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Knee-deepening insolvency
20/08/2008. Many private equity professionals have previously been schooled in keeping in mind the interests of all constituencies of a troubled portfolio company, including creditors, as it approaches insolvency. However, a recent United States Bankruptcy Court for the District of Delaware decision has potentially taken this mantra to new
heights and provides valuable lessons for private equity sponsors dealing with companies teetering on the brink of insolvency, especially with respect to engaging in self-dealing transactions and deepening the insolvency of a company to the benefit of the private equity sponsor, according to Michael Weisser, Hayward Majors and Kyle Gann of Weil, Gotshal & Manges.
Happy Birthday Mr Borrower
13/08/2008. It goes without saying that the leveraged finance markets have become a nastier, more brutish place for private equity sponsors in the year since the beginning of the credit bust. However, it appears that the more things change the more things stay the same. Although some of the familiar features of leveraged buy-outs in the last few years, such as generous leverage ratios, stapled financing, equity bridges, covenant-lite loans, PIK toggle notes and liberal equity cures, are gone from the current market, much of what remains is similar to the heady days of the first half of 2007. This article from Weil Gotshal & Manges summarises what has changed and what remains the same in the leveraged finance markets in the US and Europe one year into the credit crunch.
Loss rates in the European mezzanine market
30/07/2008. The European mezzanine market offers attractive investment opportunities across different economic environments. This paper investigates the loss rates of European mezzanine investments using transaction data from 229 fully realised mezzanine investments made during the 1989-2001 time period. Partners Group shows that the loss rate is overall very low but exhibits significant year-over-year volatility. Building portfolios that span multiple vintage years improves risk-adjusted returns significantly.
Beyond the credit crisis: the impact and lessons learnt for investment managers
29/07/2008. Since the summer of 2007, banks have suffered significant losses as a result of one of the biggest crises ever to hit the financial services sector, the so-called credit crisis. So far, banks have been the focus of attention as bearing the brunt of the credit crisis impact. But what of the fund management sector? This report from KPMG asks how fund managers have been affected by the credit crisis – and what strategies they are adopting in response.
Private equity as an asset class
23/07/2008. Guy Fraser-Sampson draws upon 20 years of private equity experience to provide a practical guide to mastering the intricacies of this highly specialist asset class. Aimed equally at investors, professionals, and business school students, it starts with such fundamental questions as 'What is private equity?' and progresses to a detailed analysis of venture and buy-out returns.
Sovereign wealth funds and the global private equity landscape
16/07/2008. The liquidity crisis in the global financial community has been a constituent part in pushing sovereign wealth funds into a glare of publicity. Recent high profile investments made by sovereign wealth funds into leading US and European banks and some of the larger global private equity funds has generated discussion, courted controversy and raised hopes within the global investment community, according to this report from law firm Norton Rose LLP.
Ernst & Young – Global Venture Capital Insights and Trends Report 2008
Innovation: the growing importance of venture capital
09/07/2008. The process of globalisation has reduced the potency of many sources of competitive advantage. Companies around the world today enjoy broad access to global resources that help them to compete on factors such as price, process, quality and customer service, diminishing the advantage these confer. One element of competition, however, is harder to replicate and scale successfully: ‘innovation’. On an increasingly flat global playing field, successful innovators differentiate themselves and reap the rewards of the value created, according to this Ernst & Young report.
Assessing the risks: the behaviours of sovereign wealth funds in the global economy
25/06/2008. The recent, rapid rise of sovereign wealth funds has ignited controversy in many parts of the world. In OECD countries, many observers worry that SWFs could be instruments of state policy posing as investment vehicles. On the other side, representatives of nations with SWFs protest that their motives are purely financial and that they wish to participate responsibly in the global financial system, say William Miracky, Davis Dyer, Drosten Fisher, Tony Goldner, Loic Lagarde and Vicente Piedrahita of Monitor Group.
Key lessons learned in executing successful merger integration
17/06/2008. With capital markets still constricted, an increasing number of private equity sponsors are pursuing smaller tuck-in or add-on transactions. This, coupled with an expected increase in §363 'auction sales' during the new default cycle, should keep acquisition activity at fairly healthy levels even as transaction volumes inevitably fall, say Michael F Murphy, David Smalstig and Victoria L Creason of FTI Consulting.
SPACs – Exit Opportunities for Private Equity Sponsors?
23/04/2008. Over the past few years, Special Purpose Acquisition Companies (SPACs), also known as “blank check” companies, have raised significant amounts of capital through the public equity markets. Since January 2007 over $14 billion has been raised through SPAC public offerings. Recent high profile offerings have brought new legitimacy to this market, including Thomas O. Hick’s SPAC, Hicks Acquisition Co. I, which raised over $530 million, and Goldman Sachs’ underwriting Liberty Lane Acquisition Corp., a $350 million SPAC organized by former Fisher Scientific CEO Paul Montrone.
Limited Partner Allocation to Private Equity 2008 - Almeida Capital Report
16/04/2008. This year will see a major shift in the investment focus of experienced LPs. Whilst the past two years have witnessed a traffic jam of mega buy-out funds raising capital, institutional investor attention is now directed towards opportunities in other segments of the private equity spectrum and towards the emerging markets, according to the latest survey by Almeida Capital, a provider of fund placement, advisory and secondary transaction services to the global private equity industry and also the parent company of AltAssets.
Reverse break-up fees: the ultimate option?
02/04/2008. Many recent LBO merger agreements do not require the buyer to specifically perform its obligations, so a buyer’s right to walk and pay a reverse break-up fee is generally clear, writes Jack Boden of law firm Covington & Burling.
Ignorance of the FCPA is no excuse
19/03/2008. Private equity sponsors and hedge funds are increasingly investing in emerging markets, including through dedicated investment funds. The risk of corrupt payments is higher in those markets than in most developed markets and US investors are subject to the U.S. Foreign Corrupt Practices Act (FCPA) in connection with those investments. Recently, the US government has become more aggressive in enforcing the FCPA, writes Weil Gotshal & Manges.
The Global Economic Impact of Private Equity Report 2008
13/02/2008. This collection of working papers is published by the World Economic Forum and is the result of collaboration with faculties at various academic institutions. The research finds that the total value of firms (both equity and debt) acquired in leveraged buy-outs is estimated to be $3.6tn from 1970 to 2007, of which $2.7tn worth of transactions occurred between 2001 and 2007. Many private equity firms have expanded dramatically in size and global reach and the sector has attracted attention from many other players, such as politicians, regulators and organised labour.
The 144A equity offerings – potential new liquidity option for sponsors
09/01/2008. On 12 November 2007, a group of Wall Street firms and The Nasdaq Stock Market announced an intention to form The PORTAL Alliance, a trading platform designed to serve the market for 144A equity securities, write Corey Chivers and Alison Cole of Weil Gotshal & Manges.
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