Private Equity
I recently interviewed Hector Cuellar, the President of McGladrey Capital Markets, on the state of M&A in the middle market. According to him, it’s not as dead as everyone says. You just need to know where to look. What is keeping an investment banker like yourself busy these days? There is a “mood” that deal volume is down, but we never felt that on the origination side. We got 11 mandates in January. The only difference is, a year ago those would have been around 80% sell side and 20% buy side. Now it’s around 65 to 35. What industries are the mandates coming from? Well there is no distress in the aerospace and defense sectors yet.
2 min read · 03 March 2009
1 min read · 03 March 2009
Want to Prank Call Steve Schwarzman? You call would probably not "be appreciated." (Cityfile) Not A Good Sign: A Sun Capital board member of Furniture Brands has resigned. (STL Today) Thank You: Deal Journal translates some of the circular PR/Lawyer-speak on the AIG press release. (Deal Journal) I Can Has Intelligent Discourse: I really should have seen this coming. Brought to you by our friends at Big Money, the Internet joke Lolcatz has an economic equivalent called LolEconz. Love/hate away. (Big Money)
1 min read · 03 March 2009
We can guess why Blackstone won't go private (pride), but it can't be as simple for American Capital and Allied Capital Corp., both which are struggling to negotiate for waivers on their credit facilities, as they have violated the covenants. As reported earlier, questions about a change in strategy came up on each of the firms' earnings calls today, and the CEO of each responded with a "No, we will remain a BDC." I got a little more color on why neither of those firms would even get the chance to take themselves public.
2 min read · 02 March 2009
There is hope for some BDCs. Despite the doom and gloom I shared earlier today after following the depressing earnings calls of Allied Capital and American Capital, I learned there is a BDC that's in compliance and still paying its dividend. Somehow, this firm managed to go public last year during, marking one of two financial services IPOs in '08. Fifth Street Finance Corp. has paid a dividend: $0.31 and $0.32 per share each quarter with a special $0.05 dividend in January. Fifth Street, unlike its much larger peers, American Capital and Allied Capital Corp., hasn't come close to violating any covenants and is still actively deploying capital. That's a good thing for middle market companies, especially if its true that
2 min read · 02 March 2009
Massive write-downs and horrific stock prices de damned. Today's earnings calls for BDCs like Allied Capital and American Capital echoed what we heard on Blackstone Group's recent call: "We're not going private anytime soon, and we're not paying any dividends for a while." American Capital announced it was in violation of covenants for the second time in the past year. During its dismal two-hour call, analysts lamented that the company' stock price reflected future (and larger) writedowns, and that it ruined the company's ability to maintain its asset coverage ratios. Even individual investors got on the line to complain. Eventually someone asked point-blank: Do you think the BDC is the best structure for American Capital going forward? Would you consider going private? CEO Malon Wilkus said, "No... Last year we conveyed we had to evaluate our structure, but in this environment it'd be hard to explain that to lenders."
3 min read · 02 March 2009
It's only been six months since Warren Buffet called private equity firms “porn shop operators,” but The Oracle of Omaha can't stay away from one of his favorite punching bags for long. In his annual letter to investors, Buffet called out private equity firms for being too opaque, and abusing portfolio companies behind those closed doors. He writes:
3 min read · 02 March 2009
Just Don't Try Selling It In New York: Place this in the "why didn't I think of this?" file. Or perhaps under "totally dumb ideas." A guy is bottling and selling tap water from New York City. It's Called Tap'd NY. (LA Times) $24 Billion: That's the total tax increase your industry is going to get over the next nine years, in case you haven't tallied it up yet. (Bloomberg) But Don't Worry: Some PE firms are prepared to fight. (FT) As Seen On TV Wars: Talk about IP protection. The ubiquitous Snuggie is an imposter because its predecessors, the Slanket and the Freedom Blanket couldn't patent the damn thing! (I mean, how can you patent a backwards bathrobe?) (Ny Times) Top Lists: Here you are, the BusinessWeek list of the best undergrad business schools. (BusinessWeek)
1 min read · 27 February 2009
Years ago I joined a social media/job search hybrid site called Doostang. It's kind of like LinkedIn, but with the expressed purpose of using "inside connections to get hired." The company has recently begun peppering my email inbox with greater frequency, and when I opened one such newsletter to "unsubscribe" (I'm not looking for a job and get enough email as it is), I was surprised to find a feature on mid-market buyout firm Accel-KKR. Is the firm hiring? Who knows. But here's VP Dean Jacobsen's take on the job market, from the Doostang email:
2 min read · 27 February 2009
Well, Blackstone Group reported its fourth quarter earnings this morning. The basics are that the firm experienced a net income loss of $827m in Q4, compared to a loss of $509m in Q3. Corporate private equity revenue was negative $193.6m in Q4, compared to negative $68.3m in Q3. On the other hand, fee-related earnings for 2008 were up 11% over 2007. I plan to liveblog the media call, which starts right about now. Hopefully I'll get a chance to ask if BX is in the market for strategic acquisitions (3i?) or whether it'd take itself private. Tune in here at 9:30.
1 min read · 27 February 2009
