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Term Sheet — Monday, September 14

Monday Mouth-Off

The sun is shining, the Fed is pondering and we’re just one day away from tickets going on sale for our next Liquidity Event. In other words, it’s time for some Monday Mouth-Off.

Most of the lagging mailbag relates to my Sept. 4 column on how CalPERS can’t get out of its own way on private equity. Mike leads us off: “I read your piece on CALPERS fee offsets and couldn’t stop laughing. Maybe it is because I have been involved in the finance function for many venture and private equity funds and these concepts seem second nature to me. However, it is astounding that he couldn’t simply answer the question or appears to have little clue how basic offsets work. Granted, they invest in many funds with different LPAs, so not knowing specifics as it relates to an individual fund is very understandable. However, the discussion was very high-level and the responses given were certainly comical/not adequate.”

K: I have known Real for close to twenty years now. He gets private equity like very, very few others… Watching him getting creamed like that by a grandstanding politician who is obviously incapable of understanding the answers (or more likely doesn’t want to get off his soapbox) is painful. Real has done an unbelievable job of turning one of the most corrupt PE programs into what will be a leading investor going forward. Thankless job if ever there was one.”

John: “If the person running private equity for the nation’s largest public pension can’t adequately answer questions from a board member and refuses to answer questions from a reporter, how can we be so sure he’s asking the right questions of general partners?”

Anon: “As someone who has interacted with Real, I think it is a mistake to hammer a seasoned private equity investor over a mistake or misunderstanding during a tense internal board discussion. How many of your readers or the Fortune staff haven’t misspoken or misquoted a piece of data, answered a question incorrectly or made a mistake during an intense investment committee meeting or editorial debate? Compared to their large, sophisticated peers in Canada, Asia, Europe and the Middle East, U.S. limited partners need more experienced, opinionated leadership to create change, provide structure and empower teams to provide better returns for our pensioners. As someone who knows the pensions portfolio and processes well, the public pensioners in CA have a more streamlined, cost-effective and higher quality portfolio than when Real arrived. I hope people don’t lose sight of the impact he has made and the growing need for better leadership and execution within our domestic pension offices.”

Another anon: “As an LP, I agree that Desrochers should have known that with a 100% fee offset, a GP still collects the full management fee. However, you and others are saying that the “obvious” answer as to why CalPERS sometimes pays less than 1.5-2% of committed capital is due to fee offsets. It is likely more complicated than this, and the trustee’s line of questioning was flawed from the outset. Most buyout funds will charge on committed capital during the investment period. After the investment period, they generally charge on invested capital – essentially, the cost basis of remaining investments. Since the fund under consideration was a 2005 fund, it is likely that the fund was applying the fee % to a lower base (i.e. not committed capital, but rather the cost of remaining investments).  So it is unknowable without additional work how much of the difference between the reported fee and fee as calculated on commitment is attributable to fee offsets vs the lower fee base.”

• Shep: “One has to believe that the RadiumOne situation points up the need for diversity on boards. If the board had any women on it, I suspect their collective reaction would have been very different.”

• Ted (from last Thursday morning): “No ‘Go Pats!’ at the end of your column? If they lose, are you to blame?” Yes, Ted. I would have been. But watching them trounce Pittsburgh is making me question whether or not my two word exhortations are really the primary basis of the team’s consistent success. I’m still thinking they are, but…


• Vista Equity Partners has agreed to acquire Solera Holdings (NYSE: SLH), a Westlake, Texas-based provider of risk management software to insurers, for approximately $6.5 billion (including assumed debt). The $55.85 per share deal represents a 53% premium over Solera’s closing price on August 3, which is when public talk of a deal first surfaced.


• Ipsy, a beauty product startup founded by YouTube celebrity Michelle Phan, has raised $100 million in Series B funding from TPG Growth and Sherpa Capital. No valuation was disclosed, but Fortune’s Erin Griffith reports that the deal values Ipsy at around $800 million. Read more.

• Plexxi, a Nashua, N.H.-based stealth converged networking company, has raised $35 million in Series D funding. An undisclosed new investor was joined by return backers Lightspeed Venture Partners, Matrix Partners and North Bridge Venture Partners.

• Crossbar Inc., a Santa Clara, Calif.-based developer of resistive RAM technology, has raised $35 million in Series D funding. Tyche Partners, Oriza Holdings and Cheerful Link were joined by return backers SAIF Partners, Korea Investment Partners, CBC-Capital, Tao Venture Capital Partners, Artiman Ventures, Kleiner Perkins Caufield & Byers, Northern Light Venture Capital and the University of Michigan.

• Adara, a Mountain View, Calif.-based platform for “leveraging global travel data to drive future business performance,” has raised $23 million in Series C funding. World Innovation Lab led the round, and was joined by return backers August Capital, Morgenthaler Ventures, ONSET Ventures and QuestMark Partners.

• WebAction Inc., a Palo Alto, Calif.-based provider of a platform for end-to-end streaming data integration and streaming analytics, has raised $20 million in Series B funding. Intel Capital led the round, and was joined by return backers Summit Partners, Panorama Point Partners, Frank Caufield and Regis McKenna.

• Mechio Inc. (dba Motiv), a San Francisco-based micro-wearables startup, has raised more than $8.6 million in Series A funding, according to a regulatory filing. Kleiner Perkins Caufield & Byers was joined by return backer Granite Ventures.

• AnswerDash, a Seattle-based provider of website contextual help, has raised $2.9 million in VC funding. Voyager Capital led the round, and was joined by Arnold Venture Group, Summit Capital, W Fund and WRF Capital. Read more.

• Enerkem Inc., a Montreal-based waste-to-biofuels and chemicals producer, has raised C$152.6 million in new funding. The deal includes C$102.6 million in debt (including a C$29m facility from Integrated Asset Management) and C$50 million in equity from existing shareholders. The company previously raised more than C$150 million from firms like Braemar Energy Ventures, Rho Ventures, Cycle Capital and The Westly Group.


• ABRY Partners has agreed to acquire International Medical Group Inc., an Indianapolis-based healthcare insurance company, from Galen Partners and Altaris Capital Partners. No financial terms were disclosed.

• Chico’s FAS (NYSE: CHS), a Florida-based women’s apparel chain, has hired Peter J. Solomon to explore a possible sale of the company, after being approached by private equity firms like Sycamore Partners, according to Bloomberg. Chico’s has a current market cap of around $2.1 billion. Read more.

• Cloud Equity Group has acquired Virpus Networks, a Seattle-based virtual private server and bare metal cloud hosting provider. No financial terms were disclosed.

• Edge BioSystems Inc., a Gaithersburg, Md.-based portfolio company of StoneCalibre LLC, has acquired the Ion Chromatography business of Transgenomic Inc. (Nasdaq: TBIO). No financial terms were disclosed. The San Jose, Calif.-based business will be renamed Concise Separations, and operate as a division of Edge Bio.

• GenNx360 Capital Partners has agreed to acquire Truck Bodies & Equipment International Inc., a Lake Crystal, Minn.-based maker of truck bodies and equipment, from Kirtland Capital Partners, according to an FTC filing.

• Marlin Equity Partners has acquired Bluegarden Holding AS, a Denmark-based provider of payroll and HR administration software. No financial terms were disclosed.

• NCR Corp. (NYSE: NCR), a Duluth, Ga.-based ATM company, is restarting efforts to find a buyer, after talks with private equity firm Thoma Bravo fell apart last month, according to the NY Times. One possible suitor is The Blackstone Group, which had taken an earlier look at the $4.6 billion company. Read more.

• The Riverside Company has acquired Nina Ottosson Puzzle Games & Toys, a Swedish dog game maker, for an undisclosed amount. Nina Ottosson will be merged into existing Riverside platform Outward Hound (based on Colorado).


• Dimension Therapeutics Inc., a Cambridge, Mass.-based developer of liver-directed treatments for genetic disorders, has filed for a $115 million IPO. It plans to trade on the Nasdaq under ticker symbol DMTX, with Goldman Sachs and Citigroup serving as lead underwriters. The company reports a $15.4 million net loss on $3.3 million in revenue for the first half of 2015. It has raised over $120 million in VC funding from New Leaf Venture Partners, Fidelity Biosciences,OrbiMed Advisors, Jennison Associates, Partner Fund Management, RA Capital Management, Rock Springs Capital and Tourbillon Global Ventures.

• Pace Holdings Corp., a Ft. Worth, Texas-based blank check acquisition company, raised $400 million in its IPO by pricing 40 million shares at $10 per share. It will trade on the Nasdaq under ticker symbol PACEU, while Deutsche Bank and Citigroup served as lead underwriters. Pace is led by TPG Capital senior partner Karl Peterson, who previously led by


• Airbnb has agreed to acquire Vamo, a Seattle-based booking service for multi-destination trips. No financial terms were disclosed for the deal, which will result in the Vamo product being shut down (i.e., this is an acqui-hire). Vamo had been seeded by such firms as CrunchFund and SV Angel. Read more.

• Applied DNA Sciences Inc. (Nasdaq: APDN) has acquired the assets of Vandalia Research Inc., a Huntington, West Va.-based DNA sequencing startup, for $1.5 million in cash. Vandalia had been backed by Mountaineer Capital and the West Virginia Jobs Investment Trust Board.

• Practo, an Indian search portal that matches physicians with patients, has acquired Insta Health, an Indian provider of hospital management systems and electronic medical records software, for $12 million. Practo has raised $120 million in VC funding (including a recent $90m Series C round) from Tencent, Google Capital, Yuri Milner, Sofina, Altimeter Capital, Sequoia Capital and Matrix Partners. Insta Health was backed by Inventus Capital Partners.

• STAR Capital Partners has agreed to sell Pepcom GmbH, Germany’s fourth-largest cable TV operator, to Tele Columbus AG (DB: TC1) for €608 million.


• H.I.G. Capital has agreed to acquire two real estate portfolios — comprised of 77 real estate assets and 114 secured loans with a face value north of €110 million, from Portuguese asset manager Finangeste. No financial terms were disclosed.

• Shire PLC (Nasdaq: SHPG) is thinking about ways it can sweeten its takeover offer for biotech company Baxalta (NYSE: BXLT), which last month rejected a $30.6 billion all-stock bid, according to the WSJ. Read more.

• Oil Search Ltd. (ASX: OSH) has rejected a US$8.06 billion takeover offer from local rival Woodside Petroleum Ltd. (ASX: WPL), saying that it “grossly undervalues the company.” Read more.


• Draper Associates, a seed-stage VC firm led by Tim Draper, has raised around $50 million for its fifth fund, according to a regulatory filing.


• Finula Cilliers has joined Evercore as a London-based managing director in the firm’s debt advisory group. She previously was a director at Rothschild, where she founded and led its derivatives and hedging advisory team.

• Ken Hanau has stepped down as head of 3i Group’s U.S. private equity business, in order to join Bain Capital as head of its North American industrials vertical, according to Dow Jones. Bain has yet to announce the hire, but 3i said in a press release that it has named Richard Relyea and Andrew Olinick as co-heads of its North America private equity business.

• The Ontario Teachers’ Pension Plan has named Nicole Musicco as managing director for Asia-Pacific and head of the group’s Hong Kong office. She has been with Teachers’ since 2002, most recently as a Toronto-based vice president of private capital.

• Jerry Pender has joined Z Capital Group as an operating partner. He previously was chief information officer and executive assistant director of the FBI.

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