"We examine the CEO turnover in LBOs backed by private equity funds. When a company is taken private, we fi nd that the CEO turnover decreases and is less contingent on performance. We also find that a higher involvement of the LBO sponsors, who replace the outside directors on the board after transition to private, reduces the CEO turnover and its sensitivity to performance, but improves the operating performance. These findings suggest that more inside information and effective monitoring allow private equity funds to assess CEOs' performance over a longer horizon relative to their publicly-traded counterparts."
Keywords: CEO Turnover, Private Equity, LBOs
Keywords: Online Education, Coursera, Massively Open Online Classes (MOOCs)
"This speech by Stanford professor and Coursera co-founder Daphne Koller is organized and sponsored by the Calit2 Technology-Enabled Learning initiative and the UC San Diego Education Initiative.
We are at the cusp of a major transformation in higher education: the use of scalable online technology to offer a top-quality education, free to everyone. It is the advent of massively open online classes (MOOCs) from top-notch universities. These courses provide a real course experience, with meaningful feedback, and rich peer-to-peer interaction. We can now offer courses across the range of disciplines -- humanities, science, math, music, medicine, and more. These courses can be used both to support an improved learning experience for our on-campus students, via blended learning, and to provide unprecedented access to education to millions of students around the world. Based on work with Coursera co-founder Andrew Ng, Koller will discuss Coursera and other examples, and cite preliminary analytics." Source: Youtube
By their nature, private equity funds hold assets that are hard to value. This uncertainty in asset valuation gives rise to the potential for fund managers to manipulate reported net asset values (NAVs). Managers may have an incentive to game valuations in the short-run if returns on existing funds are used by investors to make decisions about commitments to subsequent funds managed by the same firm. Using a large dataset of buyout and venture funds, we test for the presence of reported NAV manipulation. We find evidence of managers boosting reported NAVs during times that fundraising activity is likely to occur. However, this behavior is mostly limited to firms that are subsequently unsuccessful at raising a next fund which suggests that investors see through the manipulation. In contrast, we find evidence that top-performing funds under-report returns. This conservatism is consistent with these firms insuring against future bad luck that could make them appear as though they are NAV manipulators. Our results are robust to a variety of specifications and alternative explanations.
Keywords: Private Equity, Venture Capital, Fund Valuation
Keywords: Electric Car, Tesla
Private Equity News (US and Europe)
peHub (US and Europe)
Private Equity News New York Times (US focus)
Private Equity blog of Wall Street Journal (US Focus)
Blogging Buyouts (AOL) (US focus)
Private Equity Growth Capital Council (US focus)
Private Equity Wire (mainly US and Europe focus)
European Venture Capital Association (EVCA)
Venture Beat (US Focus)
eFinancials on Private Equity (US and Europe)
China Private Equity News (published by China First Capital)
Keywords: Venture Capital, Private Equity
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
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:
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