Private Equity
With no formal track record or pool of capital, former Cypress Group Managing Director Jon Foster set out to start a new private equity firm during a terrible time to do such a thing. Alongside a team of operating experts (Steve Cortinovis, former president of Europe for Emerson Electric, John McGovern, former CFO of Georgia-Pacific and Steven Martin, former EVP at Ingersoll-Rand), Foster founded Current Capital. The firm is presently an operations-focused fundless sponsor building its track record with the hope of evolving into a full-on buyout firm that also will offer a suite of advisory and consulting services. According to Foster, Current Capital won’t come to market with a proper buyout fund until said market turns around. At that point it’ll seek around $200 million in commitments, he said. For the time being, Current Capital is building its track record through individual, creative deals that still fit into its lower middle market services and industrials focus. The firm’s first deal, not previously disclosed, occurred back in November, when it partnered with GSO Capital to “manage the firm’s investment” in portfolio company Tompkins Associates.
2 min read · 04 June 2009
The Tale Of Two Buyouts: Further evidence of "how private equity groups are struggling to keep control of companies bought during the credit bubble and providing clues on whether they will succeed." (FT) Buyout Books: Towerbrook Capital doubled its money on its investment in celebrity show company Jimmy Choo. Now there's a book that details how the small couture business rose to become an "international sensation." (WSJ) Backing into it: WSJ breaks down just how big of a deal Delphi is for Platinum Equity: Platinum recently closed on a $2.75 billion private-equity fund. Typically a buyout fund will invest no more than 15% of a fund into a single deal, so not to concentrate its risk. Using that benchmark, Platinum's maximum capital commitment would be about $413 million. (WSJ) Won't Refi Again: Debt refinancings on buyout-owned companies are hitting a brick wall. (DJ) Bankers in Low Wage Jobs? How mortifying. "Carlos Araya used to order lobster, filet mignon and $200 bottles of red wine at the Palm Restaurant in midtown Manhattan. Now, he seats customers at its Tribeca branch." (WSJ)
2 min read · 03 June 2009
As the weather (slowly) warms up, plenty of M&A bankers are hoping the market for deals will as well. We've noticed a few more targets coming to market in recent weeks and have compiled a list of some of those we've come across. Our sources are various news reports and the Buyouts "Seeking Buyers" list. The following companies (among many, many others) are either formally considering "strategic alternatives," reported to be on the block, or rumored to be in sale talks in the past week. I can't be comprehensive, but I can try. For prior lists, go here, or here, and send any additions my way. Digital Ally- The Deal reports the company hired Banc of America Securities to help is explore strategic alternatives before Michael Caulfield, BofA's managing director on the account, joined the company as its VP of Strategic Development. AIG has lowered its asking price on its Taiwan insurance unit to between $1.8 billion and $2 billion, from between $2 billion and $2.5 billion, according to local reports.
3 min read · 03 June 2009
I'm certain that, in general, I'm not alone in my ratings agency rage, but mine is a very insular, specific rage. Standard & Poor's recently released a report titled "Global Credit Comment: Exposure to Deteriorating Assets Increases Risks To Private Equity." It's not unlike prior reports the firm has released titled "Private Equity Swirling In The Eye Of The Storm" and "Default Autopsy Finds Traces of Private Equity DNA," both of which I've been equally critical of. This report states that more half of the 293 companies on its Weakest Links list "have been involved in transactions with private equity at one point or another." The Weakest Links list consists of entities rated ‘B-‘ and lower. If the purpose of the report is the assess risk to private equity, as the title states, then it makes no sense to include companies that private equity has already exited. A buyout fund can't be exposed to risk on a company it no longer owns.
3 min read · 03 June 2009
Advice to New MBAs: Mean Street says "Hang in there, baby." (Deal Journal) Web 3.0? As Internet evolves, profit is still the missing factor. (Reuters) Great Quotes: From Kara Swisher's overview of the All Things Digital conference on the idea of Web 3.0: "Because whatever name you want to slap onto what's happening, the pace of change does not wait to be defined." (WSJ) You Love Acronyms: Here is a guide to TARP-y acronyms, including the RAT Board, SNAP, and LUST Recovery. (WSJ) Wow: How one car dealership ran up $40 billion in debts. (Reuters)
1 min read · 02 June 2009
The recent rash of PE-backed bank buyouts has prompted scores of questions, but I haven't yet heard anyone ask about strategy drift. Are investors okay with their buyout fund managers delving into the world of distressed bank assets? Or, let's look at it this way: Are general partners stepping outside of their bounds to do these deals? Ever since the prospect of private equity investing in banks arose, we've heard of the extreme difficulties posed by such an endeavor. Aside from the burns on deals like WaMu and several J.C. Flowers investments, it's been said that private equity firms don't understand the extensive federal regulation that comes with owning a bank. Aside from that, investors have expressed worries that the government is an unreliable partner, and that the numerous regulatory bodies overseeing banks have no standard policy for private equity investments.
3 min read · 02 June 2009
Private equity firms face a fund-raising overhang of $400 billion, which is an all-time high, according to Alliance of M&A Advisors and PitchBook Data. The $400 billion signifies the difference between funds raised and funds invested through April 2009, since 1998. The current total is a jump from $377 million at the end of last year and $236 million in 2007. According to the report: "There is currently enough dry powder to more than support the deal activity of 2004, 2005 and 2006 combined with the use of moderate leverage,” wrote PitchBook founder John Gabbert. The funny thing is, despite griping to the contrary, buyout firms continue to raise money. Pitchbook notes that 18 funds have closed on $25 billion in the last 60 days.
1 min read · 02 June 2009
Much ink has been spilled over the "broken" venture capital model. Several years ago, Greg Warnock reached this same conclusion while at vSpring Capital, deciding venture capitalists weren't being adequately compensated for the risk of investing in pre-revenue deals. So he started a new firm to do the opposite of that. Warnock, alongside former MarketStar Corp. CEO Alan Hall, formed Mercato Partners to invest exclusively in revenue-producing startups with the goal of finding companies "grappling for their first foothold," and bolstering their sales forces from ten to 500. That strategy has performed well thus far. Two years and four investments into its life, the firm's IRR is in the low triple digits, while its portfolio company revenues grew 50% last year. I asked Warnock a few questions about Mercato's strategy and how it fits into today's VC market.
3 min read · 02 June 2009
HIPOs: As a follow-up to Tim Draper's "prublic" idea, here's another IPO-alternative, the Hybrid IPO. (Bloomberg) Really, It's Bad Over There: The finger pointing over NY's pension fund's performance is flaring. (Dealbook) "You're a Disgrace:" That's what Mike Bloomberg told a reporter who dare question his run for a third term, now that the economy is showing signs of recovery. (Clusterstock) Michael Moore: He's got some ideas for the future of General Motors. (Michael Moore)
1 min read · 01 June 2009
Culled from regulatory filings, here are some recent private equity and venture fundraising updates, not reported elsewhere. Inventus Capital Partners, a new Menlo Park, Calif.-based VC firm has raised $51.25 million from 62 investors. The firm hasn't listed a fundraising goal, but in September peHUB reported the firm was seeking $125 million. That same report stated the firm had around $50 million in the hopper, so this new filing indicates the firm raised very little new capital in the last nine months. Firm Web site Lenox Equity Partners, an equity and mezzanine investment firm based in Atlanta, Ga., has raised $9.7 million toward a $30 million fundraising goal from 22 investors. The fund began raising commitments in 2007. Firm web site
2 min read · 01 June 2009
