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North America: August 2003

University of California kicked out of Sequoia funds, Silverlake seeks to raise $4bn, Citizens Financial Group eyeing secondary sale of private equity fund portfolio, Franklin Templeton acquires Darby Overseas, JP Morgan Chase slashes commitment to $8bn JP Morgan fund…

Draper Fisher Jurvetson launches Canadian fund
US early-stage technology venture capital firm, Draper Fisher Jurvetson (DFJ), is to launch a Canadian fund in partnership with Dr Ilse Treurnicht of Primaxis Technology Ventures. DFJ plans to enter the Canadian market with a fund targeted at US$100m. The partnership is the latest addition to the DFJ network. In the last nine years DFJ has created a broad network of venture capital partnerships. The current network consists of 70 venture capital professionals, across 23 regions and incorporates $3.2bn under management.
AltAssets 28.8.03

University of California ejected from Sequoia funds over disclosure row
The University of California, which manages $34bn of investments, has been ejected from private equity funds run by Sequoia Capital. Sequoia's decision will end a relationship that has earned the University of California nearly $400m. The University of California appealed against a court decision that compelled it to disclose the financial performance results of its private equity portfolio earlier this month. Its appeal was made on the grounds that it feared it would be shut out of future fundraisings by the leading private equity firms. Having already had an investment invitation rescinded by Three Arch Partners, it would appear that the University of California's worst fears have now been realised. Sequoia Capital has already severed its links with the University of Michigan for the same reasons.
Financial Times 29.8.03

Cisco Systems named most active buyer of venture-backed companies
Cisco Systems has been identified as the most prolific buyer of venture-backed companies over the past two years, according to the newly released Venture Capital Analyst of Corporate Acquirers released by Alternative Investor. ‘Cisco is not acquiring as many start-ups, or paying as much for them as it was in the late 1990s, but it, like so many other technology and health care leaders, still appears to be willing to make an acquisition when it makes sense,' said David Barry, editor of the directory and vice president of Alternative Investor. According to the directory Cisco has bought six venture-backed companies since September 2001. Other companies that have acquired multiple venture-backed companies in this period include EMC, Sun Microsystems and IBM.
AltAssets 19.8.03

NJTC Venture closes first fund with $80m
US-based New Jersey Technology Fund (NJTC) has closed its first fund with $80m. The fund has already completed eight investments. NJTC expects the fund to be fully invested within three years. The firm will make investments of between $1m and $2m. NJTC plans to allocate between 25 per cent and 30 per cent of the fund in healthcare companies, with the remainder of the fund being invested in the financial services, telecommunications and software sectors. The fund is affiliated with the New Jersey Technology Council and will invest exclusively in New Jersey-based companies.
VentureWire 6.8.03

CPP Investment Board unveils $550m commitments to private equity funds
Canadian CPP Investment Board has announced new commitments of $550m to a handful of new and existing private equity fund partners and funds of funds. The investments take the pension fund's private equity commitments to $5.6bn, with $1.6bn of the commitments already invested. The CPP Investment Board has committed up to $75m to Ares Corporate Opportunities and $150m to Credit Suisse First Boston Private Equity Customised Fund Investment Group, of which $100m has been committed to fund of funds. The pension board has also committed $75m to Lehman Brothers Venture Partners 2003. In addition, the CPP Investment Board has increased its commitments to two existing private equity funds. The pension board has committed an additional $100m to Kensington Capital Partners Limited, and an additional $25m to Lexington Capital Partners V for investment in secondary market opportunities.
AltAssets 14.8.03

Burrill announces second close for Life Sciences Capital Fund
US life sciences merchant bank, Burrill & Company, has held a second close at $150m for its Life Sciences Capital Fund. The firm expects the fund to close at its target of $250m in mid-October. The fund has attracted an additional $83m since its first close in October last year. New commitments have been secured from a number of new institutional investors, including several undisclosed pension funds and foundations. Disclosed investors include IBM, North Carolina Retirement System, Sam Pension, Scottish Widows and Unilever. The fund is to focus on early to mid-stage biotech and life science companies, with an average investment of between $3m and $10m.
VentureWire 26.8.03

Canadian venture capital activity slows in Q2 2003
Canadian venture capital investment levels fell in the second quarter of 2003, according to the latest industry statistics released by Macdonald & Associates and the Canadian Venture Capital Association (CVCA). The aggregate value of venture capital investments fell by 33 per cent in the second quarter, to $212m from $314m in Q1 2003. A total of 179 Canadian companies were financed this time around, 18 per cent less than the 218 firms in the first quarter. In addition, the level of disbursements was less than half of the $458m recorded for the same second quarter period in 2002. The Canadian industry has fared better than its US counterpart for most of the current downturn, but Macdonald & Associates and the CVCA believe that increasingly stable activity in the US could indicate that the Northern American market is finally beginning a slow recovery. For the first time in three years, dollars invested by the US industry grew in the second quarter, to $4.3bn from $4bn.
AltAssets 12.8.03

US Silver Lake Partners aims to raise $4bn fund
Silver Lake Partners, the US technology buy-out firm, is aiming to raise a $4bn mega-fund in September. Silver Lake's last fund closed on $2.3bn in 1999. Investors included Bill Gates of Microsoft, Larry Ellison of Oracle and Michael Dell of Dell Computers. Silver Lake has currently invested just $1.6bn from its last fund but has already distributed $1bn to its investors. Silver Lake's $4bn target makes it one of the most ambitious US fundraising efforts to be launched this year. There has been a steep decline in US private equity fundraising with just $10.6bn raised in the first half of 2003. This represents a dramatic drop from $30bn in the same period last year.
Financial Times 11.8.03

Slump in US entrepreneurial activity continues
US entrepreneurial activity continued to decline in 2002 although the fall was not as pronounced as it was in the previous year, according to the Global Entrepreneurship Monitor (GEM). The 2002 entrepreneurial activity level fell to 10.5 per cent of the adult population from 11.7 per cent in 2001 and 16.7 per cent in 2000. But the figures remained 50 per cent higher than those recorded in 1998 after a dramatic entrepreneurial surge during the high-tech boom. The number of Americans who were optimistic in 2002 about the climate for starting a new business held steady from the previous year at 37 per cent.
AltAssets 19.8.03

Citizens exploring $250m secondary sale
Boston-based Citizens Financial Group is considering selling $250m of private equity fund investments. It has hired Cogent Partners to help value the investments and source potential buyers. It is looking at the sale of a portfolio of 35 partnership investments made between 1997 and 2001 as a result of a change in strategic direction. The group said, however, that it is in no hurry to sell - it would only do so at the right price. Citizens Capital will continue to make direct investments.
The Private Equity Analyst August 2003

Washington Capital to seek $125m institutional money for latest fund
Early-stage venture capital firm Washington Capital Partners is to raise its first institutional fund, with a target of up to $125m. The firm previously raised $10m from high net worth individuals. It intends to hold a first close of around $40m to $50m in February next year and will hire two new additional managing directors before the official launch of the fund in September. WCP will focus on the security, defence, intelligence and aerospace sectors.
VentureWire 14.8.03

Lattanzio to lead new Bear Stearns middle-market private equity group
Bear Stearns Merchant Banking has announced the formation of a new group, which will focus on identifying middle-market private equity investment opportunities. The group will be led by industry veteran Paul Lattanzio. Bear Growth Capital Partners is designed to target companies that fall below the investment parameters of Bear Stearns Merchant Banking Partners II fund. It will target firms valued at between $10m and $100m. Lattanzio previously served as managing director of TD Capital, the merchant banking division of the Toronto Dominion Bank. Prior to that he was a co-founder of NMS Capital Management, a $600m private equity fund.
AltAssets 8.8.03

Director ousted at MassPRIM
In a surprise move, James Hearty, executive director of the Massachusetts Pension Reserve Investment Management Board has left the pension plan. Treasurer Dan Cahill is said to be frustrated by Hearty's opposition to disclosing the fund's private equity performance data. The pension plan has been ordered to publish the data by the state's attorney general. The replacement has been named.
The Boston Globe 15.8.03

New York appoints Pacific Corporate and JP Morgan for PE portfolio
New York State Common Retirement System has appointed Pacific Corporate Group as a non-discretionary advisor to its $10bn private equity portfolio. Pacific Corporate joins Hamilton Lane, which also advises the pension plan. In a separate move, it has also appointed JP Morgan Investment Management to review the performance of each of the funds in New York's portfolio and to recommend allocation levels to various sectors and types of private equity.
The Private Equity Analyst August 2003

HO2 taps further $1.7m for follow-on investments
HO2 Partners, a technology venture capital firm that invests mainly in the Dallas-Fort Worth area, has received a top-up of $1.7m to provide follow-on funding for its portfolio companies. It said that the capital was provided by existing limited partners. HO2 closed its fund in 1999 with $33.7m, which is now fully invested. It is currently raising a successor fund with a target of $100m.
VentureWire 14.8.03

US Darby Overseas acquired by Franklin Templeton Investments for $76m
US emerging markets private equity firm Darby Overseas Investments has been acquired by Franklin Resources, a division of Franklin Templeton Investments, for $75.88m. Franklin Resources already owned 12.66 per cent of the firm. As one of the initial investors in Darby, Franklin Templeton Investments has also participated in three of Darby's six emerging markets private equity and mezzanine funds. Darby Overseas sponsors and manages funds for institutional investors and high net worth individuals that invest in Latin American and Asian private equity, including mezzanine. Franklin Resources is a global investment organisation operating as Franklin Templeton Investments. Franklin Templeton provides global and domestic investment management services through its Franklin, Templeton, Mutual Series and Fiduciary Trust subsidiaries.
AltAssets 5.8.03

US venture-backed M&A market enjoys slight upturn in Q2 2003
US venture-backed M&A market enjoyed a slight upturn in the second quarter of 2003, according to Thomson Venture Economics and the National Venture Capital Association. This modest increase in activity follows two consecutive quarters of decline. In the second quarter of the year, 72 venture-backed companies were acquired for a total value of $1.8bn, spread among the 27 targets that disclosed a deal value. These figures represent an average deal value of $68.2m per disclosed deal. The modest increase was largely the product of a resurgence in activity in the telecoms sector, and healthy increases in the biotechnology and networking sectors. The software sector continued to dominate deal volume, with 25 transactions. The total disclosed value of the eight deals reporting was $509.4m. The largest software deal was Microsoft's acquisition of Java-based applications designer PlaceWare for $200m.
AltAssets 12.8.03

Ohio to launch fund of funds search
The $50bn Public Employees' Retirement System of Ohio is set to launch a search for an advisor to manage a $100m fund of funds diversified across private equity sub-types. Ohio is expecting to appoint a fund of funds manager by the end of the year, after which it may look at investing in a more specialised fund of funds. The plan has a target private equity allocation of four per cent - roughly $2bn - of which $400m is earmarked for fund of funds investments. It invests in funds of funds partly to gain access to funds it may not otherwise be able to commit to and partly as a way of deploying capital more efficiently - it has only three investment professionals responsible for building the private equity portfolio.
The Private Equity Analyst August 2003

JP Morgan Chase dramatically cuts commitment to its own private equity fund
JP Morgan Chase has slashed its commitment to JP Morgan Partners' $8bn private equity fund by $1.4bn. The cut is in line with the firm's declared intent to reduce its exposure to the asset class and leaves the fund only narrowly ahead of Blackstone Group in its bid to retain the title of largest ever private equity fund. The bank originally committed $6.2bn to the fund, which invests in buy-outs and venture capital deals internationally. It will now contribute less than $5bn. The bank said it received permission for the reduction in commitments from the fund's other limited partners. All outside investors were given the opportunity to reduce their commitments but chose not to do so. A spokesperson for the firm described their support as a ‘positive endorsement for the fund'. The bank also got approval to extend the fund's target investment period by a year, from four years to five.
AltAssets 4.8.03

City of Philadelphia appoints Franklin Park
The City of Philadelphia Board of Pensions and Investments has appointed Franklin Park as non-discretionary advisor on its private equity investments. Franklin Park, which spun out of Hamilton Lane earlier this year, beat off competition from Cambridge Associates, Pacific Corporate Group, Portfolio Advisors and from the incumbent, Hamilton Lane. The board commits around $80m to private equity funds each year.
The Private Equity Analyst August 2003