Those all-telling exits

The world of venture capital and private equity is all-too-often consumed by a focus on exits. But as a test of the economy, I believe they are a clear gauge of confidence and comfort within the world of business decision-makers (see prior post “M&A deals a sure sign of brewing confidence“).

We’ve had two exits over the last month or so, and the buyers in each case were the traditional large tuckunder types that you’d expect to win an auction for a sponsored business. Last December, buyers like this were no where to be seen; whatever the business or sector.

The sale of Wellington Financial Fund II portfolio co. Nexient Learning to Global Knowledge signifies the final exit for our 2004-vintage fund. Nexient is in the corporate skills training business, serving enterprise customers such as Canada Post, EnCana, Rogers, etc. The largest national provider in Canada by far. But a fixed cost business isn’t a great thing to manage during a brutal recession, and a sale was necessary to preserve the platform and the team. For N.C.-based Global Knowledge, backed by PE firm Welsh Carson, it was a natural way to enter Canada.

Our other recent exit was the acquisition of Wellington Financial Fund III portfolio co. BorderWare by Seattle-based WatchGuard. WatchGuard is backed by Vector and Francisco Partners, each well known U.S. funds in their own right. Both businesses were strong in different areas of email and network security, and channel partners have responded well to the merger. WatchGuard also became a client of our Fund III when they borrowed part of the purchase price from us to finance the acquisition.

Although these are but two more straws in the wind, they speak to a continued confidence about where 2010 is headed. Can’t come too soon.

MRM