Private Equity
After over a month of protests and on-again/off-again negotiations, Hugo Boss and workers at its Brooklyn, Ohio-based suit-making plant have reached an agreement that will keep the facility in business. No specifics have yet been disclosed about the new labor contract, which was ratified this morning. To be honest, this is more than a bit shocking. When I first began covering this story last month, sources close to Hugo Boss said that the shutdown decision was final and would not be revisited. The Brooklyn, Ohio shop was profitable, they acknowledged, but not competitive in either the short or long-term (Hugo Boss does not have any other apparel factories in the U.S.). Moreover, Hugo Boss majority shareholder Permira said it would not intervene in operational decisions, despite vocal opposition to the shutdown by a number of public pension funds that serve as Permira limited partners.
2 min read · 23 April 2010
Private equity was borne of Wall Street, but their relationship now is under regulatory attack. As we’ve discussed before, Chris Dodd's financial reform bill would prohibit banks from investing either directly or indirectly on the equity side of private equity deals (via the so-called Volcker Rule). Moreover, proposed Basel III language would make PE fund commitments difficult for any G20 bank, given the capital holding requirements for unfunded commitments. Private equity’s response to all of this has been a claim of systemic impotence: “Hey, we didn’t cause the financial meltdown.” And, to be fair, it’s a legitimate defense. Relatively few big buyouts have gone bust, and many deals (and funds) on life support last year are now breathing on their own. Moreover, most systemic risk posed by private equity relates to poorly-priced leveraged loans – a side of the business that no proposed legislation looks to curb. So let’s stipulate that the proposed rules to “break up” Wall Street’s bonds with private equity are unnecessary from the point-of-view of future economic cataclysm. Instead, let’s look at a deeper question: Will such regulations save the banks from themselves?
3 min read · 23 April 2010
Last month we wrote about how a pair of provisions in Chris Dodd's financial reform bill could be problematic for angel investors and startups. One provision would virtually double the theshold for qualifying as an accredited investors, while the other would have effectively removed the federal exemption for Regulation D -- thus increasing the cost and complexity for those raising money from sources in multiple states. VC bloggers took to their keyboards with outraged strokes, while trade groups like the Angel Capital Association and Connecticut Technology Council worked to change minds of Capitol Hill. Not sure which was more effective, but the trade groups are now claiming a tentative victory.
2 min read · 22 April 2010
2 min read · 22 April 2010
1 min read · 22 April 2010
AXA Private Equity today announced that it has acquired a $1.9 billion portfolio of limited partner positions from Bank of America. It's the largest disclosed secondary transaction since CalPERS sold a legacy portfolio at the end of 2007 for $2.1 billion, and perhaps an indication that buyers and sellers are finally bridging their long-standing price gap. My snap verdict is that this is a win-win for both AXA and BoA. No one is disclosing pricing terms, but one can assume that AXA paid less than it would have were BoA to have opened the process to competitive bidding [Update: A source tells me that BoA did run a competitive, self-managed process, with two or three firms involved]. Moreover, continued economic recovery should help the portfolio increase in value over time (remember, people thought Lexington Partners paid too much for that $1 billion Chase portfolio back in 2000, and that worked out just fine for Lex).
2 min read · 22 April 2010
Remember all that talk about limited partner defaults, whereby private equity firms would make capital calls that their illiquid investors couldn't cover? And then how it didn't seem to happen? Well, perhaps news of no LP defaults was exaggerated. peHUB has learned that Granite Hall Partners, a Chicago-based fund-of-funds, defaulted on a $15 million commitment to TPG Capital in the middle of last year. The commitment was for TPG's sixth mega-buyout fund, and was made just before TPG plugged around $2 billion into Washington Mutual. At the time, Granite Hall was seeking to raise around $150 million for its third fund-of-funds. Its prior two vehicles had been capped at just over $60 million, with most of the money coming from high-net-worth individuals. The third fund-of-fund instead was designed to entice institutional investors, although the
2 min read · 21 April 2010
Lots of talk this week about Apple's 4G iPhone, after Gizmodo found a prototype left behind at a local watering hole. The device is believed to use an internally-designed application processor, just like Apple used with its recently-released iPad. Both chips were borne of Apple's $278 million acquisition of P.A. Semi in 2008. Many of P.A. Semi's chip developers stuck with Apple, but others -- including some system-level folks -- launched a stealth startup called Agnilux. They also personally funded Agnilux with proceeds from the Apple acquisition. Now, peHUB has learned that Google recently acquired Agnilux, which previously held strategic investment talks with companies like Cisco, Microsoft and Texas Instruments. We have not yet been
1 min read · 20 April 2010
Wellspring Capital Management continues to struggle in its efforts to raise a fifth fund, according to a recent regulatory filing. The New York-based buyout firm has secured around $330 million in new commitments over the past year, bringing it to just over $490 million in total. This is compared to an original plan to raise upwards of $1.5 billion, which later was revised downward to $1.3 billion. [Update: We're told that Wellspring has closer to $600m total when overseas commitments are included, and that the $1.3b figure is a hard cap]
2 min read · 20 April 2010
New York Attorney General Andrew Cuomo has called a 12pm ET press conference to announce developments in his office's "major public integrity investigation." No additional details yet, including if today's news relates to the pay-to-play scandal involving private equity firms and the New York state pension system. Cuomo also has a bunch of other balls in the air, so this could be related to something else entirely. For example, last month we dialed in to a Cuomo presser, only to learn it was about "the manipulation of salary and overtime payments that leads to inflated pensions at the expense of taxpayers." Important stuff, but not for peHUB. [Update: False alarm, at least from a private equity perspective. Cuomo "has filed suit against Senate Majority Leader Pedro Espada Jr. for looting the Bronx based not-for-profit where Espada serves as President and CEO. Nineteen current and former officers and directors of the Comprehensive Community Development ("Soundview”) are also named in the lawsuit."]
1 min read · 20 April 2010
