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North America: November 2001

Investment frozen in Silicon Valley, Hicks Muse short of target, KKR breaks through $5bn mark, Lehman teams up with Ehrenkranz to offer fund of funds…

American VCs suffer investment paralysis
As many as 52 per cent of VCs in Silicon Valley expect further deterioration of the economic climate over the coming six months, according to the latest Silicon Valley Private Equity Confidence Survey released by Deloitte & Touche this month. Graham Watson of Deloitte & Touche used the term ‘investment paralysis' to describe the current situation where, despite having funds available, VCs are reluctant to commit to investments due to economic uncertainty resulting from the terrorist attacks.
Venturedome 21.11.01

Merrill Lynch renews commitment to private equity business…
US investment bank Merrill Lynch has decided to build a more global private equity business to replace the separate private equity operations that were previously in place in different areas of the business. It is hoped that the new operation will partly counter the poor earnings that are expected from its investment banking and broking businesses. Newly appointed CEO Thomas Davis will head the global private equity operation.
PrivateEquityOnline 2.11.01

…but restructuring moves wave goodbye to Merrill placement agents
Merrill Lynch's giant restructuring exercise has reportedly reached its private equity placement business, claiming three senior executives and a number of other associates. The US investment bank has been driven to offer unilateral redundancy packages as part of its struggle to reduce costs. Reports say that managing director Michael Berman, Robert Burke, and Reidan Cruz are to leave. Merrill's placement business is one of the biggest, alongside CSFB, and has been hit hard by the dramatic slowdown in the private equity business this year.
AltAssets 22.11.01

Lehman Brothers to offer fund of funds to institutional investors
Lehman Brothers announced a new initiative in which the firm will team up with New York advisory firm Ehrenkranz & Ehrenkranz to offer fund of funds to institutional investors.  Lehman is currently looking for a chief executive to lead the joint venture. The fund of funds will carry the Lehman Brothers name and will be distributed by Lehman Brothers but will also be available to Ehrenkranz & Ehrenkranz clients. 
Institutional Investor Online 4.11.01

Chief investment officer Szente resigns from Calpers
Daniel Szente, the chief investment officer at the giant US public pension fund Calpers, abruptly resigned from the firm, citing the uncertainty created by an ongoing legal battle over how much the fund can pay its portfolio managers. He has accepted a job at San Francisco investment management firm McMorgan & Company. Szente said he was worried that the legal battle would limit the pension fund's ability to retain the best portfolio managers and force it to employ more expensive external managers.
AltAssets 14.11.01

Private equity giant KKR raises $5.1bn for Millennium fund
Kohlberg Kravis Roberts & Co's millennium fund has attracted commitments of $5.1bn to date, following its first close on $4.95bn at the end of the summer. Previously, Thomas H. Lee Co's $6.1bn fund raised in 1999 was the world's biggest private equity fund but KKR's millennium fund could now reach a similar amount. No target or date for a final close has been announced and co-founder Henry Kravis has claimed that having the largest fund is not as important as the fund's profitability.
PrivateEquityCentral 5.11.01

Red Herring announces more lay-offs and scales back conferences
Another of the symbols of the glory days of the dot.com era appears to be struggling for its life. Red Herring, almost the last survivor of the magazines that were launched in the tail-wind of the US VC boom of the late 1990s, is reported to be laying off more than a quarter of its remaining staff and scaling back its conference activities. The implosion of the technology bubble in the US has already claimed a long list of media casualties, including the ultimate zeitgeist title the Industry Standard. A whole stable of magazines sprung out of nowhere and were rapidly inflated by booming dot.com advertising.
AltAssets 20.11.01

Venture-backed M&A remains steady in US
Venture Economics and the NVCA released latest figures for Q3 2001 showing that venture-backed M&A remained at a stable level in the third quarter of this year. The number of deals fell from 78 to 70 from the previous quarter but average deal value was up to $74.6m from $63.2m - the first increase in deal value since the end of 2000. The life sciences sector attracted increased attention in Q3 while levels of activity in other sectors remained similar to the previous quarter.
PrivateEquityOnline 8.11.01

US VC investment drops 23 per cent in third quarter
US venture capital investment slowed again in the third quarter to reinforce the mounting gloom across the sector. The amount invested fell to $6.5bn, down 23 per cent on the previous quarter and nearly 70 per cent on the same period last year, according to the latest PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne. The level of investment has fallen well below its peak in the first quarter of 2000, when a massive $26bn was ploughed into private businesses. But Tracy Lefteroff, a global managing partner at PwC, said 1999 and 2000 had been aberrational years and distorted meaningful comparison.
AltAssets 13.11.01

Hicks Muse fund falls short of target
Hicks Muse Tate & Furst has raised just over $1.5bn in its current US fund. Despite the target having been set at $4.5bn, the firm announced plans to hold a final close on this fund and all other commitments at the end of December. The announcement came as a result of the poor economic climate that has left limited partners unwilling to commit such large amounts of money as in 2000. Daniel Banks, a partner at Hicks Muse, explained that the current situation had led to everyone ‘re-examining their investments' because of a need to retain capital. 
Private Equity Week 5.11.01

Nomura and Thomas Weisel forge private equity alliance
Japanese bank Nomura and US firm Thomas Weisel Partners forged an alliance to co-ordinate on cross-border mergers and acquisitions and private equity investments. The agreement will involve Nomura injecting $125m into Weisel's private equity activities and raising another $500m for future Weisel funds.
AltAssets 1.11.01

US venture activity in Canada remains high
Investment by US VCs in Canadian start-ups rose by 44 per cent in Q3, compared to the same period last year, according to a survey released this month. The amount invested rose to C$1.1bn compared to C$797m last year. This high level of US investment has allowed to Canadian venture market to remain healthier than that of the US, according to Kirk Falconer, head of research at Toronto-based Macdonald & Associates. The life sciences and information technology sectors have been responsible for attracting the majority of the US investments - particularly in the Ottawa Valley.
The Deal.com 7.11.01

US venture-backed buy-outs hold steady in Q3
US venture-backed buy-out activity held steady in the third quarter despite the deteriorating conditions in financial markets and mounting macroeconomic uncertainty, according to the latest research from Venture Economics and the US National Venture Capital Association. There were 70 deals in the latest period, compared with 78 in the second quarter and 62 in the same quarter last year. The average value per deal was $74.6m, up from $61.3m in the previous quarter but well down on $175.3m in the same quarter last year. The dramatic fall in average deal size reflects the steep drop in valuations since public markets collapsed and the IPO exit route was slammed shut, said Jesse Reyes, vice president of Venture Economics.
AltAssets 8.11.01

Staff cuts at GE Equity
GE Equity, the private equity arm of GE Capital, announced that one-third of its investment executives would be made redundant and that its San Francisco office, opened in 1999, was to close. New investment fell sharply this year at GE Equity, reflecting the downturn that has affected the whole industry. It is thought that investment levels may have fallen by up to 90 per cent and the firm is expected to make a loss in 2001.
Financial Times 5.11.01