Random Ramblings
Some notes to kick off your Monday:
• Not preferable: Good scoop from peHUB's Chris Witkowsky, who this morning reports that private equity firm Advent International is not including a preferred return (i.e., hurdle) on its eigth flagship fund, which is coming to market with a $12 billion target.
I've since confirmed the plans with market sources, and also learned that Advent will not be changing either its carried interest structure (20%) nor the GP-beneficial quirk whereby its 1.5% management fee does not step down over time. On the other hand, it will remove a clause whereby Advent could charge LPs upwards of 75 million euros for 'business services,' a fee usually related to Advent putting its operating partners into portfolio companies (little of it was actually charged in the last fund).
To be clear, there is some decent philosophical motive for eliminating the hurdle. Such structures were originally put in place to essentially mirror interest rates, so that LPs had more incentive to invest in riskier private equity funds. But with interest rates at effectively zero, an 8% hurdle (which is where past Advent funds sat) is no longer tethered to that rationale.
But, in practice, all of that is gobbledygook. Instead, this is about Advent protecting its own downside while removing related protections from its LPs.
To be clear, I have no reason to believe that Advent won't easily surpass 8% returns on its new fund. Even though its performance has slipped pretty consistently over the past several funds, it's still well more than double that threshold.
Advent, however, appears to be taking out an explicit insurance policy against either not meeting the hurdle, or perhaps finding itself near the hurdle in five to seven years and wanting to avoid the dangerous impulse to swing for the fences in order to clear it.
Remember, this isn't a firm that has never had a hirdle -- like Warburg Pincus or Hellman & Friedman -- deciding to maintain its historical structure (upon which all of its compensation is built). It's a big firm making an intentional change.
My best guess is that most LPs will grumble loudly and then still pony up, particularly in light of a recent emphasis on making bigger bets on fewer managers. But if Advent does indeed stumble going forward, it will have deservedly lost a lot of goodwill the next time around.
• Deal data: Global leveraged buyout activity now stands at $125.6 billion, thanks to last week’s $6 billion deal for Solera Holdings from Vista Equity Partners, according to Thomson Reuters. That total figure is 12% higher than last year at this point, while overall global M&A volume is a tick behind (-0.9%) last year’s pace. Within this year’s LBO numbers, tech buyouts are up 90% over 2014 YTD, and account for 26% of the LBO total.
• Blockage: I spent an unfortunate percentage of my weekend on Twitter, conversing with readers who were upset with a Friday blog post about Apple enabling ad-blocking apps on its new operating system. You can read it here.
I only raise it here to address one consistent reader gripe: Namely, that I'm a hypocrite -- applauding disruption in other industries (namely Uber vs. taxis) and decrying it in the media space.
To be clear, I am not upset when "old media" is disrupted by newer media outlets and/or products, even if it affects me or my employer adversely. Uber, for example, is causing troubles for taxis, because it's a better product. But that wasn't my gripe here -- it was about users installing software that effectively lets them side-step paying us for our product. Almost akin to still using a cab but then walking out on the tab. As always, feel free to disagree. I just wanted to make sure we're not talking past each other.
THE BIG DEAL
• Dialog Semiconductor PLC (XTRA: DLG) has agreed to acquire Atmel (Nasdaq: ATML), a San Jose, Calif.-based chipmaker, for approximately $4.6 billion in cash and stock.
Fortune's Stacey Higgenbotham has more on why Dialog is doing the deal (hint: it has a lot to do with the Internet of things). Read her post here.
VENTURE CAPITAL DEALS
• Deciphera Pharmaceuticals, a Waltham, Mass.-based developer of kinase inhibitor treatments targeting tumors cells, has raised $75 million in Series B funding led by New Leaf Venture Partners. www.deciphera.com
• Jaunt, a Palo Alto, Calif.-based provider of cinematic virtual reality colutions, has raised $65 million in Series C funding from The Walt Disney Co., Evolution Media Partners and China Media Capital. www.jauntvr.com
• Portea Medica, an Indian home healthcare company, has raised $37.5 million in Series B funding. Accel Partners led the round, and was joined by the International Finance Corp., Qualcomm Ventures and Ventureast. www.portea.com
• Headspace, a Venice, Calif.-based maker of a meditation app, has raised $34 million in VC funding. The Chernin Group led the round, and was joined by Advancit Capital, Allen & Co., Breyer Capital, Broadway Video Ventures, Deerfield Management, Freelands Ventures, William Morris Endeavor and individual angels like Jeff Weiner, Jessica Alba, Jared Leto and Ryan Seacrest. www.headspace.com
• Cruise, a developer of self-driving car technology, has raised $12.5 million in Series A funding from an investor group that includes Spark Capital and Sam Altman. The company also has hired Andrew Gray (ex-Tesla Motors) as VP of engineering. Read more.
• iQ Media, a Conshohocken, Penn.-based provider of media intelligence solutions, has raised $9 million in Series B funding from Edison Partners. www.iqmediacorp.com
• Alignable Inc., a Waltham, Mass.-based social network for small businesses, has raised $8 million in new VC funding. Mayfield led the round, and was joined by return backers Lead Edge Capital, NextView Ventures and Saturn Partners. www.alignable.com
• Skilljar, a Seattle-based cloud learning management system platform for enterprises and their customers, has raised $2.6 million in seed funding led by Trilogy Equity Partners. www.skilljar.com
PRIVATE EQUITY DEALS
• Bain Capital Partners has acquired a 5.27% stake in L&T Finance Holdings Ltd., a listed Indian finance subsidiary of engineering and construction company Larsen and Toubro Ltd. The deal is valued at approximately $107 million. VCCircle reports that Bain also is in talks to nearly double its position via a share purchase from L&T. Read more.
• Battery Ventures has completed its previously-announced acquisition of the Physical Security business unit of NICE Systems (Tel Aviv: NICE) for upwards of $100 million. The group has been renamed Qognify, and will be a New Jersey-based, stand-alone company, providing video management and analytics technology. www.battery.com
• Covington Capital has acquired Masstech, a Canadian provider of workflow and media asset management solutions. No financial terms were disclosed. www.masstech.com
• EQT Partners has received several takeover offers for Dutch oil storage company Koole Terminals, according to Reuters. The business could be valued at more than $1.1 billion, with bidders including Borealis Infrastructure, OMERS and Ontario Teachers’ Pension Plan. Read more.
• GenNx360 Capital Partners has acquired Vintage Parts Inc., a Beaver Dam, Wash.-based provider of “slow-moving replacement parts” sourced from OEMs for dealers and distributors, from Sentinel Capital Partners. No financial terms were disclosed. www.vpartsinc.com
• HEAT Software, a Santa Monica, Calif.-based portfolio company of Clearlake Capital Group, has agreed to acquire client and enterprise mobility management software provider Absolute Manage and Absolute Service from Absolute Software Corp. (TSX: ABT). No financial terms were disclosed. www.heatsoftware.com
• Platte River Equity has acquired Huskie Tools Inc., a Glendale Heights, Ill.-based maker of battery-operated hydraulic hand tools, hoists and related accessories. No financial terms were disclosed. Sellers include Harren Equity Partners and Northstar Capital. www.huskietools.com
• Warner Brothers, a unit of Time Warner Inc. (NYSE: TWX), has launched a joint venture with private equity firm China Media Capital to create Chinese-language films. CMC will own 51% of the joint venture, called Flagship Entertainment Group Ltd. Read more.
IPOs
• Intertrust Group BV, a Dutch provider of legal and financial administrative services, is prepping an Amsterdam IPO that could raise more than 2 billion. Lazard is advising Intertrust, which is owned by The Blackstone Group. Read more.
• Surgery Partners Inc., a Nashville, Tenn.-based surgical facilities operator backed by H.I.G. Capital, has set its IPO terms to nearly 14.29 million shares being offered at between $23 and $26 per share. It would have an initial market cap of around $1.18 billion, were it to price in the middle of its range. The company to trade on the Nasdaq under ticker symbol SGRY, with BofA Merrill Lynch, Goldman Sachs and Jefferies serving as lead underwriters. Surgery Partners reports $23 million of net income on $457 million in revenue for the first six months of 2015, compared to $9 million of net income on $147 million in revenue for the year-earlier period.www.surgery-partners.com
• Two companies -- Boxlight and Oasmia Pharmaceutical -- are expected to price small IPOs on U.S. exchanges this week. Read more.
EXITS
• EQT Partners has hired Morgan Stanley to find a buyer for Energy from Waste, a Germany-based provider of energy generation from waste, according to Reuters. The deal could be worth upwards of €1.8 billion. Read more.
• Groupe Acticall SAS has completed its previously-announced acquisition of Sitel Worldwide Corp., a Nashville, Tenn.-based provider of customer care outsourcing services, from Onex Corp. and OMERS Private Equity for approximately $830 million (including assumed debt). www.sitel.com
• Swander Pace Capital has sold Gilchrist & Soames, an Indianapolis-based provider of bath and beauty products to luxury destinations, to Sysco Corp. (NYSE: SYY). No financial terms were disclosed. www.gilchristsoames.com
• TorQuest Partners has sold Pinova Holdings, a Brunswick, Ga.-based maker of specialty chemicals from natural and renewable feed stocks, to Symrise AG (XTRA: SY1) for US$417 million. www.symrise.com
• TSG Consumer Partners has agreed to sell Island Oasis, a Walpole, Mass.-based provider of frozen drink mixes to the food service industry, to Kerry Group PLC (Ireland: KRZ), according to an FTC filing. www.islandoasis.com
OTHER DEALS
• Deutsche Wohnen (XTRA: DWNI), a German real estate company, has offered to buy peer LEG Immobilien (DB: LEG) for approximately $4.6 billion in stock. Read more.
• Starwood Waypoint Residential Trust (NYSE: SWAY) is in talks to merge with fellow residential landlord Colony American Homes, according to the WSJ. Read more.
FIRMS & FUNDS
• No firm or fund news this morning.
MOVING IN, UP, ON & OUT
• Daniel Aronson has joined Evercore as a senior managing director in its restructuring and debt advisory group. He previously was a managing director at Lazard and, previously, co-COO of its restructuring group. www.evercore.com
• Golden Gate Capital has promoted Rishi Chandna to managing director. He has been with the private equity firm since 2002, focusing on the software and services markets. www.goldengatecap.com
• David Richman has joined Guggenheim Partners as a director focused on direct lending to middle market companies, according to his LinkedIn profile. He previously spent over three years with GE Capital. www.guggenheimpartners.com
• Charles Yoon has joined Bregal Partners as a managing partner. He previously was a partner with Monitor Clipper Partners. www.bregalpartners.com
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