Here's a tip for the GP who needs to close a deal in a timely manner – be pregnant. This pressure tactic worked brilliantly for Raquel Vargas Palmer, a principal at New York-based distressed investor KPS Special Situations Fund. Palmer, who led the firm in its turnaround and recent exit of paper products company Blue Heron, got down to brass tacks while six months pregnant (she is expecting her third child in January). The exit involved a complicated and innovative sale back to Blue Heron's management and an employee stock ownership plan (ESOP), and as such Palmer sometimes found herself going over terms until 3 in the morning. Palmer's own highly visible, looming exit event appears to have done much to convince buyers to hurry up. The money (a 5x multiple for LPs) was wired to KPS last month. “I think it actually helped in negotiations,” says Palmer of her pregnancy. “It's tough to sit across from someone who's pregnant and not feel pressure to get the deal done.”
“So far, we have lived through favourable times. We started in 2000 at the height of the bubble, and thanks to events in the capital markets, almost everything we've done has turned to gold. We can't take credit for the market support we've enjoyed.” Wim Borgdorff, head of fund investments at AlpInvest Partners, in this month's Privately Speaking. The interview with Europe's largest limited partner starts on p. 38.
“I expect terms to change with investors willing to pay incentives for extra performance – a 25 percent carry on portfolio performance in excess of a 3.5x gross return: investor really do want the GPs to focus on driving returns.” Mounir Guen of MVision predicts manager compensation for private equity funds will change in the coming years.
“You can make a lot of money just on the [deal] fees. The concern is how much of that is driving activity.” Steven Kaplan of the University of Chicago, quoted in a scathing cover story in BusinessWeek which accused private equity of “using slick new tricks to gorge on corporate assets”.