Within a fortnight of its Greenfield acuisition, Microsoft Corp has signed a deal to divest  the Greenfield Online Internet survey solutions (ISS) business to ZM Surveys LLC, an entity affiliated with private equity firm ZM Capital L.P, making it the PS firm's first portfolio investment. 

It had acquired Grenfield, parent firm of the European shopping and price comparison site Ciao on 29 August to strengthen its search and e-commerce services in Europe, in an all-cash $486-million deal (See: Microsoft to acquire price comparison site Ciao's parent, Greenfield Online).

At the time of announcing the Greenfield acquisition, Microsoft had planned to split up Greenfield Online and sell off the internet survey business that Greenfield owns, while Ciao's technology platform, online community and extensive merchant relationships were to be integrated within its own Live Search platform.

ZM Capital plans to keep the Greenfield Online ISS business as a stand-alone, independent, privately held company.

ISS collects, organises and sells consumer and business professional data in the form of diverse and demographically representative survey responses and targets them at approximately 2,500 full-service marketing research and consulting firms and large international marketing research companies worldwide.

ISS manages Internet panels, including the Greenfield Online panel in the United States and Canada and the Ciao Survey panels in Europe and other countries in Asia and Latin America, and provides solutions via its Real-Time Sampling capability that recruits survey takers across the Internet in real time.

''We believe that Microsoft's decision to sell Greenfield Online's ISS business to ZM Capital is an excellent opportunity to strengthen our industry leadership around the world,'' said Albert Angrisani, president and chief executive officer of Greenfield Online. ''The ZM Capital acquisition is a very positive development for ISS clients and employees, and I believe the team at ZM Capital has the right combination of domain experience and resources to help the ISS business develop the next generation of products and services.''

''We are excited to acquire one of the industry's leading service providers as the inaugural investment for ZM Capital,'' said Andrew Vogel, a partner at ZM Capital. ''We intend to keep the Greenfield Online ISS business a stand-alone, independent service provider and have no current plans to integrate or merge ISS with any other company. We look forward to working with the management team to leverage the company's strengths in data quality, technology and worldwide reach to further its global leadership and to deepen the company's relationships with its approximately 1,000 market research clients.''

''It was very important to Microsoft to find the right partner to champion the continued growth of the Greenfield Online ISS business, which is not a fit within Microsoft's strategy for our Live Search platform,'' said Tami Reller, corporate vice president and CFO for Windows and Online Services at Microsoft. ''The strength of the ISS business allowed us to find the right buyer for that business, letting us focus on our acquisition of Greenfield Online and its Ciao comparison shopping business, which we believe will help bolster our commercial search strategy in Europe.''

The agreement with ZM Capital is subject to customary closing conditions, including a financing contingency. Microsoft's acquisition of Greenfield Online is not contingent on the closing of the sale of ISS to ZM Capital. The merger of Greenfield Online and Microsoft and Microsoft's sale of the ISS business are expected to close simultaneously in the fourth quarter of 2008.

Deutsche Bank Securities Inc. served as Greenfield Online's financial advisors in connection with the transaction. Paul, Weiss, Rifkind, Wharton & Garrison LLP served as Greenfield Online's legal counsel.

NewStar Financial and CIT are providing senior financing and Veronis Suhler Stevenson's Structured Capital fund is providing mezzanine financing in connection with ZM Capital's acquisition of the ISS business. Kirkland & Ellis LLP served as ZM Capital's legal counsel.