Side Letter: EBITDA on steroids, Riverside Oceanic makeover, Nordic’s hiring spree

EBITDA is being sidelined by some investors when it comes to valuing a business thanks to so-called addbacks, and the potential damage is huge. Here’s today's brief, for our valued subscribers only.

Just happened

The problem with pumping up

The damage that could be wrought by EBITDA addbacks – one of the private debt market’s most discussed and controversial deal terms – is the subject of sister title Private Debt Investor’s cover story this month, a deeply sourced investigation into a practice that is causing no little alarm among market participants. Addbacks – sums “added back” to the profits of a company for myriad reasons, increasing the EBITDA figure – technically enable a company to disguise the amount of leverage it is taking on. As traditional limitations around addbacks are eroded, there’s some talk of investors only using EBITDA as a secondary tool when it comes to valuing a business.

Riverside’s Oceanic makeover

Riverside Company has opted to name its next Asia-Pacific vehicle Riverside Australia Fund III, rather than follow the style of its predecessor, Riverside Asia-Pacific Fund II. We understand the change reflects Australia and New Zealand’s disproportionate weighting in Fund II. Fund III will have still have capacity to invest in pan-Asian companies in other markets, should the opportunity arise.

Nordic on the talent hunt 

Nordic Capital waited almost 10 years after its first US healthcare investment to set up shop in New York and is in no rush to make new investments. The Scandinavian buyout giant will focus on building out its team first by hiring as many as four investment execs this year, as partner Thomas Vetander tells us. First up: negotiating an office lease.


Third time’s the charm. TPG’s minority investment in diversity-focused VC firm Harlem Capital Partners marks its third GP stake acquisition after Asian direct secondaries specialist NewQuest Capital Partners last year and CircleUp, which helps start-ups raise equity. The capital comes from TPG’s balance sheet, a spokesman confirmed.

Hamilton Lane rakes in big. LP appetite for co-investments continues unabated. Almost 40 percent of the capital for Hamilton Lane’s $1.7 billion Co-Investment Fund IV came from new investors. While most LPs want to co-invest, execution has its challenges, making commingled funds like this appealing, Jackie Rantanen, managing director and head of product management, tells us.

Vultures go hungry. The “vulture” stereotype of leveraged buyout funds instigating mass redundancies for profit is unfounded. So say researchers at Warwick Business School, Cass Business School and Imperial College who found that jobs were no less secure, even when an LBO featured a ‘perfect storm’ of management buy-ins, short-term deals or high levels of debt. Barbarians – not so scary after all then?

Dig deeper

Commitments from Columbus. Ohio Police and Fire Pension Fund has committed up to $20 million to Veritas Capital Fund VII. Here’s a breakdown of the $15.6 billion US public pension’s investment portfolio. For more information on Ohio Police and Fire, as well as more than 6,700 other institutions, check out the PEI database.

He said it

“Nothing has improved [in the UK]. I would say it has gotten worse. You have all these people saying that a no-deal Brexit would be fine. To me, that’s worse.”

Oaktree Capital founder Howard Marks tells the FT (paywall) that the UK is becoming a tougher place for investors.

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Today’s letter was prepared by Isobel MarkhamAdam LeAlex Lynn and Preeti Singh.

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