Can you imagine Facebook investor Jim Breyer (Accel Partners) appearing in an advertisement for MySpace? How about Blackstone boss Steve Schwarzman, whose firm owns Hilton Hotels, promoting Marriott? Or George Steinbrenner calling to ask if you'd like to buy Red Sox season tickets? Of course not, because it doesn't make any sense. So what are we to make of Bono -- a partner with private equity firm Elevation Partners, which owns around 40% of Palm --shilling for Palm rival BlackBerry in a new television advertisement (view after jump)? Apologists would give a twofold argument: (1) Bono has smartly kept his many business interests separate, which means that U2 doesn't pay attention to Elevation, and vice versa; (2) BlackBerry maker RIM stepped up in a tough economy to sponsor U2's upcoming tour, and there is no indication that Palm made a similar offer. All well and good for Bono and U2, but lousy for Elevation's investors. This group backed Elevation, in part, after being told that Bono brought unparalleled expertise in the firm's target markets of consumer, entertainment and media. Not a hard sell, but also not a private one. In other words, the public at large also gives Bono that same credibility, and he's now leveraging it to hurt one of the firm's portfolio companies.
2 min read · 20 July 2009
Robert Whiddon, editor-in-chief of Employee Benefit Advisor, passed away last Thursday, at the age of 35. For anyone who knew Robert, this is just a damn shame. Tragic. Particularly for his wife Joy and sons Judah and Canfield. Robert was part of Thomson Financial when I first joined it, 10 years ago last month. We each were working on structured finance newsletters, which required extremely long Thursday nights (press night) and short Fridays that were occasionally puncuated by pickup basketball games. He was kind, goofy and very good at his job. Robert also was the person who told me of a job opening with PE Week, an opening that would eventually lead to the creation of peHUB.
1 min read · 20 July 2009
Last week, a generous reader sent over materials from The Blackstone Group’s annual meeting, which took place in mid-May at The Waldorf Astoria. Goes without saying that he/she is currently my favorite reader... More than 100 pages of performance, predictions, posturing and (a bit of) prostrating. Rather than try to weave it all into a confused narrative, my plan is to just run through what I consider to be the most interesting items: - On the current economic conditions: “No one working today has seen anything like this… More depression than recession… Visibility is extraordinarily limited. It is a time for caution… The survivors, even if they sit on the sidelines a little too long, will have a period of fantastic investment opportunities as we recover.” - “When things do turn, we will be rapid committers of capital, similar to 2003 and 2004. Until then, we will be very cautious exposing LPs’ capital, with the exception of purchasing debt at significant discounts.”
3 min read · 20 July 2009
U.S. venture capital investment rose by 32% in the second quarter, according to data released Friday by Dow Jones VentureSource. This comes after a particularly dreadful Q1 (lowest volume since 1998), and puts the industry back at 2005 activity levels. The top-line Q2 numbers are $5.27 billion invested through 595 deals. Of greater import, however, is that healthcare investing topped IT investing for the first time on record. VCs invested $2.23 billion into healthcare companies last quarter, compared to just $1.88 billion in IT companies. The healthcare figures include the quarter's largest deal, a $146 million Series A round for Clovis Oncology Inc.
1 min read · 19 July 2009
The FDIC is two weeks into the comment period on its proposed rules for PE bank investments, and has begun publishing the inbox. Only three up there so far, but I'd expect a slew more to appear before the August 10 deadline. For the uninitiated, many of these rules are pointlessly punative and would literally prevent PE firms from investing in banks (troubled or otherwise). For example, a cross-guarantee requirement not only would violate a private equity fund's charter, but would create the very systemic risk that some other legislation is trying to guard against. The most pertinent comment comes from from Charles Moore, president of Banc Funds. Seems he's okay with the rules for most, but not for firms (like his) that limit their investments to less than 10% ownership. As such, he'd like a safe harbor for those at 9.9% or below. He writes, in part:
2 min read · 17 July 2009
Kohlberg Kravis Roberts & Co. will not begin raising its next North American buyouts fund until 2010, peHUB has learned. The buyout giant had originally planned to begin marketing earlier this year, but has since thought better of it. Worth noting that this is an informal postponement, as KKR never actually got to the point of sending out private placement memoranda. Why the delay (informal or otherwise)? Two reasons: First, it's just very difficult to raise big buyout funds right now, particularly from traditional backers like public pension systems and university endowments. Second, KKR still has more than $5 billion of dry powder from a $17.6 billion North American fund raised in 2006. That's a lot of cash, considering that the most recent North American deal it did -- a joint venture with recording label BMG -- will require a maximum equity check of around $250 million. I speak a bit more about this in the latest edition of the Laundry Room Chronicles, which also includes some new PE fundraising data from Thomson Reuters. Watch the video after the jump...
1 min read · 16 July 2009
When Steve Rattner stepped down as auto czar earlier this week, Tim Geithner said the following: “Steven Rattner, whose leadership and vision were invaluable to the Auto Task Force's efforts, has decided to transition back to private life and his family in New York City.” Almost sounds as if he’d been just renting in DC, and that the Big Apple itch became unbearable. Except… We’ve learned that Rattner bought a $4.35 million home in Washington D.C. just two months ago. Now why would you spend that much money – including more than $1 million up-front – if you weren’t planning a long-term stay? Sure it’s nice to have a summer place, but isn't that why he’s building one on Martha’s Vineyard?
1 min read · 16 July 2009
Geoff Hill has agreed to join Roark Capital Partners as a vice president, once he steps down as president of Cinnabon at year-end. Cinnabon is a unit of Focus Brands, a Roark portfolio company where Hill previously ran sales and development. We've got 5 Questions for him, including one that is obviously more important than the other four: 1. Your focus will be on franchising. What are the signs of a strong franchise brand, and warning signs of a weak one? The first sign we look for at Roark is how the brand itself is performing at the unit level. The term we use is ULE, or unit-level economics. It’s obviously important that the franchisor and company itself is doing well, but the only way to know if it’s a viable concept is if money is being made at the individual units. A lot of time I see people get caught up by a name, and good EBITDA at the corporate level. You need to dig down further, because if the units are struggling, then that corporate EBITDA will eventually come down as well.
3 min read · 15 July 2009
The Private Equity Council this afternoon will formalize its support of President Obama's proposal that private equity firms be required to register as investment advisors with the Securities and Exchange Commission. Mark Tresnowski, a managing director and general counsel of Madison Dearborn Partners, will deliver the trade group's message via testimony in front of the Senate Subcommittee on Securities, Insurance, and Investment. Tresnowski is expected to argue against private equity's ability to cause the type of systemic failure that has promped the proposed legislation, but will concede that "excluding any asset class from the new regulatory regime could contribute in some way to diminished confidence in the effectiveness of the new regulatory regime."
1 min read · 15 July 2009
We've received a bit more info on last month's shutdown of Verified Identity Pass, operator of the "Clear" system that allowed members to pass quickly through airport security. The company said on June 22 that had been "unable to negotiate an agreement with its senior creditor to continue operations." peHUB has now learned that the senior creditor was Morgan Stanley, with Verified Identity owing approximately $33 million. A loose confederation of investors is kicking the company's tires a bit, and considering whether to make an offer. But there are two big impediments to a potential deal. First, Verified Identity founder and ex-CEO Steven Brill has sued the company over what he refers to as a salary dispute (the records are sealed). Second, there is a requirement that Verified Identity must erase its user database by
1 min read · 15 July 2009
