Private Equity
Trickle Down Effects: BCE’s stock shot up as a result of the Citi bailout, since the troubled financier was one of the worrisome contingencies of the deal’s closing. Blackstone Is The Turkey Of The Year: Not sure this protest is SEUI-related, since (a) The great carry disparity is basically DOA come January and (b) It’s focused on real estate and mortgages. Get it, Blackstone owns a ton of real estate, through Equity Office and its own real estate funds. What Does it Mean: “When Harvard grads pile into Wall Street jobs, the market is probably overheated and could be heading for a tumble.” Economist’s View: Calculating exactly how much it costs to create a job: $90,323 Read why. Revisited: The whole PE-made-money-on-a-failed-investment thing with Mervyns.
1 min read · 25 November 2008
With murmurs that PE firms may not be immune to layoffs (and proof of that rumor trickling in), what’s a private equity recruiter to do? I asked Todd Monti, head of the PE practice at global executive search firm Heidrick & Struggles what's going on with the private equity job market. So your firm recruits upper level private equity pros. That must be tough if there aren’t any openings to fill. What are you seeing there? It really depends on the amount of assets under management and how much of it is deployed versus dry powder. Firms that have access to capital are being opportunistic in hiring. It’s a wait-and-see approach with a lot of questions. The main hiring I’ve been doing is when a fund has just been raised and the firm feels a need to supplement the team. The second category of firms hiring is the firms that are starting to view distressed as an opportunity. A number of firms are bringing in turnaround pros. What about layoffs?
4 min read · 25 November 2008
Despite its bad reputation for backing out of deals, private equity has managed to avoid Thomson Reuters' list of the largest withdrawn M&A bids. It was released today in honor of the largest pulled bid of all time, BHP Billiton's $188 million offer for Rio Tinto. The entry level price for the list is $54 billion (a French deal), which means even BCE, at $46.8 billion, wouldn't have qualified had the consortia walked away. So in a quasi-PR win, PE gets a pass today. Baby steps. For posterity's sake, thus far in Q4, the US has had $362 billion in deal announcements and $322 billion in cancellations, according to Thomson Reuters. That looks pretty bad compared
1 min read · 25 November 2008
Guess the Firm: "The performance of this fund is frankly pretty embarrassing for them and that is all the motivation they need. Sometimes it is about pride more than money." LP Stakes In TPG: Selling for 45 cents on the dollar, reflecting concerns over Harrah’s and other companies. It Just Looks Bad: Dealzone points out that Citigroup’s 20-year, $400 million naming rights to the new Mets stadium has now been basically sponsored by us, the taxpayers. Citi’s response is quite expected: “That was a decision made in a different time. We have binding legal agreements… I don’t think it’s an issue.” Clusterstock: Compares the new Mets Stadium to Enron Field. Trickle Down Effects: With the golden banker era over, gold diggers are having to really, really dig these days.
2 min read · 24 November 2008
A new Deloitte recruitment ad has struck some the wrong way. The Office Newb, for example, has criticized the ad for offering a confusing, if not just plain idiotic, message. I’m not sure if I quite get the message myself. It’s a string of humorous interview scenes with a 12-year-old asking asinine questions including Rorschach tests, the number of ping pong balls that fit into a 747, and snap decisions about lunch. (View it after the jump) For the first two minutes and 25 seconds, you’d think the ad’s goal is to turn you off of other consulting firms that might actually use such ridiculous interviewing processes, conducted by young, inexperienced know-it-alls. Most of the interviewees get frustrated, except the one immature “dude” who gives high fives and acts like a monkey. But then, in the last five seconds,
1 min read · 24 November 2008
You may remember American Capital’s ugly quarterly earnings report earlier this month, in which the firm reported a $548 million loss, purchased its European Capital arm and suspended its quarterly dividend. You may also remember my skepticism toward the firm's stated goal of successfully selling 14 portfolio companies. It’s only been two weeks since then, and ACAS understandably hasen’t announced any sales, but today the firm did release details on six company exits and some senior loan syndications from the prior quarter. Pulling off an exit in Q4 of this year is going to be nearly impossible, but that was said of Q3, too, and American Capital managed to swing six deals. The news hasn’t completely renewed my faith that the firm’ll close many exits in the coming month, but it is
2 min read · 24 November 2008
Pirates, Obviously: Private Equity Versus Pirates. Word still out on Pirate Capital. Speaking Of: This is a day old, but in case you missed, it, Somali pirates are in talks to acquire Citigroup. But Never Fear: Gasparino has a plan for Citi. It involves stock price predictions. Moelis: The stock market is ruining attempts to value companies, and therefore deals. Sh*t: How swear words function in the work place.
1 min read · 21 November 2008
Summit Partners' investment in Airborne Health has turned out to be a massive headache. It featured a busted auction, a class-action lawsuit over false health claims and a violation of covenant agreements. Last month the firm finally got out of the mess, quietly selling the nutritional supplement maker back to its founder, former second grade teacher, Victoria Knight-McDowell. If only it were that simple. In an attempt to start anew, Knight-McDowell today released a commercial trashing the firm's management of her company (watch video at bottom of post). In it, she explains her buying back of the Airborne: Three years ago, I sold Airborne to a private equity group and went on to raise my family during this time. However, I became increasingly unhappy with how my company was being managed, and so, in October of 2008, I bought it back. The commercial leaves out a few big things. First of all, she was both a minority shareholder and board member during Summit's ownership ...
3 min read · 21 November 2008
There have been plenty of busted auctions this year, with buyer and seller expectations set miles apart. That's bad news for PE shops in search of exits, but some firms are getting creative by using partial exits (i.e., selling a minority stake). It's simple. You scour your debt agreements and find out how much you can sell without triggering a change of control clause. Then sell exactly that much, in cash, to another private equity firm. It should be a small enough chunk that at least someone can afford to bridge it. The capital structure stays in place, you gain liquidity and your buyer gets an attractively priced stake in a company with a pre-credit crunch capital structure already in place. It's a way to rustle up some liquidity, which you could return to LPs, use to pay down debt, or help an ailing company make it through the downturn. Several sources have told me they're seeing books circulate for the
2 min read · 21 November 2008
Even though global loan defaults have quadrupled in 2008, the percentage of defaults with private equity fingerprints on them has decreased in the last quarter, according to a recent Standard & Poor's report. Titled "Private Equity Swirling In The Eye Of The Storm," the report states that 53 of the 86 loan defaulters this year have been involved with private equity firms, which equals 61%. Compare that with the ratings agency's September report, which traced 70% of the 55 defaults back to private equity firms. I'm not sure what the drop means, other than an increase in companies with non-LBO leverage are having a tough time servicing their debt. In general, I predict a spike in defaults in 2009 but don't expect the percentage of private equity involvement
2 min read · 21 November 2008
