Wednesday, January 31, 2007

Global Outsourcing to Become Main Form of IT Delivery by ‘12 – Forrester

According to a research conducted by Forrester, outsourcing will become main form of IT delivery by 2012. In addition, Indian companies are likely to overshadow the multinational firms in the application outsourcing domain. Among the key findings, more Americans are likely to offshore their work in the near future.

The Indian outsourcing firms such as TCS, Wipro, and Infosys had posted an increase in revenues in the range of about 40 percent to 50 percent. According to another research firm, Technology Partners International, the Indian vendors own just 6 percent of the global outsourcing market in 2006. In addition, the US companies are only spending about 1.9 percent of their outsourcing budgets on offshore services.

However, at present, the Indian firms are gaining with global firms relying on third-party vendors to optimize and streamline their businesses. The application outsourcing services have materialized as a highly strategic business. It has also become difficult to sell various IT and BPO services, which are prompting a huge investment.

Monday, January 22, 2007

Venture capitalists slowing down?

Venture capital investment into U.S. companies slowed markedly in fourth quarter of last year, to the slowest pace in two years.


That drop-off wasn’t enough to knock 2006 from its status as most robust year since 2001, however — and it’s too early too tell whether the slow-down will continue into this year.For all of 2006, investors backed 2,454 companies, slightly ahead of 2005’s level. Total investment was $25.75 billion, an 8 percent increase over the preceding year, according to the quarterly survey by Ernst & Young and Dow Jones VentureOne.

The surprise is the fourth quarter, when VCs backed 561 deals and invest $5.82 billion, drops of 13 percent and 2 percent, respectively, from the fourth quarter of 2005.
This comes at the same time venture capital firms slowed their own fund-raising from their investors to the slowest pace in three years, according to Thomson Financial data released last week.

Trends in Silicon Valley reflected the slowdown seen in the rest of the nation. VCs invested $1.94 billion in local companies, down from $2.12 billion the same quarter of 2005.
See diagram below, which suggests the interactive Web companies (dubbed Web 2.0) were among the few sectors to grab more money in the fourth quarter compared to the third quarter. The classifications aren’t perfect, but see “consumer/business services” and “media/content”, for example.


But if you stand back, and look at 2006 year as a whole, investments increased across each of the three main industries tracked

(a) healthcare,
(b) IT and
(c) consumer and business products and services, so this a broad recovery.
Within IT, though investments fell in the sub-category of chips.

The clear winner was alternative energy, where investments boomed 190 percent, compared to the year before.

Highlights:

–Healthcare in 2006 — 628 companies were invested in; 5% increase from 2005
–11.3% drop in communication & networking in 2006
–14% increase in electronics & computing
–27.5% increase in information systems
–6.6% drop in semiconductors
–1.8% increase in software
–Alternative Energy in 2006 - $537.6 million in 41 companies; 190% increase from 2005

The biggest deals are listed in a table at bottom.
Meanwhile, data suggests that less money can sometimes be better, according to the number-crunchers at Bridgescale, a new Silicon Valley venture firm (see Venture Beat story here). The firm used VentureOne statistics and other sources to track IPOs and mergers and acquistions. Companies funded by angels initially take in three rounds of venture capital, on average, instead of four, they found. This suggests these angel-backed companies are more efficient. Indeed, these angel-backed companies ended up taking $15 million less money from investors than other companies did before their exits — or $50 million, versus $65 million.

Finally, these companies accounted for $700 million in total investments, but led to $10 billion in exit value, a 15-fold return, Bridgescale found. That compares to $2 billion invested, and a $13 billion exit value for other companies, or a 6-fold return.



Source Feed: VentureBeat

Friday, January 19, 2007

Hyperactive Mike Moritz


Moritz, the most prominent partner at Silicon Valley's leading venture capital firm, made at least ten investments last year, according to Venture Capital Journal.


The Sequoia Capital VC, who might have been expected to rest on his laurels after the stratospheric return on his Google investment, put at least $230m to work, the Thomson Financial database shows. Why? Moritz, unlike John Doerr of Kleiner Perkins, doesn't seem inclined to save the world just yet. If the investor, a former journalist, is to establish himself as a Valley legend, he'll need a follow-up after the grand slams of Yahoo and Google.

But there could be a simpler explanation for Moritz's hyperactivity: most investors struggle to win the approval of fellow partners; Moritz's belief in Larry Page and Sergey Brin's search engine provided so much of the firm's recent returns that no other Sequoia partner dares question his investment ideas.

VC Deals Today

Workshare, a London-based provider of secure content compliance solutions, has raised $23 million in Series B funding. Backers include Steelpoint Capital Partners, Intel Capital and Quester. www.workshare.com

Player X, a UK-based mobile gaming and entertainment company, has raised Gbp5 million in second-round funding. Nordic Venture Partners and Long Acre Partners were joined by previous backer Arts Alliance. www.playerx.com

Chegg.com, a Santa Clara, Calif.-based online marketplace for college students, has raised $2.2 million in Series A funding from Gabriel Venture Partners and seed backer Mike Maples. The news was first reported by BusinessWeek. www.chegg.com

InovaWave Inc., an Austin, Texas-based maker of software that improves server and desktop virtual machine performance, has raised $2 million in Series A funding from Silverton Partners. www.inovawave.com
Building Materials Corporation of America has raised its offer for Dallas-based roofing and building products company ElkCorp (NYSE: ELK) from $40 per share to $42 per share. This is now the second time that BMCA has topped an offer from The Carlyle Group, which originally bid $38 per share and later upped it to $40.50 per share. UBS is running the auction. www.elkcorp.com www.carlyle.com

Claros Diagnostics Inc., a Woburn, Mass.-based developer of handheld urological cancer diagnostic testing system for point-of-care use, has raised $7.8 million in Series A funding. Oxford Bioscience Partners led the deal, and was joined by Bioventures Investors, Accelerated Technologies Partners and Commons Capital. www.clarosdx.com

Scott Darling has joined Frazier Technology Ventures as its fifth partner. He has spent the past seven years with Intel Capital, and 17 years overall with Intel Corp. www.fraziertechnology.com

Wednesday, January 17, 2007

The High-Profile Exits Of 2006

Get inside the world of start-ups, venture capital and private equity dealmaking in India and Asia with the fortnightly Businessworld PE Tracker IPOs gain currency

Warburg Pincus, India’s top private equity investor, shares the stage for high-profile exits in 2006 with Singapore-based Newbridge Capital and Temasek Holdings. While some reports suggest that overall the Indian private equity market earned investors over $2 billion on exits, two deals clearly marked 2006 — Warburg’s partial exit from Mumbai-based BPO WNS Global Services through the latter’s IPO and the $736-million acquisition of Matrix Labs by US-based Mylan Laboratories (Newbridge and Temasek sold their 40 per cent stake in Matrix).
There were other notable exits as well. EDS acquired Mumbai-based IT services firms MphasiS for $380 million and gave Baring Private Equity a long-awaited exit. Towards the end of the year, Infoedge (promoters of jobs portal Naukri) surprised the bourses with a spectacular public debut — a Rs 170 crore IPO, oversubscribed 55 times. What’s interesting about all these deals is the fact that unlike previous years, exits through ‘trade sales’ or M&A transactions have been balanced by IPO-led exits. It is a trend that started in 2005 and has gained momentum in 2006.

In the next 12 months, private equity investors will be looking to balance the scales further between IPO-led and trade sale exits. IPO-led exits are typically the preferred exit route. However, till 2005, trade sales dominated exits in India — nearly 90 per cent of exits — because conditions for liquidity through public markets were not conducive. 2005’s biggest exit, in fact, was a trade sale — Warburg sold its remaining 5.65 per cent stake in Bharti Tele-Ventures to Vodafone for $847.5 million. That has changed in the past year and with IPO-led exits now picking up PE players will also look at doing more non-PIPE (private investment in public enterprise) deals in the coming months.




The current year should be another one for big-ticket PE investments in India. The PE market closed 2006 with over $2 billion in investments, according to Thomson Financial (see ‘BW-Thomson Financial PE Roundup’). PricewaterhouseCoopers put the investment numbers for India at $5 billion for 2006. This took into account deals such as Kohlberg Kravis Roberts’ $900 million acquisition of Flextronics’ Indian IT operations. Bangalore-based Venture Intelligence put the numbers even higher at over $7 billion.

Tuesday, January 02, 2007

VC Deals - India and More

Investors in the India Power Fund may get tax breaks under a plan floated by the Power Ministry, according to The Economic Times. Under the proposal, up to 20% of contributions to the fund would be safe from income taxes for five years. The Power Finance Corporation Ltd. In India plans to establish the venture capital fund in the first quarter of 2007; it is to be used to help finance the build-out of power plants that generate electricity. pfc.gov.in/rti.htm

Google Inc. plans to invest in Shenzhen Xunlei Network Technology Ltd, developer of systems that let Web surfers download videos, according to Industry Updates. Backers of the company include IDG Venture Capital and Morningside Asia Advisory Ltd. Google earlier this year made a big splash in online video with its 1.65 billion purchase of Youtube.com. Shenzhen Xunlei is based in Shenzhen, in southern China. www.google.com

Medical Body Sculpting Inc. has raised $6.1 million in angel backing to open centers where people with extra fat can get the fat removed without surgery, according to VentureWire. The company promotes a treatment called “Lipo-dissolve,” in which “fat is removed by injecting a naturally occurring compound directly into the fat layer.” The company offers 3, 6, 12 and 18-month payment options, without charging interest. www.medsculpt.com

Human Resources

Fabian Mansson, president and CEO of Eddie Bauer Holdings Inc., (NASD: EBHI) stands to collect more than $2.2 million from stock payments and a bonus if the company goes through with its agreed-to sale to Sun Capital partners Inc. and Golden Gate Capital. The two buyout shops agreed to pay $286 million in cash and to assume $328 million in debt to buy the company. www.ediebauer.com www.goldengatecap.com


CORRECTION: A story yesterday, attributed to VentureWire, indicated Voyager Capital had closed its fund at $93.3 million. In fact, the firm says that its fund is still open, VentureWire reported in a correction today. www.voyagercapital.com

PE Exits

Eaton Corp. (NYSE: ETN) yesterday said it would buy AT Holdings Corp., parent of aerospace company Argo-Tech Corp., from Greenbriar Equity Group and Vestar Capital Partners, for $695 million. Argo-Tech, which employs 640 people, makes engine fuel pumps, airframe fuel pumps, and ground fueling systems used by operators of commercial and military airplanes. The company generated Ebitda of $63 million in its fiscal year ending Oct. 28, on sales of $206 million. The transaction is expected to close in the first quarter of 2007. www.eaton.com

PE-Backed M&A

Medical Consultants Inc., a company backed by Boston-based Parthenon Capital, has completed its merger with Advanced Data Processing Inc., bringing together two companies that provide medical billing services. Medical Consultants provides billing services to the emergency room departments of hospitals and physician groups; Advanced Data Processing provides billing services to emergency medical services agencies in the United States. The senior management team of Advanced Data Processing, led by CEO Doug Shamon and COO Bill DeZonia, will head the combined company. Concurrent with the merger Advanced Data Processing said it had acquired the assets of Intermedix LLX, provider of billing services to emergency medical service providers in Texas. www.parthenoncapital.com

Buyout Deals

Shares of Alitalia SpA, the Italian airline, rose sharply today in Europe amid speculation that an Italian-led consortium was preparing to make a bid, according to AFX, a news service owned by Thomson Corp. (publisher of PE Week Wire). Interested parties cited in the report include Management & Capitali SpA, a private equity firm owned by Carlo De Benedetti. The Italian government appears willing to sell its entire stake in the airline. www.managementecapitali.it

The Taittinger family is preparing to buy back a 37% stake in a champagne business that it sold to buyout shop Starwood Capital Group in July 2005, according to French newspaper Les Echos. The Taittinger family is among the country’s largest producers of champagne. www.starwoodcapital.com

Taiwan plans to take a closer look at private equity deals in which firms acquire more than 25% of a controlling stake in both publicly-traded companies and companies that need a government franchise, such as telecom carriers, banks, radio and TV companies, Taiwan Economic News reports. According to Shih Yen-shiang, vice minister of economics, the government plans to look at such factors as whether the companies would be taken private, and whether the transactions are short-term or long-term investments. In November, The Carlyle Group proposed acquiring Taiwan's Advanced Semiconductor Engineering in a $5.46 billion transaction. www.carlyle.group

Belgian private equity shop GIMV plans to hold exclusive talks with Navios Maritime Holdings Inc. regarding the sale of its 24% stake in shipping company Kleimar NV, according to AFX, a news service owned by Thomson Corp. (publisher of PE Week Wire). Navios is also trying to acquire the remaining 76% of the company held by Sea-Invest Group and management. Kleimar manages a fleet of 30 to 35 ocean-going vessels used to transport coal and iron. www.gimv.com www.sea-invest.be

Top Three Deals last week

UK private shop HgCapital said it has raised 300 million Euros ($395 million) for a fund earmarked to finance renewable power projects across Europe, Dow Jones reports. Backers of the fund include Dutch pension fund PGGM and the California State Teachers’ Retirement System. Portfolio companies in the Renewable Power Partners Fund include Wind Direct, developer of wind farms in the U.K. www.hgcapital.com

MatlinPatterson, best known for investments in troubled companies, plans to set up a joint venture with Chinese TV-maker Sichuan Changhong Electric Co. to make plasma displays, according to Dow Jones. The firm plans to invest $40 million for a 17.78% stake in the joint venture through two units of MatlinPatterson Global Opportunities Partners II—Mavericks Investment Holding Ltd. and Cloudbreak Investment Holding Ltd. Sichuan Changhong, together with one of its divisions, plans to invest $185 million for an 82.22% stake. www.matlinpatterson.com

Bus-maker Neoplan USA Corp. plans to sell its parts division and then shut down under a Chapter 11 plan approved by a bankruptcy court last week, according to Dow Jones. Willis Stein & Partners, the Chicago buyout shop, acquired the company from its German owners in 1998. Neoplan filed for Chapter 11 bankruptcy in Wilmington, Del. in August, listing assets of $13.7 million and debts of $59 million. www.neoplanusa.com www.willisstein.com