Private Equity Blogger.com

Venture Capital Confidence

2009-11-12T10:15:00.001-05:00

Venture Capital Confidence

Reading into the Venture Capitalist 'Confidence Index'

As Sarah Lacy of Techcrunch.com recently wrote, venture capitalists often talk about downturns being the right time to invest in startups. Yet the data does not reflect this belief. An interesting study was conducted by University of San Francisco associate professor of entrepreneurship Mark Cannice. He asked local venture capitalists how confident they were in the high growth industry in the next 6-18 months. This "confidence index" shows an upturn and downturn by quarter. For example, in the last quarter of 2007, when the VC industry was booming, the confidence index took a dive. Similarly, when the markets were still struggling in the start of 2009, VC confidence was soaring. So, it appears venture capitalists really can predict economic cycles. (You can find the USF Confidence Index data here).

Now, venture capitalists' confidence is the same in this quarter as it was in the second quarter of 2009. This could mean that VC's are hesitant to decide whether the current recovery is real or just the calm before another storm. The IPO market seems to be reviving but until venture capitalists see solid evidence of this recovery, they won't get their hopes too high.

Here's more from Sarah Lacy on this confidence index and the VC industry:

So what does that mean? In short, they're still confident, but waiting for that confidence to be backed up by reality.

Here's the good: VCs still feel there's a lot of good new companies out there, and they know that to make returns ten years from now, they have to keep the dollars flowing now, according to the survey. What's more: There are more private tech companies with more than $50 million in annual revenues that haven't yet exited than ever before. It's a combo of some dot com survivors whose markets finally caught up with their original hype and some surging newer companies. Both are either having a hard time going public in stock market that ignores mid-cap companies or are run by CEOs that just don't want to go public in a short-term, Sarbanes Oxley world.

Here?s the bad: VCs essentially have two 'customers' and both are cautious buyers of what VCs are selling right now. One are the LPs, who despite the recovering public markets are way over-allocated in illiquid venture capital funds and, whether they believe in the asset class long term or not, they're being forced to sell stakes or at a minimum curtail investing in the next cycle of funds. Read more here.

Popular private equity articles:

Tags: confidence index, venture capital confidence, venture capitalists, venture capitalism, venture capital investment, quarter data, venture capital and private equity

TPG Japan Airlines

2009-11-11T09:43:00.000-05:00

TPG Japan Airlines

TPG May Buy Minority Stake in Japan Airlines

TPG may purchase a minority stake in Japan Airlines in order to prevent the company from moving to Delta Airlines. The deal is overseen by American Airlines, which is hoping to expand to Japan Airlines' network in Asia. Japan Airlines is swamped with $15 billion in debt, large pension deficit and unpopular money-losing routes. The Japanese government has said it would bailout JAL for the fourth time since 2001.

Even as it struggles to avoid bankruptcy, JAL is being wooed separately by American Airlines and Delta Air Lines, which are keen to gain access to JAL's network in Asia and a stronger foothold in Japan. JAL is Asia's largest carrier by revenues.

AMR's Thomas Horton said TPG, which helped fund Continental Airlines emergence from bankruptcy in 1993 and backed a failed takeover attempt for Australia's Qantas Airways (QAN.AX) in 2007, has agreed to potentially invest in JAL as part of any deal with American Airlines.

"As appropriate and if it were welcomed by Japan Airlines and the government of Japan, TPG could also be part of a comprehensive recovery plan," Horton told reporters in Tokyo.

"They have been active in the airline space over the years." Source

Popular private equity articles:

Tags: TPG Japan Airlines, Japanese airlines, texas pacific group, tpg private equity group, texas pacific japan airlines, minority stake

Private Equity Outlook 2010

2009-11-10T10:00:00.005-05:00

Private Equity Outlook 2010

Venture Capital & Private Equity Outlook 2010 Video

I came across a great video today from the Venture Capital and Private Equity Outlook 2010. It's difficult to guess what the future holds for private equity. At the onset of the recession, few were expecting such a severe downturn; in 2008, it seems some predictions were overly pessimistic. Now that the worst of the recession appears to have passed, it is a bit easier to predict how the buyout industry will fare in 2010 and beyond. A diverse panel from VC's to buyout managers addresses this question including: Rich Brenner, President & CEO, The Brenner Group, Inc.; Rajeev Batra, Director, Mayfield Fund; Rich Garnick, Founder &CEO, The ConJoin Group; Rich Lawson, Co-founder & Managing Director, Huntsman Gay Global Capital.

Popular private equity articles:

Tags: private equity video, private equity outlook 2010, venture capital and private equity outlook 2010, private equity outlook, videos, buyout outlook, future

China and Private Equity Investment

2009-11-09T10:00:00.001-05:00

China and Private Equity Investment

Carlyle Group Sees China as Best Private Equity Destination

I recall a discussion I had with a private equity professional a few months ago. He was preparing to move to China in anticipation of the economic development and the opportunities for private equity investment. It appears his decision was a good one.

This has been a big year for China and private equity despite the dismal economic climate. China's national pension fund has invested in four private equity firms this year and the fund's manager has promised, "The social security fund won't stop investing in PE in the future." And buyout funds are returning the favor, led by Carlyle Group, taking both minority and majority stakes in Chinese companies.

David Rubenstein, co-founder of Carlyle Group, has selected China as the most desirable location for private equity investment. Rubenstein said at a recent conference, "I regard China as the single most attractive place in the world for us to invest at the moment." His buyout firm is a testament to this belief, last year Carlyle agreed to invest $87 million in a Shanghai-based chemical company, as well as committing $50 million to a private education firm in China. It has bought a minority stake in a Chinese infant formula producer. And with Carlyle raising $1.04 billion for a fourth Asian development fund, more deals in China are expected. So, it is little surprise that Rubenstein is so optimistic about the outlook for private equity investment in China. Other buyout firms are active in China too; KKR, Sequoia Capital and other funds have invested over $1 billion combined in China's dairy industry.

The U.S.-based private-equity fund, which has more than $86.1 billion under management, is planning to expand its presence in China by setting up a yuan-denominated fund.

"For any of the large private-equity firms in the West to be a real player in China you probably should have a RMB fund," he said, using another name for China's currency.
Until now, Carlyle's investments in China--as with most foreign private-equity firms--have been from funds raised in dollars outside of China. Yuan-denominated funds will allow foreign firms to avoid a lot of regulatory red tape while accessing China's massive domestic savings.

Rubenstein said that over the last two years Carlyle has invested $2.5 billion in China in 47 deals.
Speaking on the eve of U.S. President Barack Obama's first visit to China, he said that the U.S.-China relationship is the "best it's ever been."
"Right now the Obama administration has excellent relations with the Chinese government." Source

Also see Blackstone Group in China.

Popular private equity articles:

Tags: private equity china, private equity development, asian private equity investment, buyout capital buyout investment, private equity firm Carlyle Group, Blackstone

LBO Debt

2009-11-06T10:31:00.002-05:00

LBO Debt

The Worrying Debt Facing 10 Large LBO's

Buyout deals financed between 2005-2007 are "drowning in debt" and struggling to refinance in this economic climate. Moody's Investors Service has tracked the performance and finances of companies owned by the top 14 buyouts firms as well as non-mega buyouts in its report, "$640 Billion & 640 Days Later: How Companies Sponsored by Big Private Equity Have Performed During the U.S. Recession" and found that six are considered distressed and four have defaulted.

I've discussed this mounting pile of debt previously when debating the so-called "comeback" of private equity, and I still believe it is an obstacle facing the industry that must be addressed before the bigger buyout firms can execute new deals consistently at a pre-recession level. Buyout firms may have been correct to continue to use borrowed capital to keep their failing portfolio companies afloat in the crisis, but Moody's may be correct in suggesting that several large investments are due to default anyway. I have a suspicion that the Moody's estimate may be exaggerated to some extent but there is no denying the debt issue.

It appears these deals were financed with the hopes that the recession would be shorter or that the buyout management would be able to turnaround the company enough to scrape by in the crisis. However, most of these firms are consistently under-performing and hope for returning to profitability is dwindling. An important note is that very few of the companies held by private equity firms received capital infusions to reduce their debt, those buyouts injecting capital were likely trying to avoid covenant violations.

The report found that deals by Cerberus Capital Management LP and Apollo Management Lp have performed the worst among their peers. Four of Cerberus' six buyouts are in distress or in default, and about two-thirds of Apollo's companies are in equally dire straits. However, these firms have focused more closely on distressed targets than their peers covered by Moody's, including Kohlberg Kravis Roberts & Co., Blackstone Group LP (NYSE:BX), Welsh, Carson, Anderson & Stowe and Madison Dearborn Partners. Additionally, the revelation about problems in Apollo's and Cerberus' portfolios was already well known thanks to the high-profile bankruptcies of Cerberus' Chrysler LLC and Apollo's Linens 'n Things Inc.

"These mega-deals continue to under-perform," said John Rogers, Moody's senior vice president. "As with Harrah's, the announced debt exchange at the former TXU is only the first step in addressing its over-leveraged capital structure."

Only three of the biggest 10 LBOs remain above the distress level, according to Moody's:

HCA Inc., bought by a private equity consortium for $35.3 billion;

First Data Corp., another "Large Club" LBO, acquired for $29 billion; and

Hertz Global Holdings Inc. (NYSE:HTZ), bought out by a private equity consortium led by Carlyle Group for $15 billion in 2005. Source

Popular private equity articles:

Tags: LBO debt, leveraged buyouts, leverage, buyout, private equity deals, debt, restructuring, refinancing

Email Marketing Best Practices

2009-11-04T10:00:00.011-05:00

Email Marketing Best Practices

Capital Raising With Email Marketing Best Practices

I am syndicating the following article from Richard Wilson of Hedge Fund Blogger. I have worked with Richard for years and he is extremely knowledgeable in capital raising for hedge funds. The recent poll on this blog has led me to enlist Richard's help in providing more articles on fund marketing. The best practices he employs are very applicable to private equity, given that you are targeting the same investors for alternative funds.

Marketing has evolved to include e-mail marketing in many funds' capital-raising strategies. Similarly, businesses and start-ups searching for capital have also successfully implemented email marketing. While a large amount of marketing remains more personal, either face-to-face meetings or by phone, email has become an accepted and even preferred form of contact. Therefore it is essential to have experience in copy writing.

I worked as a risk consultant and capital raiser for 7 years before starting my own firm. During the last few years of those positions I was responsible for raising most assets on an email and phone-based system and I have slowly picked up some tips for capital raising since then. I started my own firm 2 years ago and since then I have sent and received over 800,000 emails. Our business is so email-based that we have been forced to study best practices within this space to improve our efficiency at connecting with potential clients.

Most CEO's don't invest their time or put much importance on managing email communications. One of my favorite quotes by Brian Tracy is that if you don't what others won't you will get what other's don't. If you invest your time in increasing your effectiveness at email marketing you will have an edge over others.

Tonight I'm speaking on email marketing for capital raising. I will be sharing best practices in reaching out to potential and current investors through writing copy and using email marketing best practices. While 99% of those reading this blog will not be able to attend the event we will be posting a recorded video of this discussion to Hedge Fund Premium and sharing some of the tips below within this post:

Email Marketing Best Practices

Understanding Importance of Copy: What is the difference between a $1 and a $100 bill? The message on the paper. The message on your email, the message on your investor letters, the message on everything you write makes the difference between it being worth $1,000 and $100,000. I think that sales copy writing is consistently under-valued and overlooked by business and investment professionals of all types. One of my best tips for email marketing would be to simply not overlook the power of a carefully constructed email marketing campaign or well written piece of communication.
Use the professionals first name within the subject of emails to them - Marketing Sherpa 2008 study showed this increased open rates by 30%, using both the first and last name increased open rates by 22%.
Focus on the Headline: The most important part of any piece of copy is the headline. Often times over email the headline of the email is a slight variation of the subject line, perhaps the subject line minus the person's first name. Focus on fitting a benefit and then the chain reaction of that benefit into the headline if possible. "Double Your Capital Raising Resources to Cultivate More Investors Each Day" We have found that putting the benefit after your firm name is most effective. Just be careful not to promise benefits that are odds with your compliance department.
Focus on the Start: Hook the reader within the first paragraph. Make sure the first paragraph is no longer than 2 sentences and provides a very concise summary as to what will be discussed within the following message. If possible try to fit in both what the benefits will be of hearing this information and what the dangers are of not paying attention to this information. Psychology studies consistently show that professionals are almost twice as likely to listen more closely and take action on information related to a fear or some negative result rather than some potential benefit or positive outcome. This does not mean you should scare clients into working with you, but you should hook readers using framing which mentions the positive as well as negative consequences of not taking action. The recent use of email browsers which let you preview the first 50-150 words of email messages make the start of your email even more important.
Use Professional Email Distribution Services: Use a professional email distribution services such as Aweber, this costs $10/month or less to start using. By using this service your emails will be delivered more often, your campaigns will be more organized and the service will more than pay for itself through saving you and your time valuable time. Make sure that whatever service you use, you consider opt-in confirmation and enable an unsubscription link at the bottom of each email you send.
Automate Relationship Development: Use automated follow up emails. Write a series of 20 educational emails covering industry white papers, industry findings, commonly misunderstood terms, and information about your fund. Once you have qualified an investor, ask for their permission to opt into an email list which will automatically email these professionals once a month for the next 20 months. If you deliver value within each of these 20 emails your further inquiries will be well received. We currently use Aweber to send out automated emails to over 50,000 professionals each month.
Use Stories: Whenever you are writing an email or sales letter try to incorporate a story of some type. How was this product created? How did your career and experience evolve and bring yourself to this point where you have gained this knowledge? If you scroll up to the beginning of this post you will see that I have a short story about my own experience with email marketing which led me to write this article.
Picture & Signature: End your communication with a picture of the professional on your team which is held out as the communicator or leader. Make sure that a real scanned signature and professional picture are included to help readers connect with your team.

I hope these tips help you improve your email marketing campaigns!

To learn more on fund marketing read Private Equity Fund Marketing

Also read how to create a Private Equity Pitch Book

Popular private equity articles:

Tags: private equity, private equity management, fund marketing, best practices, email marketing, fundraising, capital raising by email, fund raising by email

Private Equity Insider Trading

2009-11-03T10:09:00.000-05:00

Private Equity Insider Trading

Looking at Recent Private Equity Insider Trading Cases

Last week, the SEC filed charges of insider trading against seven individuals including Ronald Yee, former CFO at ValueAct Capital and Chen Tang, former employee at Friedman Fleischer & Lowe (a San Fransisco buyout firm).

Tang and Yee, who are brothers-in-law, along with the others in the case, allegedly made nearly $2 million in profit from trading Tempur-Pedic shares, and $6 million from trading shares of Acxiom, based on information they obtained by virtue of their employment at Friedman Fleischer and ValueAct, respectively, according to the SEC. Lawyers for the two said they will fight the charges. Neither of the firms where the two worked are implicated in the case - indeed, the SEC appears to have bent over backwards examining their ethics and compliance policies. Friedman Fleischer sent a firm-wide email advising of a trading blackout in Tempur-Pedic as the firm considered that deal, while the SEC said ValueAct has ethics and insider trading policies that Yee had certified he understood several times. Source

While insider trading is not common in the buyout world there is a history of some private equity individuals profiting off inside information. The Journal has provided a brief history of insider trading in private equity which includes Hilton Hotels Corp, Albertson’s Inc., TXU Corp., Petco Animal Supplies Inc and others. See the article here.

Popular private equity articles:

Tags: Private Equity Insider Trading, Private Equity Insider Trading cases, private equity SEC, securities and exchange buyouts, buyout insider trading

Private Equity Companies Debt

2009-11-02T00:01:00.000-05:00

Private Equity Companies Debt

Debt-Heavy Portfolio Companies Taken Over By Lenders

Private equity firms are struggling to protect their portfolio companies from bankruptcy. As the recession continues, several private equity-backed companies have been taken over by lenders causing the private equity investors to lose their stakes.

Recent examples include CPI Group (Europe's biggest book printer), Linpac (maker of the plastic packaging for McDonald's), and Navimo (producer of yachting accessories). The private equity buyers--such as CVC Capital Partners and Montagu--have lost control of these companies in the recession and there are fears that other debt-laden companies may fail as well.

What do the maker of McDonald’s fast food cartons, Europe’s biggest book printer, and a French yachting accessories group have in common?
They are all companies bought by UK-based private equity groups before the credit crunch, which have run into trouble because of excessive debts and been taken over by their lenders in the past few weeks.

The next wave could include Hit Entertainment, the Apax Partners-owned media group behind Bob the Builder and Thomas the Tank Engine; Gala Coral, the betting and bingo group owned by Cinven, Candover and Permira; and Foxtons, the London estate agents owned by BC Partners.
The growing list of credit crunch victims illustrates how hard private equity groups are having to fight to protect investments.

The latest example is Linpac, the Birmingham-based maker of plastic packaging for McDonald’s and Tesco, which has been taken over by lenders led by Lloyds Banking Group in a restructuring that halves its debts to about £320m ($526m). Source

Popular private equity articles:

Tags: Private equity, private equity firms, private equity companies, company lenders, buyout financing, restructuring, private equity assets, buyouts

Technology M&A

2009-10-30T09:24:00.002-04:00

Technology M&A

Is Technology M&A at a Tipping Point? | Video

Jeff Bistrong, managing director with the middle-market-focused investment bank Harris Williams & Co, says that lending is getting better in the middle market. Bistrong talks specifically of a technology M&A being at a tipping point, with stock prices rising and more interested buyers. E-mail subscribers can watch the video here:

Popular private equity articles:

Tags: technology m&a, m&a, tech mergers and acquisitions, technology, tech investments, technology buyouts, technology 2009, videos, private equity videos

Private Equity Managers 1 Year

2009-10-28T10:00:00.000-04:00

Private Equity Managers 1 Year

Bill Proposes Giving Buyout Managers 1 Year to Register

The House Financial Services Committee has passed a bill that will give alternative asset managers--including private equity fund managers--one year to register with Securities and Exchange Commission. The drafter of the proposal said that the grace period is necessary because both fund managers and the SEC will need time to prepare for the new work required for registering and examining the funds.

Hedge-fund managers and private-equity managers would be given a one-year transitional period before being required to register and open up their books to periodic examinations by the Securities and Exchange Commission, according to a measure approved by the House Financial Services Committee on Tuesday. Rep. Susan Kosmas, D-Fla., the drafter of the measure, said a one-year transition period for registration is necessary because both the SEC and fund managers will need time to organize themselves. "The SEC will need time to prepare for the additional responsibilities that will come from the registration of potentially thousands of new managers," said Kosmas. She added that managers will need time to set up formal compliance programs, hire chief compliance officers, all of which is required by the legislation. Source

Popular private equity articles:

Tags: private equity managers, private equity fund management, private equity assets, buyout managers, registering with the SEC, compliance regulation, private equity compliance

Private Equity North Africa

2009-10-26T01:50:00.001-04:00

Private Equity North Africa

New Opportunities for Private Equity in North Africa

Local businesses in some north African countries have picked a poor time to seek private equity investment. While many private equity firms are interested in investing in the area, the financial turmoil has led most buyout groups to hold back from making new deals.

The demand for outside capital is largely a result of incentives for businesses located in North African nations including Tunisia, Morrocco and Egypt. The region is becoming a more attractive destination for companies because of tax breaks, cut price land deals and new free trade zones. Unfortunately, these pro-business reforms have come at a time when few private equity firms are interested in new ventures.

"There is lack of funding for these relocations, yet people want to do it more and more. It's a paradox," said Dekli. Delegates at the Euromed Capital Forum said the global downturn had not interrupted a trend for north African family-run firms to seek foreign expertise and capital to grow.

Algeria, seen as tough for foreign investors outside the dominant energy sector, announced its first capital development fund set up by bank BEA in cooperation with Portugal's Banco Espirito Santo and French capital investment group Siparex.

Barriers to trade and investment across the region have stymied economic integration -- political tensions have shut the border between Morocco and Algeria for more than a decade. Yet some firms backed by venture capital are starting to expand across the region...Private equity is hoping for a growing role in state-led projects for roads, railways, ports, health and education.

Read whole article here.

Read more about Private Equity in Africa

Popular private equity articles:

Tags: private equity north africa, northern africa, private equity in Africa, North Africa private equity, firms, investment, foreign investment, north africa business

Boston Hedge Fund Networking Event Thursday 10.29.09

2009-10-25T13:29:00.002-04:00

Boston Hedge Fund Event

Our next networking event is coming up quickly, this Thursday we are hosting 3 speakers for short 15 minute discussions on hedge fund compliance, capital raising strategies, and pending regulations. We will then have 1 hour and 15 minutes of open networking time with food and drinks provided to attendees.

What: Hedge Fund Group and Hedge Fund Premium are hosting a seminar networking event in downtown Boston.

When: Thursday October 29th, 2009 6-8PM EST

Location: U Mass Club in downtown Boston at 225 Franklin Street, 33rd Floor Boston, MA 02110.

Sponsors: Malik Law Group & Armor Compliance

Entrance Fee: Waived, our sponsors have covered the costs of this event and not entrance fee will be required for this Boston event.

Speakers:

Tanya L. Goins, Malik Law Group: Harvard Alumna, Tanya L. Goins, Esq., of Malik Law Group comes back to Boston to speak about recent regulatory and industry developments affecting hedge fund managers.

Richard Wilson, Hedge Fund Group: Richard will speak about copywriting capital raising, how fund

managers can write more effective sales letters and improve their email marketing.

Douglas F. MacLean, Armor Compliance: Douglas will speak about the Private Fund Investment Advisers Registration Act of 2009, which will soon require hedge fund managers managing more than $30 million to register under the Investment Advisers Act, appoint a chief compliance officer and implement a compliance manual.

<a href="https://hedgefunds.wufoo.com/forms/m7x3a7/" title="Networking Event RSVP Form" rel="nofollow">Fill out my Wufoo form!</a>
Tags: Boston hedge fund premium event, hedge fund premium event in Boston, hedge fund networking events in Boston MA, Boston hedge fund manager networking

Private Equity Blogger Poll Results

2009-10-22T10:26:00.002-04:00

Private Equity Blogger Poll Results

Private Equity Blogger Poll on Reader Interest Results

I have ended the PrivateEquityBlogger.com readers poll after a month and I want to say thank you to all those who responded. This website is a service to those interested in private equity and I wanted to know what readers would like to see more of in this blog. Your response was the following (e-mail subscribers click here for results):

Fundraising and marketing articles	23 (44%)
Data and trends in the private equity industry	21 (40%)
Private equity career-related articles	18 (34%)
Up-to-date news and activity in the private equity industry	15 (28%)
Educational articles about the private equity industry	16 (30%)

According to the poll, readers would like me to cover fundraising and marketing articles and pay the least attention to following the news. This makes sense considering most private equity professionals are less interested in current news surrounding other firms. I will still mention any news stories I come across which are valuable, but I will reserve most firm-specific stories for the Private Equity Tracker Tool profiles.

I'm encouraged by the great following this blog has attracted and any feedback is welcome, just send me an e-mail to Theo@PEblogger.com (I'll try to respond as quick as I can).

Popular private equity articles:

Tags: private equity poll, private equity tracker, private equity investors, career, blog, privateequityblogger.com, private equity blog, buyout blog

Japan Buyout

2009-10-21T02:34:00.001-04:00

Japan Buyout

Buyout Firms May Have to Think Smaller in Japan

Japanese companies have often resisted private equity deals but, despite the slow-moving process, the buyout industry is gaining ground in the country. Big buyout shops have opened up offices in Tokyo, firms including KKR, Carlyle, TPG and Cerberus. While these heavyweight private equity firms are increasingly frustrated with companies in Japan, they may be thinking too big, according to Tokyo-based Ant Capital.

Ant Capital has been able to sell 5 of its portfolio companies just in the last year and recently purchased VarioSecure Networks for $5.7 million. The firm targets companies valued at less than $200 million in enterprise value. According to the Center for Asia Private Equity Research, smaller deals have generated better returns for buyout firms in Japan.

"Basically small cap is undervalued because of its non-profile. To be small caps means they are discounted already," Ozaki [CEO at Ant Capital] said at the Hong Kong conference.

The market for private equity in Japan has indeed looked unappetizing. The value of acquisitions in Japan by private equity firms fell to $8.8 billion last year from $21.2 billion in 2007, according to Thomson Reuters data. That is just $1.7 billion so far this year. But targeting smaller transactions may indeed be the right strategy, as 94 percent of Japan's roughly 3,000 M&A transactions were worth less than $100 million last year, according to Thomson Reuters.

Some 33 deals completed from 2004 through the end of June this year have showed transactions for companies with market value between $100 million and $500 million had an internal rate of return of 19.6 percent. That compared with an 8.7 percent internal return on companies with more than $1 billion market value. Source

Popular private equity articles:

Tags: japan, japanese companies, private equity japan, alternative investment in Japan, Japan buyouts, buyout industry in Japan, returns, enterprise value, ant capital

Private Equity India Video

2009-10-20T09:10:00.001-04:00

Private Equity India Video

Video: Private Equity Firms and Companies in India

Private equity is developing a strong base in India, despite a drop in investment during the recession. More and more foreign private equity firms are looking to get a share of the fast-growing Indian economy. There is a lot of interest in current private companies going public but it is a difficult environment to raise funds and execute new deals. Here is a great video overview from PEI's forum in India. I have covered private equity in India previously, be sure to check out these other stories and resources:

E-mail subscribers click here for Part 1 of Private Equity India Video:

Part 2 of Private Equity India Video, this segment focuses more on entrepreneurs and venture capital in India.

Read about Private Equity India Companies
Learn about the increase in India family offices
Guide to Private Equity India
Value of Private Equity Deals in India Drops
Private Equity Boom in India

Popular private equity articles:

Tags: private equity india, private equity guide to India, Indian private equity, india buyout, entrepreneurs in India, india private equity video, video on India private equity

EU Alternative Investment Regulation

2009-10-19T02:22:00.001-04:00

EU Alternative Investment Regulation

EU's Directive May Cost Alternative Firms £2.9 billion

The European Union's new bill, the Directive on Alternative Investment Fund Managers, is expected to cost hedge funds and private equity firms up to £2.9 billion ($4.7 billion). Also, alternative investment firms will have to shoulder annual costs estimated around £283 ($463 million).

The combination of a costly registration, having to adhere to greater disclosure requirements, and the limiting of leverage make for a harsh legislation targeting alternative assets that could have significant effect on other industries as well. Private equity firms are expected to pay the most in annual costs complying with the Directive.

The study, conducted by Charles River Associates for City watchdog the FSA, also said the affected firms would be hit with annual costs of around €311m. The EU is planning to force fund managers to sign up to a costly registration and disclosure regime, and to adhere to caps on leverage.

Hedge funds would bear the brunt, paying €1.4bn in one-off costs to comply with the directive. Private equity firms face one-off costs of up to €756m, but they would bear the largest ongoing costs, totalling €248m a year, the study found. And the report said that pension funds would be £1bn a year worse-off under the EU proposals. Source

Popular private equity articles:

Tags: alternative assets, alternative investment fund managers, fund management rules, european union alternative assets, eu directive, european union compliance laws

William Edwards Deming

2009-10-15T13:23:00.001-04:00

William Edwards Deming

Below is a short guest post from Richard Wilson at HedgeFundBlogger.com.

One person who has affected me in business has been William Edward Deming. He has a quote that says "If you can't describe what you are doing as a process, you don't know what you are doing"

I think this also goes along with another popular business quotes "What gets documented gets improved"

Most investment funds and family offices that I have worked with do not have an investor cultivation process or pipeline drawn out as a process. They do not have their ongoing investor communication strategy documented, and in many places the only documentation of their investment process is at a very high level within their marketing materials. I think many hedge funds, portfolio managers and capital raisers could benefit from using PowerPoint or a free program such as Bubbl to document their processes.

This documenting of critical processes takes little time and costs nothing to do but allows you to step back from the process and evaluate it, improve it, or delegate where appropriate. Our firm recently used Bubbl and PowerPoint together to describe a business process we were completing ourselves and we were able to not only use this internally but also externally as we trained a third party that we decided to outsource some of this work to.

The processes I have found to be valuable to document are:

Investor Acquisition Process
Current Investor Communication Strategy
Hiring New Employees
Managing your portfolio on an ongoing basis

Tags: William Edwards Deming Quotes, Quote by Edward Deming, W. Edward Deming, Quality Management and process improvement tips, documenting business processes for improvement

Private Equity Name Change

2009-10-15T09:25:00.001-04:00

Private Equity Name Change

Should Private Equity Change Its Name?

There's no question that the private equity industry is changing following the credit crisis, but is a name change in order? David Rubenstein of Carlyle Group has proposed "change capital" or "value-added equity." The buyout industry has slowly moved away from the term "leveraged buyout" presumably after the financial crisis has been at least partly attributed to over-leveraged investment firms.

Now, with a greater push toward transparency, "private" isn't exactly an ideal association. If private equity firms hope to adapt to the evolving market and changing public perception it has to be more than a surface makeover.

BreakingViews has a couple name suggestions to add:

"Underwater equity," for instance. The historical record of the private equity business is pretty good. The better firms have delivered high returns for pension funds, college endowments and other investors.

Or how about "fee-squared capital?" Private equity firms may make money investors, but not before raking off plenty themselves. Rubenstein, for instance, was recently ranked at number 123 on the Forbes 400 list of the richest Americans.

Or just maybe "Pupa equity." It sounds like something leading to a transformation. But it stands for "private until public again." Buyout firms like to tout the value of taking a company off the public market. Source

Popular private equity articles:

Tags: private equity name, leveraged buyout, leveraged buyouts, buyout industry, industry name, what is private equity, private equity name change, lbo, buyout name, name of private equity

Achieving Your Goal

2009-10-13T10:00:00.000-04:00

Achieving Your Goal

The Power of Focus in Achieving Your Goals

Richard Wilson of the Hedge Fund Certification Program and Hedge Fund Blogger recently told me a story from a conference he attended. This lesson is applicable to any goal, from capital raising to opening a private equity firm.

Last week, I was speaking with an investment fund manager who was looking to raise capital and they were doing so by approaching every investor they could possibly speak to. They were explaining how their firm has so little resources compared to their $1B competitors. I recalled the following quote:

“You can take a $5 disposable camera and take it out of the box, stand 10 feet from a building and take a great picture that will be developed and look good if not great. You could stand in that same position with a $10,000 camera with every gadget, lens, and a tripod and it will not take as good of a picture if you do not do one thing, focus.” - Brian Tracy

The Point: You can beat your competition with a smaller staff, with less financial resources, and less experience if you just learn to focus. Focus on your top prospect investors, focus on local potential investors, and focus exclusively on the types of investors which are most likely to make allocations to your fund. If you can dial-in on these three areas your hot prospect list, local investors and the right investor mix (family offices, wealth management, pension funds, etc.), than you can really cover a lot of ground quickly.

I've worked with Richard for years and he is a testament to the power of focus. I gave similar advice to an aspiring private equity professional at a conference in New York last month. He was doing a great job of actively networking. Instead of waiting for professionals to initiate a conversation, he was reaching out to everyone at the table. I could tell he was a little discouraged as people were less than enthralled by an eager young professional looking for work, and he asked me "How do you think I'm doing?" I told him that it almost always takes hundreds of rejections to get that dream job, that great sale or to achieve any other goal you set for yourself. We hear this all the time growing up, but too often we still look for the easiest path.

Set a difficult but attainable goal for yourself and achieve it, whether it is to raise more capital or to advance yourself in a PE firm. Focusing on this goal means not getting caught up looking for easier solutions to come about or waiting help from someone else. I have every confidence that the person I was speaking with at the conference can find a great job in private equity if he doggedly pursues that goal.

Popular private equity articles:

Tags: private equity conference, private equity goals, marketing, career advice, finding a job in private equity, private equity career, private equity jobs, private equity work

Blackstone Vs KKR

2009-10-12T02:57:00.001-04:00

Blackstone Vs KKR

KKR Joining Blackstone & Other Public Buyout Firms

KKR's recent merger with its Amsterdam affiliate, KKR Private Equity Investors, makes the private equity firm one of the few publicly traded ones. As the buyout shop plans to become listed on the New York Stock Exchange, BreakingViews has made an important comparison between KKR and another publicly-listed titan of the industry, Blackstone Group.

I am providing a the link to the article because it's difficult to condense, so it's best to just read it here. The main focus of the comparison is the valuation gap between the two private equity firms and concludes with an optimistic prediction of KKR's valuation when it is listed in New York and more investors have access to the firm. Read the article here.

Popular private equity articles: Blackstone Vs KKR

Tags: Blackstone Vs KKR, blackstone group, kkr, private equity publicly listed, public private equity firms, euronext, new york stock exchange, private equity kkr, kohlberg kravis roberts and company

Institutional Investors Mandates

2009-10-07T10:00:00.002-04:00

Institutional Investors Mandates

Stanford & London Pension Fund Looking to Private Equity

This week, two large institutional investors showed an interest in investing in private equity. First, the London Pension Fund Authority's CEO announced that the fund is seeking investment opportunities in private equity and infrastructure. As of June 2009, the London pension fund's assets are divided between 2.1 billion pound ($3.3 billion) in an active fund primarily invested in global equity and 1.1 billion pound ($1.74 billion) in a "sub-fund" which invests more conservatives and is used to pay out pensions. Now, private equity firms will compete for a share of the fund's total assets, in excess of $5 billion. At the end of June, the pension fund had 9% of its assets invested in private equity.

Chief Michael Taylor wants the active fund to use some of its cash, worth 7 percent of its assets.
"We are looking for investment in private equity and infrastructure, but the problem is that there has been precious little distribution at the moment; not a lot of IPOs and little trade in that area," he said.

As part of the same cash redeployment, the LPFA has invested 20 million pounds in the Prudential (PRU.L) M&G UK Comapanies Financing fund, which will make loans to sound UK companies stymied by a lack of bank lending.

The scheme may invest a further 30 million pounds if M&G hits the 2 billion pounds target.
The fund has so far gathered 1.3 billion pounds and its total assets may rise to 1.6 billion pounds after its third closing. The fund has not yet made any loans, said M&G's fixed income chief investment officer Simon Pilcher. Source

Stanford also showed interest in investing more in private equity. The university's endowment fund is looking to private equity firms to take some $1 billion of its $14.5 billion in assets.

Although the story became public in the past few days, university finance officials have been conversing with major private equity firms on the matter for several weeks, I'm told. They wouldn't say who, or if there are any takers yet. "We're testing the market," said one official, who hastened to add, "We're not in a liquidity crisis. We're just looking to balance our portfolio."

Said portfolio hasn't been very good to Stanford of late. As of the year ending June 30, it was down 25.9 percent from the previous year, according to the Stanford Management Co., which manages the portfolio. Source

Popular private equity articles:

Tags: private equity, institutional mandates, institutional fund mandates, fund mandates, private equity mandates, private equity fund investments, investment opportunities, capital calls

Family Office Book

2009-10-06T06:18:00.000-04:00

Family Office Book

Free Downloadable Book on Family Offices

This website is build as a free resource to help educate and update readers on the private equity industry. I understand some readers are students and are hesitant to pay for information so I keep an eye out for free or discounted materials. My friend Richard Wilson at FamilyOfficesGroup.com has put together a free collection of writings and data on the family offices industry, a valuable source of capital for private equity and venture capital funds.

The Family Office Report

The Family Office Report is a 65 page e-book on single and multi-family offices. If you are looking to learn more about family offices this guide will help you understand the family office industry. The Family Office Report was produced by the Family Offices Group, has a $250 value and is now free to download through completing the form below.

Benefits of Reading the Family Office Report:

Grow More Effective Family Office Relationships
Better understand Trends Affecting Family Offices
Learn more about the services offered by single and multi-family offices
Raise more capital from HNW wealth management firms and family office institutions
Position your firm or career in line with family office trends and industry challenges

Download the Family Office Report by typing in your first name and primary email address below:

Related to Free Family Office Book: The Family Office Report

Private Equity Fundraising

2009-10-01T05:08:00.000-04:00

Private Equity Fundraising

Update on Private Equity Fundraising in Q3 2009

Fundraising is still in the doldrums as an estimated 90 funds stopped their fundraising process entirely and many funds have lowered their target amounts. Fundraising fell to a six-year low in Q3 2009. Surely some of the drop in fundraising is private equity managers hesitating to throw their hat in the ring while the economy is still unstable, but investors are not making new commitments--probably for the same reason. In a recent Preqin survey, only 41% of surveyed investors reported making a new fund commitment in the first half of 2009.

Although private equity firms are having trouble raising capital, the survey found that the majority of PE funds are hoping to make new private equity investments in 2009. 54% of firms surveyed said they expect to make new deals this year and 25% plan to invest in 2010.

As the graph below shows, private equity fundraising fell yet again, to its lowest point in six years at $38 billion (45% drop from last quarter).

For the full fundraising data see this PR

Popular private equity articles:

Tags: private equity fundraising, fundraising quarter 3, private equity fund raising, private equity firms, raising money from private equity, raising capital for private equity firms, fund marketing

KKR Goes Public

2009-10-01T01:10:00.005-04:00

KKR Goes Public

KKR Goes Public After Long Delay

(Oct. 1, 2009) I am a little late reporting this, but I guess that is fitting. Kohlberg Kravis Roberts is finally a public company after merging with its Amsterdam-publicly listed affiliate. Although the firm is yet to be listed on the New York Stock Exchange, Euronext is a big step toward that aim.

“Our missing [sic] is to create attractive returns for our investors,” KKR founder Henry Kravis and George Roberts said. “This transaction is a milestone that will enhance this mission and provide capital to grow our firm.”

The listed European partnership, KKR Private Equity Investors, has been renamed KKR & Co. (Guernsey). KPE shareholders own 30% of the combined company, while KKR’s executives own the rest. And while the plan may eventually be to raise capital for the firm, KKR neither issued new shares, nor did its executives sell any of theirs.

Over the summer, KKR shelved its planned listing in New York to offer better terms to KPE investors. It was the third time the firm has postponed plans to go public since first announcing them two years ago.

Source

Popular private equity articles: KKR Finally Goes Public

Tags: KKR Goes Public, KKR Public, KKR Stock Exchange, KKR Stock Price, KKR share price, KKR public company

Private Equity Fund Law

2009-09-30T13:51:00.002-04:00

Private Equity Fund Law

The Legal Protections Funds Have When Investors Fail

Many institutional investors and high net worth individuals have fallen on hard times, opening up the possibility of limited partners failing to meet capital requirements for private equity funds. When a limited partners goes bankrupt, the general partners of the fund may also take a loss. An important case in bankruptcy involved the limited partners of several private equity funds who sought and received recognition of insolvency proceedings commenced in the British Virgin Islands.

According to the NY Law Journal, in the event that an investor fails to meet a capital commitment, the manager of a private equity fund has the following recourse:

(i) offering the defaulting limited partner's unfunded commitment to another limited partner or a third party,

(ii) withholding distributions to the limited partner,

(iii) offsetting distributions to the limited partner against unfunded capital calls,

(iv) compelling forfeiture of all or a percentage of the limited partner's interest in the fund,

(v) charging interest to the limited partner on the unfunded amount until such amount is satisfied, and

(vi) initiating a lawsuit against the defaulting limited partner.

However, a limited partner under bankruptcy protection may be sheltered from some of these actions, according to §362 of the Bankruptcy Code. Section 362 gives automatic stay to many actions based on pre-bankruptcy agreements and often a bankruptcy court order is required to enforce any capital calls agreed upon before the LP filed for bankruptcy.

The problem in limiting the fund's ability to enforce capital calls or forfeit the defaulting party's stake is that it may inhibit the fund's investing. If an investor cannot pay the capital commitment then a deal may have to be put off or canceled entirely. The NY Law Journal says that this restriction on the general partner from enforcing capital calls "could detrimentally effect a fund's ability to make investments in portfolio companies or satisfy expenses, and thereby interfere with the fund's operations."

There seems an unfair advantage given to the defaulting party if the investor receives all the benefits of the partnership agreement without fulfilling the entire obligation. Luckily, the NY Law Journal suggests several ways to remedy this unfortunate situation:

Negotiate With the Debtor/Limited Partner: Often the defaulting investor values his stake in the fund and will be willing to negotiate different terms or a suitable compromise so that he can keep his partnership interests.
Relief from the Court: As previously noted, by appealing to the bankruptcy court for relief, a general partner may be able to still make capital calls or other remedies. The GP will have to show that by not receiving the investors' capital the fund is suffering and the court may lift the stay.
Setoff or Recoupment: The Journal explains: "Section 553 allows a creditor to offset a debt owed to it arising before the commencement of a case against a claim of the debtor against the creditor also arising prior to the commencement of the case.
Alternatively, the general partner may exercise the equitable remedy of recoupment, pursuant to which a creditor reduces the amount of debt owed to a debtor by the amount owed by the debtor to the creditor. Recoupment is an equitable defense; it is like setoff in the sense that one obligation reduces another, but in the case of recoupment the obligations arise out of the same transaction."
Assumption or Rejection of the Partnership Agreement: "The general partner also may make a motion with the court seeking to compel the debtor/limited partner to assume or reject the partnership agreement (or other fund governing agreement) pursuant to §365 of the Bankruptcy Code."

The Journal also suggests several ways to protect the fund against this situation in the pre-bankruptcy period, see this article for the full explanation of each measure.

Automatic Triggering of Capital Calls
Setoff/Recoupment Provisions
Covering Shortfalls in Capital Contributions
Cross-Default Provisions
Capital Calls Secured by Partnership Interests

It is important for General Partners to consider the unfortunate possibility that investors will default on obligations to the fund. I am not a lawyer, but the authors of the piece that this explanation of private equity and bankruptcy courts is based on are Richard F. Hahn and Michael E. Wiles are partners, and Bryan R. Kaplan is an associate, with Debevoise & Plimpton. Disclaimer: consult a legal professional before following any of the preceding suggestions. Source

Popular private equity articles:

Tags: private equity law, legal protection, bankruptcy, bankruptcy court, private equity laws, buyout law, general partners, partnership agreements, limited partners, partnership, capital calls, commitments