Keywords: Private Equity, Private Equity Trends, Regulation, Impact of Regulation on Private Equity Deal Activity
Veröffentlicht am 30.04.2013
Leon Black, Chairman and CEO, Apollo Global Management, LLC
David Bonderman, Founding Partner, TPG Capital
Jonathan Nelson, Founder and CEO, Providence Equity Partners
Jonathan Sokoloff, Managing Partner, Leonard Green & Partners, LP
Scott Sperling, Co-President, Thomas H. Lee Partners, LP
Maria Bartiromo, Anchor, CNBC
After a flat 2012 in the private equity market, competitive deal-making has intensified worldwide. Aging assets requiring exit, restructuring and rebirth are waiting to be sold. The current period of low-cost financing, strong stock markets and accelerating growth bodes well for new directions in the industry. However, recent moves by banking regulators, including a redefinition of highly leveraged transactions, could dampen underwriting by financial institutions that participate in buyouts or refinancing leveraged firms' debt. The costs of fixing companies could rise, and such investments could be deterred. Our panel will discuss how the PE industry is adjusting to change in the regulatory and fiscal environments. What sector and geographic trends are fueling these new directions in private equity?"
Keywords: Government, Venture Capital, Government as Venture Capitalist
Keywords: Innovation, Future of Work
Keywords: Steve Jobs, Visionary Thinking, Entrepreneurship
no surprise that specific situations have an impact on the valuation of portfolio companies during the holding period. What matters at the end is net cash in after the liquidation of a fund. In this respect, the cash returns of the top players are attractive, at least in the buy out segment.
"The ultimate performance of private equity funds is only known once all investments have been sold, and the cash returned to investors. This typically takes over a decade. In the meantime, the reported performance depends on the valuation of the remaining portfolio companies. Private equity houses market their next fund on the basis of these interim valuations of their current fund. In this paper we analyze whether these valuations are fair, whether the extent of conservative or aggressive valuations differ during the life of the fund, and at what stage interim performance measures predict ultimate performance. This paper is the first to use the quarterly valuations and cash flows for the entire history of 761 fund investments made by Calpers – the largest U.S. investor in private equity. Our main findings are as follows. First, over the entire life of the fund we find evidence that fund valuations are conservative, and tend to be smoothed (relative to movements in public markets): valuations understate subsequent distributions by around 35% on average. We find a significant jump in valuations in the fourth-quarter, when funds are normally audited. Second, the exception to this general conservatism is the period when follow-on funds are being raised. We find that valuations, and reported returns, are inflated during fundraising, with a gradual reversal once the follow-on fund has been closed. Third, we find that the performance figures reported by funds during fund-raising have little power to predict ultimate returns. This is especially true when performance is measured by IRR. Using public market equivalent measures increases predictability significantly. Our results show that investors should be extremely wary of basing investment decisions on the returns - especially IRRs – of the current fund."
Keywords: Private Equity, Private Equity Funds,Valuation
Keywords: Entrepreneurs, Entrepreneurship
We like the description that an entrepreneur is somebody who believes in "a yet-to-be-made future".
"What are the characteristics, habits, and behaviors of the species entrepreneur? Is there such a thing as "entrepreneurial thinking"? Is there a learnable and teachable "core" to entrepreneurship? This case examines the problem-solving process of 30 entrepreneurs from a variety of industries whose companies range in value from $200 million to $6.5 billion. Careful analysis reveals a distinct thought process: "effectual reasoning." Using U-Haul as an example, the case delineates the way in which entrepreneurs factor in affordable loss, strategic partnerships, and leveraging contingencies. Thinking entrepreneurially, as opposed to managerially or strategically, means believing in a yet-to-be-made future that can be shaped by human action and realizing that, to the extent that such action can control the future, one need not expend energy trying to predict it. It is much more useful to understand and work with the people who are engaged in the decisions and actions that bring it into existence."
Keywords: Entrepreneur, Entrepreneurship
Keywords: Investment Climate, Investment Strategy, Private Equity, Global Economy, China
"This paper studies the effect of business partners on the commercialization of invention based ventures, and it assesses the relative importance of partners’ human and social capital on commercialization outcomes. Projects run by partnerships were five times more likely to reach commercialization, and they had mean revenues approximately ten times greater than projects run by solo-entrepreneurs. These gross differences may be due both to business partners’ value added and to selection. After controlling for selection effects and observed/unobserved heterogeneity, our smallest estimate of partner value added approximately doubles the probability of commercialization and increases expected revenues by 29% at the sample mean."
Keywords: Inventions, Entrepreneurial Success Rates, Partnerships
The answer seems to be clearly No, as a new study shows:
Bargeron, Leonce, Schlingemann, Frederik P., Zutter, Chad J. and Stulz, Rene M., Does Target CEO Retention in Acquisitions Involving Private Equity Acquirers Harm Target Shareholders? (December 5, 2012). Charles A. Dice Center Working Paper No. 2012-026. Available at SSRN: http://ssrn.com/abstract=2185574
"While there is widespread concern that target CEO retention by the acquirer harms target shareholders when the acquirer is a private equity firm, CEO retention can also be valuable to private equity acquirers, and hence potentially benefit shareholders. We find that CEO retention does not harm target shareholders when the acquirer is a private equity firm. In fact, we show that, in acquisitions by private equity firms, better performing CEOs are more likely to be retained and target shareholders gain an additional 10% to 23% of pre-acquisition firm value when the CEO is retained compared to when the CEO is not retained. In contrast, shareholders of targets acquired by operating companies do not benefit from CEO retention. Finally, we find no evidence that the target’s value is artificially depressed ahead of a private equity acquisition where the CEO is retained."
Keywords: Private Equity, CEO Retention, Acquisition Premium
Randy Komisar, Partner at Kleiner Perkins, explains that market forces and current opportunities play a big role in whether or not an entrepreneur succeeds.
Keywords: Skills of Entrepreneurs, Taking Advantage of Opportunities
Opp, Christian C., Learning, Active Investors, and the Returns of Financially Distressed Firms (June 14, 2012). Available at SSRN: http://ssrn.com/abstract=2181441 or http://dx.doi.org/10.2139/ssrn.2181441
"I develop a dynamic asset pricing model to analyze expected returns of financially distressed firms in the presence of learning about firm fundamentals and endogenous information acquisition by active investors that acquire large stakes in distressed firms via private investments in public equity. The model reveals that learning and information acquisition critically affect risk exposures close to default and can rationalize low and even negative expected equity returns for firms with high default risk. Similar to Schumpeter's (1934) argument that recessions have a positive, cleansing effect on the economy, the model reveals that equity holders may benefit from the increased speed of learning about insolvent firms in downturns, which increases the value of their abandonment option in these times. Equity holders' option value is further enhanced by the ability to partially free-ride on active investors' acquisition of information on firm fundamentals. Both information channels are shown to affect equity betas, and may account for striking, momentum-type dynamics in risk premia." Source: SSRN
Keywords: Learning, Financial Distress
Keywords: Venture Capital, Entrepreneurship
"The re-balancing of China's economy will offer opportunities in various sectors and benefit small-and medium-sized enterprises. However, direct access to SMEs for international investors is often difficult. Private equity is well placed to benefit from this opportunity, and provides access to small companies (70% of deals were done were < usd 50mn in the last 5 years) not available through public equity markets." Source: SSRN
Keywords: Private Equity, China, Chinese Private Equity Market
Further China PE market information:
China Europe Mergers & Acquisitions:
A prominent transaction example:
"Private equity critics claim that leveraged buyouts bring huge job losses. To investigate this claim, we construct and analyze a new dataset that covers U.S. private equity transactions from 1980 to 2005. We track 3,200 target firms and their 150,000 establishments before and after acquisition, comparing outcomes to controls similar in terms of industry, size, age, and prior growth. Relative to controls, employment at target establishments declines 3 percent over two years post buyout and 6 percent over five years. The job losses are concentrated among public-to-private buyouts, and transactions involving firms in the service and retail sectors. But target firms also create more new jobs at new establishments, and they acquire and divest establishments more rapidly. When we consider these additional adjustment margins, net relative job losses at target firms are less than 1 percent of initial employment. In contrast, the sum of gross job creation and destruction at target firms exceeds that of controls by 13 percent of employment over two years. In short, private equity buyouts catalyze the creative destruction process in the labor market, with only a modest net impact on employment. The creative destruction response mainly involves a more rapid reallocation of jobs across establishments within target firms." Source: NBER
Keywords: Private Equity, Employment
Keywords: Technology, Entrepreneurship
A 2009 survey (see below) showed that "building wealth" is an important objective for entrepreneurs. Private equity offers an excellent opportunity for entrepreneurial managers to achieve such goal.
Wadhwa, Vivek, Holly, Krisztina, Aggarwal, Raj and Salkever, Alex, Anatomy of an Entrepreneur: Family Background and Motivation (July 7, 2009). Kauffman Foundation Small Research Projects Research. Available at SSRN: http://ssrn.com/abstract=1431263 or http://dx.doi.org/10.2139/ssrn.1431263
"Entrepreneurs are among the most celebrated people in our culture. Celebrity entrepreneurs such as Steve Jobs, Bill Gates, Sergey Brin and Larry Page, often grace the covers of prominent publications. These company founders and innovators fuel economic growth and give the nation its competitive edge.
However, very little is known today about the backgrounds, life histories, motivations and beliefs of these entrepreneurs. So myths and stereotypes prevail. The commonly held belief is that entrepreneurs are young, lightly-educated, childless unmarried workaholics. They are perceived to come from rich families and graduate from elite colleges.
But is this true?
This research answers some of these questions. This is based on a survey of 549 company founders in 12 high-growth industries.It finds that most founders came from middle-class or upper-lower-class backgrounds, are well-educated and married with children. The strongest motivation for starting a company was to "build wealth". Other popular motivators included capitalizing on a business idea; the appeal of a startup culture; a desire to own a company; and a lack of interest in working for someone else."
Keywords: Entrepreneur, Entrepreneurship
PRIVATE EQUITY DEMYSTIFIED, An explanatory guide, John Gilligan and Mike Wright _________________________________________________________________________________
PRIVATE EQUITY NEWS:
FOUNDER HIGHLIGHTS AND FOUNDER FRUSTRA- TIONS:
PRIVATE EQUITY STATISTICS:
WORKING PAPERS PRIVATE EQUITY AND VENTURE CAPITAL:
|<< <||> >>|