Private Equity
Tomorrow we will launch our annual Desperate Interns Drive, in which first-year MBA candidates find summer jobs at VC firms, PE firms, banks, portfolio companies, etc. So if your firm or one of your portfolio companies is looking to hire summer interns from the current crop of first-year MBA candidates, please drop me a note at daniel.primack@thomsonreuters.com. All postings can include as much or little information as you’d like to provide. Minimums are firm type (VC, LBO, I-Bank, etc.) and job location. If you’d like to keep your firm identity anonymous, just be sure to let me know. There is no fee for this service.
1 min read · 20 April 2010
More than 700 peHUB readers took over Mighty in San Francisco last Wednesday, for our latest peHUB Shindig. Plus, we raised more than $6,400 for the Guardsmen, a local group that helps send 2,500 at-risk youth to outdoor education programs each year. Great to see so many of you there, and sorry we’d been gone for so long (our last SF event was in October '08). Next up will be Chicago, with details to come soon. And, yes, we do hope to return to San Francisco before the year is out. A final thanks to our sponsors: Capital Dynamics, FLAG Capital, Rothstein Kass, SecondMarket and True Ventures. Photos after the jump...
1 min read · 18 April 2010
At approximately 10:05am ET yesterday morning, the political aspirations of Steven L. Rattner were pronounced dead. An autopsy revealed an overdose of hubris, and a deficiency of caution. In a 27-page document, the New York Attorney General Andrew Cuomo lays out a narrative in which Rattner -- then a partner of private equity firm Quadrangle Group -- fought to secure business for the brother of New York’s chief investment officer, at the urging of now-indicted “finder” Hank Morris. Specifically, Rattner persuaded a Quadrangle portfolio company (since defunct) sign a DVD distribution deal for the brother’s film – “Chooch” – over the initial objections of portfolio company management. Once the DVD distribution deal was signed, Rattner retained Morris as a “placement agent,” in order to secure fund commitments for Quadrangle Group. Morris helped Quadrangle raise $100 million from the New York State Common Retirement Fund, even though one of Quadrangle’s legitimate placement agents – Monument Group – only had been able to secure between $25 million and $50 million. This increase occurred without Morris setting up or attending any meetings with NYCRF on Quadrangle’s behalf. Morris also helped Quadrangle secure $75 million from New York City, in part via a deal with another placement agent named Julio Ramirez, who last year pled guilty to securities fraud. Quadrangle did not disclose Morris and Ramirez's involvement in official disclosure forms. As a follow-up, the CIO’s brother helped put Rattner in touch with potential investors on the West Coast. These included Elliott Broidy, who sat on the board of the Los Angeles Fire & Police Pension Fund. That system gave Quadrangle $10 million, and Broidy has since pled guilty to felony charges of rewarding official misconduct.
5 min read · 16 April 2010
1 min read · 16 April 2010
Steve Rattner today broke his silence on the pay-to-play scandal, just hours after being fingered as the badie by his former partners. What follows is his brief statement, via attorney Jamie Gorelick: "Mr. Rattner does not agree with the characterization of events released today, including those contained in Quadrangle's statement. Mr. Rattner shares with the New York Attorney General the goal of eliminating public pension fund practices that are not in the public interest. He looks forward to the full resolution of this matter." Also defending himself was Thomas DiNapoli, the current New York comptroller whose office also is under investigation (as confirmed during Cuomo's press call earlier today). His comments were a bit more detailed, and follow in full after the jump...
2 min read · 15 April 2010
Busy morning over at Quadrangle Scandal Central. To sum up, before looking forward: 1. The SEC sued Quadrangle Group for its role in the New York pay-to-play scandal. Specifically, it accused Quadrangle of agreeing funneling cash to the the brother of a state pension fund official, for the production of a straight-to-DVD film called Chooch. 2. Quadrangle Group settled with the SEC, agreeing to pay $5 million in penalties. This sue/settle process apparently is standard operating procedure for the SEC, although the settlement is still subject to a judge's approval. 3. Quadrangle Group also settled with NY Attorney General Andrew Cuomo, agreeing to repay $7 million and sign a "code of conduct" which would preclude Quadrangle from using placement agents going forward. This deal did not include a settlement with Quadrangle co-founder Steve Rattner (who left last year to become Obama's car czar), whom Quadrangle called "unethical" in an official statement. Ok, them's the facts. Now some thoughts:
3 min read · 15 April 2010
This is not a good day for Steve Rattner. The SEC this morning sued his former firm, Quadrangle Group, for a kick-back scheme related to the New York State pay-to-play scandal. In related news, Quadrangle agreed to repay $7 million to the State of New York, via an agreement with AG Andrew Cuomo. As part of the latter deal, Quadrangle said the following: "We wholly disavow the conduct engaged in by Steve Rattner, who hired the New York State Comptroller’s political consultant, Hank Morris, to arrange an investment from the New York State Common Retirement Fund. That conduct was inappropriate, wrong, and unethical. We embrace the reforms in the Attorney General’s Code of Conduct, including the campaign contribution and placement agent ban, which are vitally necessary to eliminate pay-to-play practices from the public pension fund investment process. We urge others in the industry to follow.” You can read the SEC's complaint by clicking here. More info after the break...
2 min read · 15 April 2010
Regular readers know that buyout fund fees are one of my most stubborn bugaboos. Not the annual management fee, but all the ancillary fees that often serve to enrich the general partner at the expense of its portfolio companies (and, consequently, the fund's limited partners). My bias would be to eliminate such fees altogether, and perhaps someday we'll get there. In the meantime, the best we can hope for is that buyout firms share more of these noxious fees with their investors. Not only for the sake of fairness, but also because fewer fees in GP pockets could diminish GP interest in charging fees in the first place. To that latter point, The Blackstone Group reportedly has altered the transaction fee split for its new global mega-fund, which is expected to close on June 30. The buyout
1 min read · 14 April 2010
Greycroft Partners today announced that it has closed its second fund with just over $130 million in capital commitments. This is the early-stage VC firm launched several years back by Alan Patricof, with a focus on digital media. A few quick notes (since I'm writing from 30k feet on my way from Boston to San Francisco): 1. Patricof has promised LPs that Greycroft will never raise more than $150 million for a fund. Ever. 2. That said, this vehicle is much larger than Greycroft’s debut effort, which originally closed on $50 million before later expanding to $75 million. The idea for the larger fund is to do more deals, rather than to do larger deals. 3. Greycroft is in the process of hiring a new partner for its Los Angeles office, but has not yet decided between a couple of finalists for the job. The firm also has promoted principal Ian Sigalow to partner.
1 min read · 14 April 2010
When writing about the Elevation Partners portfolio last month, I gave particular attention to its investment in Palm. As one source summed it up: “As goes Palm, as goes Elevation.” The reason, of course, is that Elevation has invested just over 25% of its $1.8 billion fund in Palm, via a series of commitments. Such over-allocation apparently was permitted by the fund’s LPA, but it is leading Elevation down a path well-worn by other private equity firms. Basically: If you invest 15% or more of your portfolio in a single company, you are just begging to be knocked to the ground. Remember these moldy oldies: Forstmann Little pumping $1 billion into McLeod USA (not to mention its big bet into XO Communications)? Or how about Parthenon Capital plugging around 20% of its second fund into
2 min read · 13 April 2010
