1 min read · 16 October 2008
The Private Equity Council today released the latest iteration of a long-term academic study on private equity’s role in the financial market. Not surprisingly, it finds that the industry does not pose significant risks to the financial system at large (particularly when contrasted to investment banks). Here are its six main points, with my gut reactions: 1. Efforts to turn around or strengthen undervalued companies represent a very unlikely source of systemic problems in capital markets. I would agree, if only that’s what private equity was doing prior to the credit crunch. Instead, lots of firms (particularly in the large/mega markets) abandoned buy low/sell high strategy for buy high/sell higher. How many times did we see substantial premiums paid for public companies in the midst of a bull market? How many times did we hear: “This is already a market leader” or “This is a very strong company that we feel could be just a bit stronger?” Very few private equity firms were able to follow the sage words of Rudyard Kipling… 2. Private equity losses are unlikely to be of a cascading nature that could trigger a systemic event. This point here is that PE transactions are financed with less debt than are bank investment holdings. And it’s fair, albeit damning with faint
3 min read · 16 October 2008
* Daily carnage report: Merrill posts a worse-than-expected loss, Citi posts a better-than-expected loss, U.S. futures are up, Asian markets are crashing, particularly in Japan. * Huntsman and Hexion are quickly morphing from foes into friends. All it takes is a common enemy. * A squeeze in the P2P lending world, which is largely financed by venture capital firms. * Tesla Motors cans another CEO and lays off staff. Elon Musk is now in charge, and gives his take on what's happening.
1 min read · 16 October 2008
4 min read · 15 October 2008
* Nouriel Roubini: Dr. Doom or Hugh Hefner? * JP Morgan income sank in Q3, the the Wall Street survivor somehow managed to turn a profit. It's already beginning to turn around the futures... * Carlyle Group has filed an objection to bankrupt Lehman Brothers' sale of Neuberger Berman to Bain Capital and Hellman & Friedman. The filing was joined by former Neuberger CEO Jeffrey Lane, with the WSJ reporting that Carlyle and Lane have put together a rival bid. That's right: We could be looking at some actual deal competition. * National recapitalization tracker. * Yet another investor memo with advice for startups. This one is from John Borthwick of Betaworks.
1 min read · 15 October 2008
Booyah is stew-like food prepared en masse for large gatherings, and has become an exclamatory catchphrase for broadcasters like Jim Cramer and Stuart Scott. More quietly, it’s also become the name of an online content startup funded by Kleiner Perkins Caufield & Byers. The Silicon Valley company is still in stealth mode, but here is what we know: Booyah was formed earlier this year by a trio of folks – Sam Christiansen, Keith Lee and Brian Morrisroe -- who previously worked at Blizzard Entertainment, which is responsible for the World of Warcraft games. Kleiner Perkins is its only institutional backer to date, and has invested
1 min read · 14 October 2008
Last Friday, I asked you to name the university endowment that’s trying to sell a large portfolio of private equity fund commitments. I probably should have italicized the word “large,” or perhaps used a more emphatic synonym like humongous. The result was that some of you offered up schools like Duke and Stanford – both of which have assets for sale on the secondary market, but not of the scope I was suggesting. Then yesterday one of you got it right, which means it’s time to share… The answer we were looking for was Harvard. The Ivy Leaguer has retained Cogent Partners to pitch what could be one of the largest secondary sales of all time, with an optimistic asking price in excess of $1 billion. The available portfolio includes a variety of venture capital and buyouts funds, albeit none of its crème de la crème VC (i.e., Sequoia Capital or
2 min read · 14 October 2008
* KKR vs. KKR * U.S. futures are up, as the Fed plan to inject equity into banks is apparently more potent than the opportunity to profit take. * Forget Joe Sixpack. How is Benny the Loanshark handling the economic downturn? * Epicurian Dealmaker thinks it's time to climb off the ledge. * Stephen Grocer sees dead deals.
1 min read · 14 October 2008
Did Barack Obama just propose to eliminate capital gains taxes on venture capitalists? The same Barack Obama who most VCs believe will increase their tax burdens? The answer seems to be yes, upon my first reading of a new economic stimulus plan released this morning by Obama, called the Small Business Emergency Rescue Plan. Here's a snippet: Barack Obama believes that we need to encourage investment in small businesses to help create jobs and turn our economy around. That’s why Obama will eliminate all capital gains taxes on investments made in small and start-up businesses. Unlike John McCain, who wants to give $200 billion in new tax cuts to America’s largest and most profitable businesses, Barack Obama wants to cut taxes for the small businesses that create jobs but struggling with restricted access to credit alongside skyrocketing health care and energy costs. That would seem to cover venture capitalists, or at least those who still engage in early-stage investing. I've put in a call to Obama's campaign to see if there's any fine print that would exclude institutional investment, but have not yet gotten a call back. At the very least, angel investors would seem to be covered. The only caveat here, and it's a big one, is that Obama favors a change
2 min read · 13 October 2008
File under: Confirmation of what we already knew. The National Venture Capital Association and Thomson Reuters (publisher of peHUB) today released data showing that VC fundraising has declined from both the prior quarter and from the third quarter of 2007. Fifty-five U.S.-based firms raised approximately $8.12 billion in Q3 2008, compared to 76 firms raising $9.25 billion in Q2, and 78 firms raising nearly $8.6 billion in Q3 2007. It's worth noting that the Q3 tally was higher than what was raised in Q1 of this year, and that it's higher than all but one quarter of 2006. On the downside, however, the Q3 capital was raised by fewer firms than in any time over the past few years, which means two things: (A) Fewer firms are raising larger funds; (2) Most of those fewer firms are existing firms, rather than new ones. Download the press release here: q3fundraising. Deal data will be released this coming weekend.
1 min read · 13 October 2008
