CIBC takes Accenture's VC portfolio
by Vyvyan Tenorio
TheDeal.com
Updated 08:05 PM EST, Aug-6-2002
In a move that surprised some secondary market executives, CIBC World Markets said Tuesday, Aug. 6, it has purchased most of Accenture Ltd.'s venture capital portfolio for an undisclosed price.
The Hamilton, Bermuda, consulting firm will retain 5% of the portfolio, which comprised 80 early- to mid-stage technology companies, mostly in software. Accenture has paid about $325 million for minority stakes in them.
Accenture, which rode the venture capital investment wave starting in 1999 with an intent to invest $500 million, is one of many corporate venture capitalists to exit the industry now that returns have soured. It has shopped the portfolio around to secondary-market buyers at least since March, when Accenture said it was halting new venture capital investments and selling its venture portfolio because of its losses. At that time, it reported a book value of about $95 million for the portfolio and said it would take a charge of $212 million in the second quarter to cover anticipated losses from the sale. No additional charges are expected in connection with this sale.
CIBC, the New York investment arm of the Canadian Imperial Bank of Commerce, was a surprise buyer. It has not been an active buyer of secondary private equity interests for at least 18 months, despite frenetic dealflow coming from corporate venture portfolios.
"Acquiring portfolios with direct investments is a much different game than buying limited partnership interests in venture funds," said Scott Conners, a principal at Landmark Partners Inc. of Simsbury, Conn. "It's much less diversified, and managers of corporate venture units don't normally have the same disciplines as the traditional venture fund managers. Also, even if they had the requisite management skills, why not handpick your own investments rather than acquire other people's baggage?"
According to sources, Accenture had been negotiating with frontrunner Thomas Weisel Partners LLC of San Francisco. Credit Suisse First Boston, retained as investment adviser, was also believed to be a potential buyer. Neither could be reached for comment.
CIBC gave no details on the transaction, due to close at the end of the year. As with all secondary market transactions, it remains subject to transfer approvals from companies within the portfolio.
Some secondary market sources said they had given Accenture's offer a "quick look" but declined because the portfolio consisted of direct investments that are tougher to manage or require undetermined extra financing to make them viable.
"They've been trying to sell for a long time now, and it didn't look spectacular to me," said one potential New York buyer.
Conners added: "Many corporate venture deals tend to be 'me-too' deals that they pay a high price for."
CIBC executives described the deal as "an attractive investment" opportunity.
"The acquisition clearly demonstrates our commitment to the technology sector generally and software specifically," said Marshall Heinberg, a CIBC World Markets managing director and head of U.S. corporate finance, in a statement.
It isn't clear whether the transaction will include the transfer of any managers from Accenture Technology Ventures, the Palo Alto, Calif., business unit that made the original investments, to help manage the assets.
CIBC's venture group, consisting of six investment professionals, makes direct investments as part of CIBC Capital Partners. Its portfolio currently includes about 50 companies, primarily in North America. Since its inception in 1989, CIBC Capital Partners has invested more than $1 billion.
The firm would not elaborate on its secondary market activities, but one New York-based secondary specialist said CIBC hasn't bought such interests since a $300 million purchase nearly two years ago.
Accenture, which split from Arthur Andersen LLP and was formerly known as Andersen Consulting, said it will continue its existing client relationships with companies in the portfolio.
Accenture made only direct investments in companies, putting in $2 million to $30 million, according to New York financial markets research firm Capital IQ. Portfolio companies include AltoWeb Inc., a Palo Alto-based supplier of application production platforms, and Epylon Corp., a San Francisco-based online procurement company.
Accenture and CIBC World Markets also said they plan to join an alliance to offer CIBC access to Accenture's technology-sector knowledge. |
