplextech.com
Rhone Capital has completed its acquisition of a majority interest in vacuum cleaner company Rexair Inc. from Jacuzzi Brands Inc. (NYSE: JJZ) for $170 million. Jacuzzi retained a 30% interest in Rexair, while senior Rexair management provided equity alongside Rhone Capital. www.rexair.com
Yellowstone Capital has sold Grayloc Products LLC to Oceaneering International Inc. (NYSE: OII) for approximately $41 million. Grayloc is a Houston, Texas–based manufacturer of clamp connectors for the oil & gas industry. www.grayloc.com Lightyear Capital has sold its controlling interest in Ripon Cogeneration LLC for Countryside Power Income Fund for approximately $96 million. Ripon owns and operates two gas-fired cogeneration plants in
Litorina Kapital, a Sweden-based private equity firm, has agreed to acquire a 75% interest in PAX Electro Products AB, a Swedish maker of fans and vents. No financial terms were disclosed. Arcapita Inc. has acquired Cypress Communications Holding Company Inc. (OTC BB: CYHI) for approximately $41.5 million. Ivan Taranov, a Russian brewery controlled by Allied Partners and Texas Pacific Group, is on the block for around $400 million, according to Reuters. CVC Capital Partners and Inveralia are planning to sell their 70% stake in Spanish Burger King and Pizza Hut franchiser Zena Grupo de Restauracion SA, according to Expansion. No financial terms are being disclosed for the offer, although the report puts the entire company’s value at between 200 million euros and 300 million euros. It is being shopped on the private equity secondary market.
TAL International Group Inc., a Purchase, N.Y.-based provider of inter-modal freight containers, has filed to raise $201.25 million via an IPO of common stock. It plans to trade on the NYSE under ticker symbol TAL, with Credit Suisse First Boston, Deutsche Bank Securities and Jefferies & Co. serving as lead underwriters. TAL International is controlled by The Jordan Co., with other significant shareholders including Fairholme Partners, Seacon Holdings Ltd., Edgewater
IntraLinks Inc., a New York-based provider of software for managing and distributing confidential financial documents via the Internet, has filed to raise $50 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol ILNX, with JPMorgan and UBS serving as lead underwriters. The company has raised over $110 million in VC funding since its 1996 inception, with significant shareholders including TowerBrook Inv*stors (f.k.a. Soros Quintana Maritime Ltd., a Houston, Texas-based provider of dry-bulk marine transportation services, has set its proposed IPO terms to 16.7 million common shares being offered at between $14 and $16 per share. It plans to trade on the Nasdaq under ticker symbol QMAR, with Citigroup and Morgan Stanley serving as lead underwriters. Quintana was formed earlier this year by First Reserve Corp., American Metals & Coal International Inc. and chairman Corbin J. Robertson.
Consolidated Communications Illinois Holdings Inc., a Mattoon, Ill.-based rural local exchange carrier in ITC Holdings Corp., a Hittite Microwave Corp., a Chelmsford, Mass.-based maker of integrated circuits, modules and subsystems for RF, microwave or millimeter-wave applications, has set its proposed IPO terms to 4.5 million common shares being offered at between $14 and $16 per share. The company plans to trade on the Nasdaq under ticker symbol HITT, with Lehman Brothers serving as lead underwriter. Hittite raised a $15 million Series A funding round in 2000 led by Summit Partners, at a post-money valuation of approximately $148 million. www.hittite.com BlogChina is planning to price an IPO on the Nasdaq next year that could value the company at more than $1 billion, according to the South China Morning Post. The report says that BlogChina has more than two million users, raised $500 million in seed capital last year from Softbank Asia Infrastructure Fund, and is planning to close another $10 million in funding from both Chinese and
Apax Partners has closed its sixth private equity fund with 4.3 billion euros. It had been targeting 4 billion euros, with a 4.5 billion euros cap. www.apax.com
The Blackstone Group is looking to raise $667 million for its second mezzanine fund, according to a regulatory filing. As of the June 24 filing, the New York-based private equity firm reported $314 million in commitments. www.blackstone.com Banca Popolare di Milano has agreed to merge its BPM Butler Capital Partners has held a 320 million euro final close on its
David Lund has joined Hercules Technology Growth Capital Inc., a business development company focused on VC-backed tech companies, as vice president of finance and senior corporate controller. He most recently served as corporate controller for Rainmaker Systems Inc. In related news, current Hercules CFO Dennis Wolf has decided to “pursue other opportunities,” and will resign effective next month. www.herculestech.com
Ray Hood has joined SensorLogic Inc., an Addison, Texas-based provider of machine-to-machine platforms, as CEO. He previously served as managing partner of tech inv*stment firm Rodin Management, and as founder and CEO of logistics software company EXE Technologies Inc. SensorLogic is backed by VC firms like Boston Millennia Partners, Sevin Rosen Funds, Hunt Ventures, Star Ventures Management and STARTech. www.sensorlogic.com Nassim Usman has joined Morgenthaler Ventures as an entrepreneur-in-residence, focused on biotech opportunities. He most recently served as senior vice president and chief operating officer of onetime Morgenthaler portfolio company Sirna Therapeutics Inc. (Nasdaq: RNAI). www.morgenthaler.com
| |||||||||||||||||
July 1, 2005 
Interested in placing
your ad above?
Learn How
| Copyright 2005 by Thomson Financial. All rights reserved. 195 Broadway, 10th Floor, New York, NY 10007 |