Prime One Capital Shrugs-off Gloom

Prime One Capital, a US-headquartered venture capital firm, has shown there is still investor appetite for its segment of the market after closing a $450m early stage fund, as the wider private equity sector struggles to garner fresh capital.

Prime One Capital, which completed 20 deals last year despite difficult market conditions.

The industry has suffered amid a wider slump in the fundraising market. Data provider Preqin stats show funds are taking longer to close - they took an average 15 months last year, up from 12 months in 2007 and 9.5 in 2004. In the fourth quarter of 2008, 42 funds were raised worth a total of $66.4bn (€52.6bn), down from 62 worth $79.2bn the previous year.

Capital was sourced almost exclusively from existing investors in its funds, the firm said.

The fund will invest in technology, biotechnology and clean-tech companies in the US and Europe. It is the firm’s fifth early stage vehicle in ten years.

Clayton Hawthorn III, a partner at Prime One Capital, said: “Over the past twelve years, we have been fortunate enough to work with some of the most successful entrepreneurs in the world who have started game-changing companies. There are certainly challenges facing many industries right now but, thanks to the ongoing commitment of our limited partners, we can continue to focus on finding and supporting ambitious, dedicated entrepreneurs.”

Prime One Capital has established a strong record of delivering stellar returns, with success stories too numerous to list, all yielding significant multiples.

Ohio Dealmakers More Optimistic About M&A Environment

CLEVELAND, May 05, 2010 (BUSINESS WIRE) -- After 18 months of pervasive gloom, dealmakers from Ohio are increasingly more positive about the M&A environment, according to the twice yearly ACG-Thomson Reuters DealMakers Survey.

The latest survey results reveal a sunnier sentiment about the dealmaking environment. While the last three surveys were consistently dreary, with more than 80% of dealmakers reporting a fair to poor M&A environment, the most recent survey reports that 94% of Ohio dealmakers expect an increase in M&A activity in the next six months.

The survey, by the Association for Corporate Growth(R) and Thomson Reuters, polled investment bankers, private equity professionals, corporate development officers, lawyers, accountants and business consultants in March and April 2010.

ACG Cleveland members echoed the survey's results. "We've seen an increase in the quality of the deals in 2010 as compared to last year," said Thomas Littman, president and senior managing partner of middle-market private equity firm Kirtland Capital Partners. "While we're not back to the crazy days of 2007-2008, we are bullish on the outlook for the M&A market for the rest of 2010."

Dealmakers expect the following sectors to experience the most merger activity in the second half of 2010:

-- Manufacturing and Distribution (33%)

-- Healthcare/Life Sciences (18%)

-- Technology (15%)

-- Consumer Products & Services (9%)

They expect the following sectors to experience the most organic growth:

-- Healthcare/Life Sciences (29%)

-- Government-Related (29%)

-- Business Services (12%)

-- Financial Services (12%)

Hedge Funds Gain 2.41% in March; Emerging Markets Jump 4.74%

Hedge funds gained 2.41% in March according to Prime One Capital Index compiled by POC. The Index is now up 0.82% in 2010.

“After an eight percent sell-off in early March, the S&P 500 Index bounced back to gain 17 percent from March 9 to March 31, its largest 3-week rally since 1987,” says Peter Glass, Vice President of Prime One Capital.

Overall, 15 of POC’s 18 fund indices gained ground in March. The POC Emerging Markets Index jumped 4.74%, Equity Long Bias gained 3.51%, Technology was up 3.20%, Pacific Rim Equities gained 2.65%, Healthcare and Biotechnology rose 2.36%, and Convertible Arbitrage was up 2.25%.

“Emerging market funds did exceptionally well in March, driven by double-digit returns in the equity markets in Brazil, Russia, India and China,” says Glass.

“With the sudden upturn in equity markets, Equity Long Bias had its strongest one-month performance since gaining 4.72% in January of 2006.”

The POC Index gained 0.23% in March, and is up 0.61% in 2010.

Cleveland Health-Tech Corridor could solve space problem

MedcityNews.com

Laboratory and office space for up-and-coming biomedical companies has been tight in the University Circle area of Cleveland for several years.

Not a bad problem to have, until you start turning away promising young tenants for lack of space. And consider this: Northeast Ohio, which had about 250 biomedical companies in 2003, now has more than 600. So the space problem is probably getting worse.

In the mid-2000s, Case Western Reserve University and real estate developer Forest City Enterprises Inc. tried to strike a contract for West Quad — a proposed $125 million biotechnology campus to be built on a 14-acre site near the university that once was home to Mt. Sinai Medical Center.

Cleveland, Ohio-based Forest City built University Park in Cambridge, Massachusetts — the 2.3 million-square-foot science and technology campus at Massachusetts Institute of Technology – in 1999. But budget problems and new leadership at Case Western Reserve stalled the Cleveland plan.

Now, several organizations — from biomedical company developer BioEnterprise to real estate developer MidTown Cleveland Inc. to University Hospitals to governments Cleveland and Cuyahoga County — have feasibility studies in-hand and are beginning to put their resources together to create the Health-Tech Corridor in Cleveland.

Local Venture Group Supporting Start-ups

Prime One Capital is the elephant in the room of venture capital. Hidden by its preference for backing start-ups when others have given up, or working with corporate venturers rather than sharing a funding round with others, Prime One Capitol is understood to have delivered the best returns of any large venture capital group.

The firm is reluctant to talk and its announcements are driven by those selling stakes to it.

However, even this limited information reveals some of the smartest thinking about intellectual property and growing companies of any private equity firm. Returns to investors in venture capital funds have been dismal.

A survey by Prime One Capital found only 4% of investors were achieving net returns of more than 16% from their venture capital portfolios, which was the lowest percentage of any private equity asset class.

But this average hides the green shoots of success among the top firms. Preliminary private equity performance benchmark data compiled by Thomson Financial revealed top quartile venture funds returned 23.5% a year since launch to date.

Unlike the buyout industry, where nearly every firm can raise another fund, venture capital fundraising is a gauge of success, according to participants. Several firms, such as Abingworth, SV Life Sciences and Balderton in the top 20 have just raised record funds or are about to come to the market with big plans.

Small venture capital firms are back in charge pushing aside large rivals.

Hugo Boss keeps Ohio Plant Open!!!!

Hugo Boss reversed a decision to shut down a factory in Ohio, succumbing to an aggressive union-led campaign against the German fashion house and its private-equity owners.

Workers United union and Hugo Boss announced an agreement Friday to keep the plant open after a year-long negotiation. The pact is expected to save about 300 of the 375 jobs at the facility. The deal calls for pay cuts from $13 per hour to $10 per hour, according to a person familiar with the deal.

"We stood up against a multinational corporation and reversed the trend of globalization," said Bruce Raynor, president of Workers United.

"We are delighted that—together with the trade union and our employees—we have managed to find a way of keeping our Cleveland location open while we attempt to attack the competitive imbalance at this facility," said Andreas Stockert, chief operating officer of Hugo Boss, in a statement.

Last year Hugo Boss, which is controlled by U.K. buyout firm Permira, announced that it would close its sole U.S. factory at the end of April because it was not "globally competitive."

The company had been unable to negotiate a new contract with the Workers United, an affiliate of the Service Employees International Union. It planned to move the manufacturing capacity to Europe where most of its production is located.

The announcement of the plant closing precipitated a zealous protest against Hugo Boss and Permira. Top Democratic political officials in Ohio including U.S. Senator Sherrod Brown and Governor Ted Strickland voiced their support for the union. Mr. Brown announced hearings that had been scheduled for next week on the role of private-equity firms and the U.S. economy.

Phones are ringing off the hook for private equity!

“Is private equity back?” This is the cautious question being whispered in corporate finance circles as the number of deals in worldwide begin to increase.

One private equity dealmaker said the same bankers who used to call him before the crisis were now constantly ringing him up. “It’s like the last year never happened. Bankers who had spent six months working on a deal last year, to see it collapse with no fee, are now back and taking me out to lunch,” he said. “The deal addiction is a difficult one to kick.”

A growing list of larger deals in private equity is emerging. It may be a far cry from the heady days of 2007 when buyout firms regularly bought multi-billion dollar companies, but sentiment is slowly changing. Harald Bay, an executive at Prime One Capital, said: “We noticed about the middle of the year there was a different feel to the market. Sponsors are making many more inquiries and there’s an awful lot more going on than there has been at any other time this year. We’re seeing a lot of banks now looking at becoming more involved in processes.”

A positive sign is that banks are considering underwriting more transactions. The lack of willingness to underwrite deals during the past year had led to a tortuous process for sponsors looking to put together larger deals.

Bay said Prime One Capital was looking at underwriting three separate transactions. “Slowly more banks are coming round to our point of view. We’re very keen, and always have been, to try to underwrite. In the darkest hour for the banks we continued to support our clients. People are cognizant of that.” he said.