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Term Sheet — Tuesday, September 23

Random Ramblings

Finally!

That was my first thought upon seeing that the SEC had charged private equity firm Lincolnshire Management with breaching fiduciary duty by an improper allocation of portfolio company fees. After all, it had been more than four months since an SEC official said that the regulator had identified “violations of law or material weaknesses in controls” in over half of the private equity managers that had undergone presence exams. Lots of rumors of pending enforcement actions, but nothing in writing until Lincolnshire — which has agreed to pay a $2.5 million penalty without admitting any wrongdoing.

Huh?

That was my second thought, after speaking with Lincolnshire managing director and general counsel Jim McLaughlin. He tells me that his firm never underwent a presence exam and that the SEC first inquired around two years ago (i.e., before such exams really got underway). McLaughlin says he is unaware of why the SEC first began investigating Lincolnshire, and the Agency declined to comment.

So maybe this is just a one-off, sparked by a hunch or an unknown (to me) complainant.

Here are the details: In April 1997, Lincolnshire acquired a hard drive repair company called PCS Inc. through its debut fund. More than four years later, it acquired a complimentary company called Computer Technology Solutions — with the intention of merging it with PCS. But Lincolnshire’s first fund was out of money at that point, so it funded the CTS acquisition via its second fund (raised in 1999).

Such comingled investments can be tricky, particularly given that each fund has at least a slightly different investor base. So Lincolnshire developed expense allocation policies — including annual management fees to be paid directly to Lincolnshire — that were shared verbally with management of both companies. In short, each company’s allocation would be based on the percentage of its contribution to the combined platform’s overall revenue. But the policies somehow never were formalized in writing, thus leading to occasional misallocations. For example, PCS “paid the entire third-party payroll and 401(k) administrative expenses for employees of both companies.”

Each company did undergo regular audits, but it is unclear if the auditors were fully aware of the allocation expectations.

“The companies didn’t fully follow the allocation policies we put in place,” McLaughlin says, adding that Lincolnshire is “happy to conclude this matter.”

Per is settlement with the SEC, Lincolnshire will pay $1.5 million in disgorgement plus a $450,000 penalty and $358,112 in prejudgment interest. All of the money will come from Lincolnshire’s management company, meaning that its limited partners are not on the hook. Lincolnshire no longer owns either of the portfolio companies in question, having previously sold them to another private equity firm.

• Answer Key: Last week I asked you to name the later-stage venture investor that has begun marketing its latest $1 billion+ fund. Your hint was that it has been less than 18 months since the firm raised its last $1 billion+ fund.

The answer is Tiger Global, which has begun talking to investors about raising its ninth Private Investment Partners Fund with a $1.5 billion target. That’s the same amount it closed on back in April, making this both the fastest and largest follow-on fundraise I can ever remember (including the dotcom boom years). It should be very interesting to see how LPs respond…

• Quiz Time: Can you name another venture capital firm that has told LPs to expect its next $1 billion+ fundraise to begin in Q4? Hint: This firm has been around for much longer than has Tiger Global.

• Brand strategy: ISIS Equity Partners is a British private equity firm that has been in business for nearly two decades. But, as you might imagine, it has decided to change its name. Read more here.

• All over? Venture capital firm CMEA Capital has agreed to settle the sexual harassment claims brought against it last year by three former firm employees, according to a court filing. Also party to the settlement is defendant John Haag, CMEA’s former chief operating partner who was accused by the plaintiffs of being the primary perpetrator of the harassment. No terms were disclosed of the settlement, which still must be approved by a San Francisco Superior Court judfge.

• 42k and counting: Every time I add another thousand Twitter followers, I like to remind you to join the others. That way we can chat throughout the day. I’m @danprimack.

Coming attractions: We’ll be announcing details of our San Francisco Liquidity Event in one week from today…

THE BIG DEAL

• Yara International (Oslo: YAR) said that it is in talks to merge with Deerfield, Ill.-based rival fertilizer company CF Industries (NYSE: CF). The two companies have a combined market cap north of $27 billion. Read more

VENTURE CAPITAL DEALS

• Radius, a San Francisco-based B2B marketing intelligence company, has raised $54.7 million in Series C funding. Return backers BlueRun Ventures and Formation8 Partners co-led the round, and were joined by Founders Fund, Glynn Capital Management, Slow Ventures, Western Technology Investments, Yuan Capital, John Mack, Jared Leto and Charles Songhurst. www.radius.com

• Teladoc, a Dallas-based provider of 24/7 tele-health consultations, has raised $50 million in new VC funding. Jafco Ventures led the round, and was joined by FLAG Capital Management, Greenspring Associates, Mellon, QuestMark Partners and return backers Cardinal Partners, HLM Venture Partners, Kleiner Perkins Caufield and Byers, New Capital Partners and Trident Capital. www.teladoc.com  

• iHealth Lab Inc., a Mountain View, Calif.-based maker of mobile personal healthcare products, has raised $25 million from Xiaomi Ventures in its first round of institutional VC funding. www.ihealthlabs.com

• Jiff, a Palo Alto, Calif.-based enterprise solutions for self-insured employers to connect to and manage digital health tools, has raised $18 million in Series B funding. Venrock led the round, and was joined by  Aberdare Ventures and Aeris Capital. www.jiff.com

• Agari, a Palo Alto, Calif.-based provider of email security solutions, has raised $15 million in Series C funding. Scale Venture Partners led the round, and was joined by return backers Alloy Ventures, Battery Ventures and First Round Capital. www.agari.com

• Traxpay, a Mountain View, Calif.-based online payment platform for the B2B sector, has raised $15 million in Series B funding. Commerzbank and Software AG co-led the round, and were joined by return backer Earlybird Venture Capital and individual angels. www.traxpay.com

• Silvercar Inc., an Austin, Texas-based airport car rental startup, has raised $14 million in Series B funding. Velos Partners and Velos chairman Eduardo Saverin led the round, and were joined by Austin Ventures and CrunchFund. www.silvercar.com

• Kinvey, a Boston-based enterprise backend-as-a-service platform, has raised $10.8 million in Series B funding. NTTDoCoMo Ventures and Verizon Ventures co-led the round, and were joined by return backers Avalon Ventures and Atlas Venture. www.kinvey.com

• Inivata, a UK-based clinical cancer genomics company focused on circulating tumor DNA analysis, has raised £4 million in VC funding. Imperial Innovations led the round, and was joined by Cambridge Innovation Capital and Johnson & Johnson Development Corp. www.inivata.com  

• Branch Metrics, a Palo Alto, Calif.-based provider of mobile app referral solutions, has raised $3 million in seed funding. New Enterprise Associates led the round, and was joined by Pejman Mar Ventures, Ben Narasin and TriplePoint Capital. www.branchmetrics.io

• CurbStand, a Los Angeles-based mobile app for locating and paying for valet parking, has raised $3 million in VC funding from an undisclosed “private investor.” www.curbstand.com

• IronSource, an Israel-based online software distribution company, confirmed that it has raised around $85 million in new venture capital funding. The WSJ had reported the round last month, at an $800 million valuation led by The Disruptive Fund. www.ironsource.com

PRIVATE EQUITY DEALS

• Atlas Southeast Papers, a portfolio company of Peak Rock Capital, has acquired Roses Southeast Papers, a Sanford, Fla.-based manufacturer of tissue paper products. No financial terms were disclosed. www.atlastissue.com

• BreandMaker GmbH, a German provider of marketing resource management systems, has raised $30 million in private equity funding. Pinova Capital led the round, and was joined by a fund managed by L-Bank. www.pinovacapital.com

• Larsen MacColl Partners has acquired S. Walter Packaging Corp., a Philadelphia–based provider of packaging solutions to branded consumer products companies and retailers, from Brynwood Partners. No financial terms were disclosed. www.swalter.com

• Mad for Garlic, an Italian wine bistro chain in South Korea, has raised $48 million in private equity funding led by Standard Chartered Private Equity. www.sc.com

• Safe Fleet Holdings LLC, a Kansas City-based portfolio company of The Sterling Group, has acquired Seon Design Inc., a Canadian maker of video surveillance and fleet management solutions for school and transit buses. No financial terms were disclosed. www.seon.com

• Silver Lake is in “advanced talks” to acquire online photo-sharing site Shutterfly Inc. (Nasdaq: SFLY) for at least $2 billion, according to Reuters. Read more

• Sovereign Capital has acquired two British accounting services companies: SJD Accountancy and Nixon Williams. The combined transaction is valued at £100 million. www.sovereigncapital.co.uk

• Symphony Technology Group has agreed to acquire McGraw Hill Construction, a provider of construction industry data and analytics, from McGraw Hill Financial (NYSE: MHFI) for $320 million. www.mhfi.com

• TBC Holdings, a marketing and ad industry acquisition platform sponsored by GSO Capital, has acquired LocalVox Media, a New York-based provider of marketing software targeting local and multi-location businesses. No financial terms were disclosed. GSO had previously invested in LocalVox. www.localvox.com

• Tiger Infrastructure Partners has agreed to acquire a majority interest in Hudson Fiber Network, a Paramus, N.J.-based data transport provider for financial, carrier and enterprise clients. No financial terms were disclosed for the deal, which is expected to close in Q4. www.hudsonfiber.com

IPOs

• DBV Technology, a French provider of allergy diagnostics and therapeutics, has filed for a $90 million IPO. It plans to trade on the Nasdaq under ticker symbol DBVT, with Citigroup and Leerink Partners serving as lead underwriters. The company currently is listed in Paris. Shareholders include Sofinnova Capital (18.6% stake) and Bpifrance (18.2%). www.dbv-technologies.com

• Exagen Diagnostics, a Vista, Calif.-based provider of diagnostic and monitoring solutions for autoimmune rheumatic diseases, has filed for a $69 million IPO. It plans to trade on the Nasdaq under ticker symbol EXDX, with Leerink Partners and Baird serving as lead underwriters. Shareholders include NMSIC (37.4% pre-IPO stake), Tullis-Dickerson (29.4%), Hunt Holdings (15.7%), vSpring Partners (6%) and Capital Royalty Partners (5.9%). www.exagen.com

• Jimmy Choo Ltd., the UK-based luxury footwear brand, is prepping an October IPO in London. Read more.

EXITS

• Adobe (Nasdaq:ADBE) has acquired Aviary, a New York–based developer of mobile software development kits. No financial terms were disclosed. Aviary had raised around $17 million in VC funding from Bezos Expeditions, Spark Capital, Vision Ventures and individual angels like Reid Hoffman. www.aviary.com

• Eurazeo has sold its remaining 7.13% stake in French electrical company Rexel (Paris: RXL) for €320 million. Read more

• Global Infrastructure Partners has agreed to sell its 50% stake in the Ruby Pipeline, a natural gas pipeline that runs from the Rocky Mountains to the West Coast, to Veresen Inc. (TSX: VSN) for approximately $1.43 billion. The other 50% will continue to be held by an affiliate of Kinder Morgan (NYSE: KMI). www.global-infra.com

OTHER DEALS

• Auxilium Pharmaceuticals (Nasdaq: AUXL) has rejected a $2.2 billion takeover offer from Endo International (Nasdaq: ENDP). Auxilium recently agreed to acquire Canadian biotech company QLT Inc. (Nasdaq: QLTI) in a tax inversion transaction. QLT said yesterday that it still supports the deal. www.auxilium.com

• MGM has acquired a majority stake in One Three Media, the Mark Burnett-led television production company whose shows include Survivor, The Voice and Shark Tank. No financial terms were disclosed. The Hearst Corp. will maintain a minority ownership position in One Three Media. Read more

• Royal Philips announced that it plans to spin off its lighting business in order to concentrate on its healthcare and consumer goods activities. Read more

• Volaris Group, the investment arm of Constellation Software (TSX: CSU), has acquired Incognito Software Inc., a Vancouver–based provider of operations support systems. No financial terms were disclosed. www.volarisgroup.com

 

FIRMS & FUNDS

• The Rural American Fund, a Chicago-based private equity firm, has held a $20 million first close on its $75 million-targeted second fund focused on the American rural agribusiness market. Mira Capital Advisors is serving as placement agent. www.raflp.com

MOVING IN, UP, ON & OUT

 Borja Arteaga and Albert Fernandez have left Rothschild to join The Blackstone Group’s advisory business in Madrid. Arteaga will serve as a senior managing director, and head of Blackstone’s restructuring and M&A advisory business in the Iberian Peninsula. Fernandez will serve as a managing director. www.blackstone.com  

• Eyob Easwaran has joined Power Capital Partners as a managing director and director of asset management. He previously was lead asset manager for Conduit Capital Partners. www.powercapitalllc.com

• Patrick Fox has joined New Energy Capital Partners as a Hanover, N.H.-based partner. He previously was a director with Hannon Armstrong Capital. www.newenergycapital.com

• Werner Geissler, vice chairman and advisor to the CEO at Procter & Gamble, has agreed to join Advent International as an operating partner, effective January 1. www.adventinternational.com

• Keith Grossman has rejoined Thoratec Corp. (Nasdaq: THOR) as president and CEO, effective immediately. He served in the position between 1996 and 2006, after which he spent five years as a managing director with TPG Capital. www.thoratec.com

• Bill McBeath has joined Z Capital Partners as a managing director and operating partner. He previously was president and COO for CityCenter, a resort operator whose properties include the Mandarin Oriental in Las Vegas. www.zcap.net

• Jordan Peer has joined H.I.G. Capital as a New York-based managing director and head of investor relations. He previously spent five years with GSO Capital Partners. H.I.G. also has added Thierry Edde (ex-MAB Partners) as a London-based director of investor relations. www.higcapital.com

• Preston Hollow Capital, a Dallas-based merchant bank, has hired three former ORIX USA executives: John Bills as chief credit officer, Greg May as managing director of corporate development and Kandice Stephens as director of operations. www.phcllc.com

• Randall Weisenburger has stepped down as CFO and executive VP of Omnicom Group Inc. (NYSE: OMC), in order to “return to private equity.” He had served as president and CEO of Wasserstein & Co. between 1988 and 1998. www.omnicomgroup.com

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