As any battle-scarred financial services investor knows, plummeting bank valuations are the proverbial falling knives that scar anyone who tries to catch them before hitting the ground.
But it's increasingly becoming a knife that cuts both ways: emptying, as well as filling up, private equity firms' coffers as bank collapses wipe out some but allow others with seasoned financial services professionals onboard to raise heaps of dry powder for their efforts.
For the former, TPG's $1.3 billion loss on its $2 billion equity infusion into ailing savings and loan Washington Mutual is a case-in-point.
For the latter, Flexpoint Ford stands out an example of how general partners are turning their experience in the sector into major fundraising achievements.
The Chicago-based financial services and healthcare specialist headed by managing principal Don Edwards recently finished a fast and fruitful fundraise that, at around $1.3 billion, more than quintupled its debut fund of $225 million, raised in 2005.
Flexpoint's new war-chest is comprised of an $800 million core fund along with a $480 million sidecar fund composed of the same investors on a pro-rata basis.
The purpose? Continue investing in healthcare, which was the founding partners' mainstay at buyout shop GTCR Golder Rauner – but also launch a much stronger push into financial services, particularly US depositary lenders.
To help it accomplish this, Flexpoint recruited some new talent and, in the process of doing so, changed its name. The 12-person firm appointed former “special limited partner”Gerald Ford, who had invested $50 million into Flexpoint's first fund, as principal and brought on two of his financial services investment colleagues, Randy Staff and Carl Webb, to help him spearhead Flexpoint Ford's foray into financial institutions.
Ford, who served as chief executive of California-based savings and loan Golden State Bancorp before selling it to Citi in 2002, is no stranger to financials. Neither are Staff or Webb, who have worked alongside him for 25 years acquiring and operating numerous financial institutions.
In an environment where US financial institutions as measured by Dow Jones Financial Services Index have tumbled 63 percent in value in the last 12 months and are trading at unprecedented price-to-book values, this kind of expertise attracts plenty of capital.