Private Equity
2 min read · 15 September 2008
FT: A detailed comparison of the current economic environment and the Japanese banking crisis. My favorite phrase is “great creativity of with the truth.” As a reporter, trying to figure out who is feeling the pain, it is sometimes very difficult to dig deeper than the “creative” answers financial types spin. New York Post: When your portfolio company goes bankrupt, watch out for crazy vendors with threatening emails. A Steve & Barry’s (backed by TA Associates) vendor writes that shoppers of the bargain retailer are buying clothes that are “soaking of blood and tears of worldwide vendors." Hello, Melodrama. New York Times: Hedge funds can now romanticize the good old days, because the good old days are now a thing of the past. Well that’s not exactly a newsflash, but there is one part of this “trend” story that interests me:
2 min read · 12 September 2008
ZM Capital: a small investment subsidiary of ZelnickMedia that somehow managed to convince a $249 billion company with 91,000 employees to do its bidding. Three weeks ago, most everyone assumed that Quadrangle Group’s agreement to buy media services company Greenfield Online was a done deal. It had a standard go-shop provision, but conventional wisdom tells us those rarely go anywhere. And besides, Greenfield’s stock was trading at a relatively small spread. Business as usual. Ho-hum. Then, seemingly out of nowhere, Microsoft upended the whole thing with a superior offer that Quadrangle was unable to match. Who knew little ZM Capital was behind the scenes, plotting a rival bid, for almost a year?
2 min read · 12 September 2008
Lehman Edition: Follow the jump for some non-Lehman reading. Business Week: So, there is nothing but Lehman Brothers coverage in the news, and you don’t need me to point you to it, but I wanted to draw attention to a specific piece of private-equity-focused analysis. Business Week asks, is it time for Lehman to go private? Dealbook responds with even more insightful commentary (and comments), including two cents from an analyst who believes Lehman’s management may be able to piece together enough money to buy the company. Wall Street Folly: In response to the Reuters and CNBC “debunk” that Goldman Sachs isn’t interested in buying Lehman Brothers, the blog asks: “Did anyone *really* think that Goldman would buy Lehman Brothers? Of course by now we all know the report and the blog are referring to a Goldman bailout of all of Lehman; all the hubbub over the piecemeal auction of its asset management businesses is long gone. Dealbreaker: Ok, last one, I promise. Best irreverent headline on the whole mess.
2 min read · 12 September 2008
Linens ‘n Things could become the subject of a probe from a disgruntled bondholder, LBO Wire reported. Bondholder Levine Leitchtman Capital Partners is suspicious of Linens ‘n Things’ “quick demise” under the private equity ownership of Apollo Management. It’s true, Apollo only owned Linens around two and a half years before it went bankrupt. And it’s also true that there have been reports of strange management behavior at the company (but come on, it’s The Post…). Even so, this filing is significant for any PE firm facing a leveraged, unplanned disaster with potential for bankruptcy. The key word here is “unplanned.” If Levine Leitchtman’s probe is (a) granted and (b) fruitful, its bad news for private equity’s image and potentially, its deal flow. The probe follows a similar line of thinking as the Mervyns lawsuit from last week. (You might remember, bondholders accused its PE backers of basically sabotaging the company to make money on its real estate.)
2 min read · 11 September 2008
The Daily Deal: TPG’s $2 billon investment in WaMu looks bad, as its stock along with most financials plunged this week. But I disagree with the article’s assertion that a dismissed CEO is a cause for alarm. That move has been known to make a company’s stock rise in some cases. Either way, the point is, TPG’s lost $1.2 billion in a matter of days. PE Insider: Ventures West, one of the largest VC firms in Canada, is cutting its staff, including part time consultant and infectious greed blogger Paul Kedrosky. However, he didn’t blog about it. Dealbreaker: Is asking, ‘who’s next?’ Sad that I don’t even need to specify what they’re talking about to know. ...
2 min read · 10 September 2008
S&P’s latest credit analysis blames this year's skyrocketing default rate on a lot of things, but the most common thread is private equity. The report, titled “Default Autopsy Finds Traces of Private Equity DNA,” lists the usual suspects (bad economy, high energy prices, low consumer confidence, high cost of capital) as reasons the sharp rise in global defaults. But the fact remains: Of the 55 defaults in the first eight months of this year, 70% were involved in transactions involving private equity. The excuse S&P offers is one I don’t fully buy. The report explains that private equity firms want to buy cheap, therefore PE firms buy already-troubled assets, which is why they've got their hands in so many defaulting companies. For turnaround investors like Cerberus and Sun (who each have more than one ringer on this list), perhaps. Keep reading.
2 min read · 10 September 2008
Hiring Bob Lipp is one of the best moves Marge Magner’s ever made. At least that’s what she told me this morning in a discussion about Lipp and what LPs think of her firm’s moving parts. Despite (basically) losing her partner and co-founder to the corporate world, Magner and her young firm, Brysam Global Partners, couldn’t be happier. See, Magner and her fellow ex-Citigroup exec Bob Willumstad formed Brysam Global Partners in 2007. They raised a $1 billion private equity fund to invest in consumer facing financial services companies in emerging markets. But in June, Willumstad decided to take on a minor, insignificant extracurricular activity. He became CEO of AIG International. (You may have heard of it, some paltry $49 billion company.) He technically still works for Brysam Global Partners as a Senior Advisor, though the amount of time he commits can’t be much. Naturally, I had a few questions for Magner and Lipp. Follow the jump to read what Brysam’s LPs did when Willumstad left, where the firm sees opportunities, the status of its fund, and a bonus piece of trivia.
3 min read · 10 September 2008
How-To Edition: How to keep your investors, how to pretend everything’s OK (Ahem, Blackstone), how to equitize a deal and how to raise prices at a store named “99 Cents Only.” Bloomberg: 99 Cents Only is a no-bullshit dollar store—when they say 99 cents, they mean there is no item over 99 cents in their store. Unlike say, their KKR-backed peers, Dollar General (more like, A Dollar, Generally). But the store’s founders didn’t account for long term headwinds like rising costs and inflation with that philosophy. How to solve it? They’ve raised prices, for the first time since opening in 1981, by a whole penny, to 99.9 cents. Genius. (Via Wall Street Folly.)
2 min read · 09 September 2008
Is this surprising? Probably not. Green is such a buzzword these days that I’ve heard a number of people express fears of a backlash. I'm not talking about venture investing, I’m talking about plain, vanilla M&A, where there hasn’t been much of a surge of interest to backlash against! By and large, green M&A is still waiting for its day. A feature from mergermarket reports that the “groundswell of interest” in environmentally friendly building materials and processes has been slow to translate to M&A activity. "Obstacles to M&A could include the generally difficult construction market, a skepticism about the profitability of green products and the difficulty in defining what really counts as green." Aside from the first one, those obstacles apply to most green buyout targets. So how does PE activity fare?
2 min read · 09 September 2008
