Private Equity
Well Is It? In the vein of "Is it iced coffee weather?" we have "Is This The Bottom?" (Via Market Movers) Fallin: Recovery Rates for leveraged loans have been less than 25%. (WSJ) Same Dif: "As hedge funds come under increasing regulations, analysts believe the next industry to face tighter and stricter rules could be private equity," reports Business 24/7. Hate to break it to you but most regulators hardly know the difference! (Business 24/7) It's Like Crack: Investors in the so-called toxic fund won't do it without leverage, Wilbur Ross and Jeffrey Gundlach say. (Reuters)
2 min read · 26 February 2009
Some time last year, Deloitte launched its “Straight Talk” series called M&A Lies (And Why They’re Sometimes True). It’s a catchy title, but after receiving a few press releases on the topic, I have to say that it’s painfully misleading. Take today’s M&A Lie #3: “M&A matters only during a boom.” Since when was this a widely-held assumption? It certainly isn’t among investors. We have listened for months as private equity pros fill the conference echo chamber with comments like “investing in downturn produces the best returns,” and “Now is a great time to buy,” etc. Everyone wants to play in a down market, so they can show off how resourceful they are, and how hot the returns on their ’08 and ’09 vintage funds will be. That makes Deloitte’s M&A Lie the opposite of a lie! It’s a straw man!
2 min read · 26 February 2009
3 min read · 26 February 2009
Gift Horse: "Every family business should have a plan to sell," according to a book by Tom Deans, a guy who worked his way up at a family business. He believes gifting a business kills it. (Canadian Private Equity) [Ed. note: Apparently around 12 hours after I linked to the blog "Canadian Private Equity," the entire thing has been deleted! Strange. But never fear, Google cache never forgets. You can still read the post I linked to right here, just scroll down to the second post titled "Does Gifting a Family Business Destroy It?"] We're Aware: The FT "breaks" the stale news that mega-buyouts are having a tough time raising their funds and smaller funds, like Riverside, are now more attractive. Ironic, considering Riverside's own micro-cap fund has been placed on hold due to a lack of interest. (FT) Bob Marley Now Owned By Wall Street: Want the background of Hilco Consumer Capital's deal with the Bob Marley brand? Macleans has an in-depth piece on it this week. Making Lemonade: Madoff is helping private equity, according to Robert Tomei of Advanced Capital. "It will push investors away from hedge funds to private equity." (FT) Fine Lines: How is Pimco both a private investor and manager of government bailout programs? Is Bill Gross "too big?" (Fortune)
1 min read · 25 February 2009
FdG Associates has bought a company that stands to benefit from the new economic stimulus package, but according to managing director Doug Dossey, there’s plenty of growth beyond that spending. “The stimulus package, we view, as icing on the cake,” he says. Yet it’s hard to argue that the firm’s purchase of Joseph B. Fay Co., a civil constructor and demolition company, could have come at a better time. The company expects that business from the stimulus package could drive the growth for the first 12 to 18 months of FdG's ownership. States like Utah and California face acute budget pressures, but with money from the stimulus package, they won’t have to match federal funding for their “shovel-ready” projects.
2 min read · 25 February 2009
2 min read · 25 February 2009
If you're a mid-market lender, chances are that you've canned a few people in recent weeks (I believe the sanitized term is "headcount reduction"). We're hearing about layoffs and office closings at Orix Capital Markets, Bank of Ireland, Newstar Financial and National City. That's in addition to the cuts we recently reported at Churchill Financial and Freeport Financial. To be more specific: Bank of Ireland laid off 10% of its staff around a month ago, a source close to the situation said. It doesn't plan any further reductions, and has around 30 on its staff now. The layoffs are concentrated in the origination side and were driven by a lack of deal flow.
2 min read · 25 February 2009
Someone's Hiring: CFO.com has a listing for a pre-MBA Analyst at a Venture Capital/Private Equity. (CFO) Ouch: OMERs released its year-end results and, as said by a blog called Pension Pulse, "took a drubbing in private equity." The blog reports that "private equity returns were down a 13.7% in 2008 - a whopping 27.2% below the PE benchmark return of +13.5%." It Happened: The Internet has officially topped print as a source of news in the US. (Reportr.net) Apparently: Ya'll are "flocking" to SecondMarket, the consignment shop for PE and hedge fund secondary sales. (FT)
1 min read · 24 February 2009
Last week we learned that a long list of buyout firms are in the bidding for Oriental Brewery, South Korea's second largest beer maker. Meanwhile, New York-based buyout firm KPS Capital Partners has agreed to purchase Labatt USA from Anheuser-Busch InBev. We suggested the rash of interest must be countercyclical. The idea being, of course, that people turn to drinking when times get tough. But that's not the case at all. Stats guru Nate Silverman of FiveThirtyEight has concluded that booze is in fact not countercyclical. According to his analysis, sales of alcohol for off-premises consumption dropped 9.3% in the fourth quarter last year! That's 5.6 points greater than the prior largest drop, a 3.7% decline in the back half of 1991.
2 min read · 24 February 2009
As usual, I have a week and a day’s worth of Moody’s and S&P downgrades on PE-backed companies. This week, there were nine new ones, including two backed by Warburg Pincus and two from Bain Capital. (Apologies for the delay as I was out Friday and Monday) Company: Rafaella Apparel Group Sponsor: Cerberus Capital Management Downgrade: S&P announced a corporate credit rating downgraded from 'CCC' from 'B-'.The outlook is negative. Highlights: “We estimate that leverage may increase to over the 11.5x area (assuming debt levels do not increase significantly from current levels) if revenues decline by about 13% for fiscal 2009 from fiscal 2008 levels and EBITDA margins remain in the low single digits, which may reduce Rafaella's net income covenant cushion.”
3 min read · 24 February 2009
