Andrew Cuomo vexes me. For the third time since the New York pension fund scandal began, he has allowed a private equity player to buy its way out of trouble. I know the state has a fiscal crisis, but is this really the best way to move from red to black? The latest insult to legal accountability came yesterday, when Cuomo announced that PE consultant Pacific Corporate Group had agreed to: (a) Pay $2 million, and (b) Sign Cuomo’s much-ballyhooed Code of Conduct. In exchange, PCG was promised that Cuomo would not pursue criminal or civil prosecution related to PCG’s past activities in New York or anywhere else (like, say, California – although sources say that Jerry Brown is beginning to look into that state's placement agent skeletons). What had PCG done wrong? Well, officially nothing – since PCG was required to neither confirm nor deny any of the AG’s findings. Kind of like how The Carlyle Group didn’t do anything wrong, even though it cut a $20 million check. That Cuomo must be awfully persuasive. Maybe he actually could resolve the budget mess, by squeezing cash out of every other PE firm doing business in New York, given that no actual wrongdoing is needed as a prerequisite… Unofficially, PCG was accused of helping enrich indicted “placement agent” Hank Morris. Specifically, Morris was given an undisclosed 5% ownership stake in a $750 million co-investment vehicle funded by
3 min read · 02 July 2009
Pacific Corporate Group, a La Jolla, Calif.-based private equity consultant, has agreed to pay $2 million as part of a settlement related to the New York state pension kickback scandal. PCG also has agreed not to use placement agents to solicit business from public pension funds, although it can continue to use placement agents when securing fund commitments for public pension clients (except when banned by a client, like the New York State Common Retirement Fund). In exchange, NY Attorney General Andrew Cuomo said that he has ended the investigation into PCG, although did not specify if the termination was to all of PCG's activities or only to its New York dealings (PCG has major business with state and municipal pension systems in California, and word is that Cuomo was taking a look via The Martin Act). In a statement, PCG said: "We are taking these steps to make the public whole for the improper actions of a former executive, to put this episode behind us and to move our business forward." That former executive is Steve Moseley, who in late 2006 helped form a $750 million co-investment vehicle funded by the New York State Common Retirement Fund. It was done in partnership with hedge fund The Clinton Group (where Moseley later went to work), and allegedly included an undisclosed participation by indicted "placement agent" Hank Morris. The vehicle also included a partial ownership, and investment committee seat, for Barrett Wissman, a Texas hedge fund manager who has plead guilty to securities fraud.
5 min read · 01 July 2009
Private equity fundraising last quarter rose by 28% to $76.2 billion, according to data released this morning by industry research firm Preqin. That total comes from 82 funds from all over the world, including vehicles focused on buyouts ($33.9b), natural resources ($9.9b), real estate ($8.9b), secondaries ($8.4b), venture capital ($4.7b), fund-of-funds ($7.7b) and mezzanine ($1.2b). Sounds kind of impressive on first glance, but the topline number should not overshadow what is mostly a nnegative report. Among the downers: - The Q209 tally is off more than 60% from the $213 billion raised in Q208 (which was an all-time record). - The number of funds currently seeking capital has dropped by 10% over the past three months. This includes some of the 30 abandoned fundraising efforts so far in 2009, which matches the entire 2008 total.
2 min read · 01 July 2009
Global private equity deal volume for the first half of 2009 was $32.9 billion, according to data being released later today by Thomson Reuters. It represents the lowest opening six months for any year since 1997. Second quarter volume was just $15.1 billion, compared to $17.8 billion in Q1. Overall, financial sponsors accounted for just 3.5% of announced transactions in the first half, which is the lowest such percentage since the first half of 2000. Update: Get all the data after the jump.
1 min read · 01 July 2009
I spent some time yesterday morning discussing KKR's double secret reverse IPO with Reuters Insider, the new online television initiative from my corporate overlords. The anchor was based in New York (you might recognize him from last night's Daily Show), while I was situated in a laundry room just a few yards from my home office (washer? check. dryer? check. tripod topped with high-end camera? check). Still working out some bugs, but getting there. Get the video after the jump.
1 min read · 30 June 2009
Five venture-backed companies went public in the second quarter of 2009, which is an infinite improvement from the prior two quarters' grand total of zero. Moreover, the $720 million raised by those five companies was the highest quarterly tally since Q4 2007, when 31 VC-backed companies raised $3.04 billion. Each of the five offerings was trading above its offering price, as of today's market open, with an average increase of 22.35 percent. Here is your quintet:
2 min read · 30 June 2009
Another day, another survey. This one comes from RSM McGladery, and focuses on PE-backed portfolio company management. The most notable -- albeit unsurprising -- response was that 88% of those surveyed have implemented "headcount reductions" at portfolio companies, while another 10% are considering such moves. Moreover, 75% of respondants have used salary freezes. Also worth noting that PE pros are concerned about how layoffs and other cost-cutting measures will impact the private equity industry's reputation. The survey included replies from nearly 100 senior buyout, venture and mezzanine professionals. They said that their greatest portfolio company concerns revolve around the overall economic outlook, while more than half are worried about portfolio company loan defaults (a result that should be amplfied, given that the VC respondants are unlikely to have used debt in the first place). Read the survey after the jump, or download it here:
1 min read · 30 June 2009
In February 2008, Jeff McDermott asked his eldest son about what he might someday want to do for a career. “Wall Street, because it’s been so good for our family,” answered 14-year-old Dylan. McDermott paused. Wall Street had indeed been good to his family. He had risen to co-head of UBS investment banking, before stepping down in March 2007 to pursue new opportunities. But he also had “gotten wet in a thunderstorm,” leaving business school during the financial industry’s Golden Era. Had he been drawn to automobile manufacturing, McDermott realized, his family would not have been so fortunate. “I told him that I was in the right place at the right time, because Wall Street was growing and changing so fast,” McDermott says. “My son asked what that industry is now, and I said that, were I his age, I’d think about cleantech, because there is a real societal move toward sustainable living, and there are lots of new companies forming that will eventually consolidate. Plus, Dylan loves science. Then I stepped back and wondered why I wasn’t applying that same advice to myself.”
3 min read · 30 June 2009
Bain Capital is offering investors the chance to reduce their commitments to a $1.8 billion co-investment fund, peHUB has learned. Each limited partner would be allowed to cut back by up to 50%, assuming that a majority of investors ratify an amendment to the original fund documents (which they almost certainly will). LPs also would have the option to increase their commitments by acquiring someone else's discarded position (which they almost certainly will not). Bain closed the co-investment fund in late 2007, as a sidecar to what became an $11.5 billion general fund (Bain Capital Fund X). The idea was that it would be used for North American deals in which Bain’s equity check exceeded $650 million, with the general and co-invest funds to split the remainder 50/50. It also could theoretically be used for deals out of Bain’s European and Asian funds, although the initial waterfall for those vehicles flowed into Bain Capital Fund X. Since the co-investment fund was raised, however, it has only been tapped twice: First for the $17.9 billion buyout of Clear Channel Communications in July 2008, and then for the $3.5 billion buyout of The Weather Channel in September 2008 (using a combined $100m from the co-invest fund). All of Bain’s subsequent deals have been
2 min read · 29 June 2009
3 min read · 29 June 2009
