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Term Sheet — Thursday, December 18

Random Ramblings

TPG Capital has scrapped plans to hold a first close this month for its seventh flagship buyout fund, which is targeting a total of $10 billion, according to sources familiar with the situation. Instead, it now plans to hold a first close on between $4 billion and $5 billion (including the rollover of a $2b bridge fund and up to $400m from the GP) in mid-January. TPG originally had expected several LPs to need the 2014 close for calendar allocation reasons, but it turned out not to be the case. Expect a first close on TPG’s new growth equity fund to occur in February.

It’s also worth noting that a reader sent over the PPM for TPG Partners VII, which includes a variety of previously-reported fee discounts for larger investors. Hard to tell how much of this will ultimately be applied, however, given that some prospective investors tell me that there could be wide variance on side letter agreements (and fee discounts are excluded from the fund’s “most favored nation” clause).

Through June 30, the net IRRs for TPG’s three previous flagship funds were 16% (TPG IV), 5% (TPG V) and 12% (TPG VI). Each one is below the Cambridge Associates benchmark for that fund’s vintage year.

TPG is sharing 100% of most portfolio company-related fees with its LPs, but does explicitly exclude fees that may be paid by portfolio companies to TPG consultants or senior advisors (neither of whom are firm employees). LPs also must reimburse up to $5 million in so-called “organizational expenses,” which include legal and travel. The PPM also suggests that most portfolio company management agreements will continue to come with acceleration clauses, and that portfolio fees “may adversely affect a portfolio company’s financial performance” (something which is obvious, but rarely acknowledged by PE firms).

Finally, there are three pieces of boilerplate in the PPM which stood out to me as fairly egregious, even if they are industry standard. All defenses can be emailed to me…

“Since the amount of carried interest payable to the General Partner depends on the Partnership’s performance, we may have an incentive to approve and cause the Partnership to make more speculative investments than it would otherwise make in the absence of such performance-based compensation. We may also have an incentive to dispose of the Partnership’s investments at a time and in a sequence that would generate the most carried interest, even if it would not be in the Partnership’s interest to dispose of the investments in that manner.”

And

“The General Partner may take its own interests into account in the exercise of such discretion. The exercise of such discretion may negatively impact the Limited Partners generally or may impact some Limited Partners disproportionately.”

• Fund fees: I’ve also received a copy of the LPA for Apollo Global Management’s eighth flagship buyout fund, which closed earlier this year with $18.4 billion in total commitments (including $880m from the GP). The base management fee was 1.5%, but reduced by 0.10% per annum for LPs that committed between $250m-$500m, and reduced by 0.20% per annum for LPs that committed in excess of $500 million.

• Next act: Yesterday afternoon I spent some time at the Massachusetts State House, interviewing outgoing Gov. Deval Patrick. The full piece should be online later today or tomorrow, but one thing he said was particularly notable for Term Sheet: Patrick had pre-gubernatorial experience in both the public and private sectors, having spent time in executive positions with such companies as Texaco and Coca-Cola, and had previously said that he plans to return to the private sector (without ruling out future political ambitions). Here was his reply when I asked what comes next:

“I don’t have a plan yet because you can’t really have any conversations while you’re here. We’re going to go on a long warm-weather nap and then I’ll look in earnest starting at the end of January. But I think it’s probably going to be some kind of portfolio of things. I’ve been approached by venture firms, equity firms, a couple of companies, a number of boards and maybe will do some speaking.”

• Correlation or causation? 2014 was not the busiest year for activist investors in terms of engagements, but Tyson McCabe, NASDAQ’s senior director of advisory services, says that the data suggests it was one of the most successful. “We’re having a bit of a hard time separating out the success of activists this year, outside of oil, from market-wide investment gains, but we’ve definitely seen a number of companies being more willing to meet in the middle with activists than we have in past years… Part of it is a shift in traditionally-passive managers that already have good relationships with companies choosing to take governance in-house.”

• Unprofessional personal note: Finally, a very happy 70th birthday to my father, without whom there would be no Term Sheet. Not only for the obvious reasons, but because he set for me an extraordinary example of hard and diligent work. Talk to you tonight…

THE BIG DEAL

• Redfin, an online real estate brokerage, has raised $70.9 million in new venture funding. Wellington Management Co. and Glynn Capital Management co-led the round, and were joined by Brothers Brook, Annox Capital Management and return backers T. Rowe Price and Tiger Global Management. Other existing shareholders include Greylock Partners, Globespan Capital Partners, Draper Fisher Jurvetson, Vulcan Capital and The Hillman Company. All of the new capital was primary. www.redfin.com

VENTURE CAPITAL DEALS

• Hampton Creek Foods , a San Francisco-based food company known for its egg-free condiment Just Mayo, has raised $90 million in Series C funding co-led by return backers Horizons Ventures and Khosla Ventures. Read more.

• Skytap Inc., a Seattle-based provider of “on-demand environments-as-a-service,” has raised $35 million in new VC funding. Insight Venture Partners led the round, and was joined by return backers OpenView Venture Partners, Ignition Partners, Madrona Venture Group and Washington Research Foundation. www.skytap.com

• Rapid7, a Boston–based provider of security analytics software and services, has raised $30 million in new VC funding from existing shareholders Bain Capital Ventures and Technology Crossover Ventures. www.rapid7.com

• Padlock Therapeutics, a Cambridge, Mass.-based developer of therapeutics for “destructive autoimmune diseases,” has raised $23 million in Series A funding. Atlas Venture led the round, and was joined by Johnson & Johnson Innovation, MS Ventures, and Index Ventures. www.padlocktherapeutics.com

• Expect Labs, a San Francisco-based developer of an API that lets developers plug in an intelligent voice interface, has raised $13 million in Series A funding. IDG Ventures and USAA co-led the round, and were joined by such backers as Samsung, Intel Capital and Telefonica. The company previously raised funding from In-Q-Tel. www.expectlabs.com

• Nutrinia, an Israel-based developer of oral insulin therapies to treat rare gastrointestinal disorders in babies, has raised $12 million in Series C funding. Backers include OrbiMed, Jacobs Investment Company and Pontifax. www.nutrinia.com

• Open Garden, a San Francisco-based maker of the FireChat messaging app, has raised $10.8 million in Series A funding. August Capital led the round, and was joined by Firebolt Ventures, Future Perfect Ventures, Kima Ventures, Tseung Kwan Ventures and Sherpalo Ventures. Read more.

• Ridibooks, a South Korean e-book vendor, has raised $8 million in Series B funding. NeoPlux led the round, and was joined by Company K, Mirae Asset Venture Investment and Atinum Investment. Read more.

• First Opinion, a mobile health app that provides users with personal health consultations from physicians, has raised $6 million in Series A funding. Polaris Partners led the round, and was joined by return backers True Ventures, Felicis Ventures, Scrum Ventures and Monashees Capital. www.firstopinionapp.com

• GameAnalytics, a Copenhagen-based analytics platform for game developers, has raised $5.5 million in Series A funding. Beta Angels was joined by return backers like Sunstone Capital and CrunchFund. www.gameanalytics.com

• FolioMetrix, a Portland, Ore.-based investment management research company, has raised $5 million in new funding led by Grail Partners. www.foliometrix.com

• LaunchKey, a Las Vegas-based mobile authentication and real-time authorization system, has raised $3 million in new seed funding led by Metamorphic Ventures. www.launchkey.co

• EdgeWave, a San Diego-based provider of military-grade cyber-security solutions, has raised $2 million in new Series A funding. Participants included existing investor TVC Capital. www.edgewave.com

• Truly Wireless, a New York-based mobile business telephony startup, has raised $1.4 million in seed funding. Backers include Index Ventures, Greylock Partners, Boldstart Ventures and ENIAC Ventures. www.trulywireless.com

PRIVATE EQUITY DEALS

• Advent International has agreed to acquire a majority stake in Allied SA, a provider of supply chain management solutions in Brazil, from One Equity Partners. The company’s founding Radomysler family will retain a “significant minority stake” and will continue to lead it. No financial terms were disclosed. www.adventinternational.com

• Alex Brands, a portfolio company of Propel Equity Partners, has acquired toy brand Shrinky Dinks for an undisclosed amount. www.alexbrands.com

• Clean Linen Services, a UK–based commercial laundry operator, has raised an undisclosed amount of funding from MML Capital Partners. CSL generated around  £30 million in revenue last year. www.cleanservices.co.uk

• Spectrum Equity has acquired a control stake in ExactBid, a San Jose, Calif.–based marketplace for commercial real estate appraisals. No financial terms were disclosed. www.exactbid.com

• Tailwind Capital Partners has acquired Diamondback Drugs LLC, a Scottsdale, Ariz.-based veterinary compounding pharmacy, from Sheridan Legacy Group. No financial terms were disclosed. www.diamondbackdrugs.com

 Turnbridge Capital has acquired Cimarron Energy Inc., a Norman, Okla.-based manufacturer of production, processing and environmental equipment for the oil & gas industry, from Curtiss-Wright Corp. (NYSE: CW) for $100 million in cash.  http://cimarron.cwfc.com

• Visteon Corp. (NYSE: VC) has agreed to sell its South Korean air conditioning unit for $3.6 billion to South Korean private equity firm Hahn & Co. and tire-maker Hankook Tire. Read more.

• Vistronix Intelligence & Technology Solutions, a portfolio company of Enlightenment Capital, has acquired three companies focused on providing IT solutions to the intelligence community: Agency Consulting Group (Columbia, Md.), ExaTech Solutions Inc. (Herndon, Va.) and Objective Solutions Inc. (Columbia, Md.). No financial terms were disclosed. www.vistronix.com

IPOs

• No IPO news this morning.

EXITS

• 2x Consumer Products Growth Partners and The Riverside Company have sold FoodState Inc., a Derry, N.H.-based maker of whole food nutritional supplements under the MegaFood and Innate Response brands, to Pharmavite LLC, a Northridge, Calif.-based subsidiary of Japan’s Otsuka Pharmaceutical Co. No financial terms were disclosed. www.foodstate.com

• AMN Healthcare Services Inc. (NYSE: AHS), a provider healthcare workforce solutions and staffing services, has agreed to pay $82.5 million to acquire three business units from OGH LLC,  a portfolio company of Welsh, Carson, Anderson & Stowe. The units are: Onward Healthcare (nurse and allied healthcare staffing), Locum Leaders (locum tenens provider) and Medefis (SaaS-based vendor management system for healthcare facilities). www.amnhealthcare.com

• Apax Partners has agreed to sell Swiss mobile operator Orange Communications to NJJ Capital, an investment vehicle led by Iliad founder Xavier Niel, for approximately $2.9 billion. Read more.

• EQT Partners has sold its 65% equity stake in Chinese bakery group Chongqing New Qinyuan Bakery Co. to a unit of Swire Pacific Ltd. (HK: 19). No financial terms were disclosed. www.eqt.se

• Merck (NYSE:MRK) has acquired OncoEthix, a Swiss developer of oncology drugs. The deal is valued at up to $375 million, including a $110 million up-front payment and $265 million in possible earn-outs. OncoEthix had raised over $18 million in VC funding from Edmond de Rothschild Investment Partners, Endeavour Vision, Index Ventures and SV Life Sciences. www.onxcoethix.com

• The Progressive Corp. (NYSE: PGR) has agreed to acquire most of the shares it does not already own in the parent company of St. Petersburg, Fla.-based insurer American Strategic Insurance Corp. for approximately $875 million in cash. Sellers include Flexpoint Ford, New Capital Partners, Fasteau Insurance Holding, XL Re. and Stewart Insurance Holdings. www.americanstrategic.com

• Teradata Corp. (NYSE:TDC) has acquired RainStor, a San Francisco–based provider of big data management software. No financial terms were disclosed. RainStor had raised more than $26 million in VC funding from backers like Credit Suisse, Rogers Venture Partners, Doughty Hanson Technology Ventures, Storm Ventures and Dow Chemical Co. Read more.

OTHER DEALS

 Cubic Corp. (NYSE: CUB) has acquired DTECH Labs Inc., a Sterling, Va.-based provider of tactical baseband networking communications equipment used by the U.S. Special Operations Command and other DoD and commercial clients. The deal is valued at upwards of $114.5 million, including a $99.5 million upfront payment. www.dtechlabs.com

• Shire PLC (LSE: SHP) is considering a takeover offer for NPS Pharmaceuticals Inc. (Nasdaq: NPSP), a Bedminster, N.J.-based drugmaker, according to Bloomberg. NPS shares climbed more than 18% on the news, giving the company a market cap of around $3.9 billion. Read more.

• XL Group (NYSE: XL) has approached Bermuda-based insurer Catlin Group (LSE: CGL) about a takeover that could value Catlin at nearly $4 billion. Read more.

• YouTube, a unit of Google (Nasdaq: GOOG), has acquired Vidmaker, a Madison, Wis.-based provider of a collaborative online video editing tool. No financial terms were disclosed. www.vidmaker.com

FIRMS & FUNDS

• Gávea Investimentos has closed its most recent Brazil-focused private equity fund with $1.1 billion in capital commitments. Read more.

 Khosla Ventures is raising upwards of $400 million  for its third seed fund,  according to a regulatory filing. www.khoslavetures.com

• Partners Group said that it has raised over $1 billion in new commitments for its eighth mid-market mezzanine debt program. www.partnersgroup.com

MOVING IN, UP, ON & OUT

• Curtis Buser has been named chief financial officer of The Carlyle Group. He had joined the firm 10 years ago as an audit partner, and had been serving as interim CFO since Adena Friedman left to return to Nasdaq OMX Group as president. www.carlyle.com

• Castanea Partners has promoted Juan Marcos Hill to partner. He joined the firm in 2002 as an associate. www.castaneapartners.com

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