Pearls of wisdom: spotlight on non-executive director talent
09/05/2008. Legendary banker JPMorgan said that when two non-executive directors (NEDs) agree, most of the time one of them is unnecessary. A century after he bailed out the US financial system, his words still carry weight and in a post-Enron age the topic of NEDs continues to spark controversial exchanges, writes Scottish Equity Partners. 
Growth equity: finding the right 'Tweener' investor
30/04/2008. In 2007, US private equity firms raised a record $302bn in 415 funds. While the vast majority of this capital is earmarked for leveraged buy-outs and early stage venture, many companies fit the criteria for neither, says Richard Maclean of Frontier Capital. These 'Tweeners' are established and growing businesses that lack the intellectual property to attract venture investors or the EBITDA to be a leveraged buy-out.
Perspectives - Capital Dynamics quarterly newsletter April 2008
30/04/2008. Within the bulletin, the international private equity asset manager offers its take on why pension funds should continue to invest in private equity despite the recent market turmoil. An easy-to-use graphical illustration of the market climate for the different regions and sectors can be found on page 3, followed by key market figures.
California’s Responsible Private Equity Investment Act of 2008
26/03/2008. The substantial increase in size of sovereign wealth funds has led state, federal and international officials to examine more closely the potential economic and political impact sovereign wealth funds might exert. While some are urging greater controls on the sovereign wealth funds themselves, California is taking a different approach by proposing to adopt legislation that would regulate investments by the state's retirement systems into sovereign wealth funds.
Preempting Private Equity
19/03/2008. Executives often complain that Wall Street doesn’t appreciate the value of their companies, and they are often right. Research shows that companies’ shares can trade at up to a 30 per cent discount - either to what the companies would fetch if the pieces were on the market separately or to the value as seen by private equity investors. As the conventional institutional market has adopted passive strategies in which fund managers buy and sell companies to replicate indexes, the art of active investing has shifted to private equity firms, writes Booz Allen Hamilton.
Sovereign funds in the spotlight
12/03/2008. In an environment of tightly constrained equity and debt markets, attention has swung to sovereign funds as a source of M&A deal flow, writes Robert Nicholson of Australian law firm Freehills.
CDC 2008 Outlook: an interview with Richard Laing, chief executive
23/01/2008. Richard Laing, chief executive of CDC, the UK government-backed private equity emerging markets fund of funds investor, gives his outlook for 2008.
Litigation: a growing risk factor for private equity
17/01/2008. It is a truism in the US economy that as a particular industry grows in size and influence, it becomes a magnet for litigation. Litigation risk for an industry follows a typical arc, trailing the industry upward as it grows, and then rapidly closing the gap with a proliferation of suits over scandals and misdeeds, both real and imagined, warn Timothy W Mungovan and Jonathan Sablone, partners at law firm Nixon Peabody.
Will private equity investment in healthcare remain private?
16/01/2008. Have private equity investments in nursing homes compromised the quality of care provided to residents in these facilities? That is what the US Congress and several state legislatures want to know in the aftermath of a New York Times article claiming cost-cutting measures have been carried out in facilities that have been taken over by private equity sponsors, say partner Susan M Hendrickson and counsel Beth L Rubin of law firm Dechert.
Argos Mid-Market Index H1 2007
09/01/2008. The Argos Mid-Market index measures the evolution
of European private mid-market company prices.
Carried out by Epsilon Research for Argos Soditic and
published every six months, it reflects median EV/EBITDA
multiples, on a 12-month rolling basis, of mid-market
M&A transactions in the euro zone. For H1 2007, the index is at an historic high.
MAC and MAE clauses: uncertain provisions in uncertain times?
09/01/2008. In the midst of the credit crisis that began this summer, there are numerous reports of would-be buyers seeking to terminate or renegotiate signed acquisition agreements based on a claimed occurrence of a 'material adverse change' or 'material adverse effect' on the target, an event that would trigger what is commonly known as a 'MAC' or 'MAE' clause, says Patrick C Lord, an associate at law firm Dechert LLP.
The Relationship between GPs and LPs: The Stony Road to Success
02/01/2008. With $432bn collected worldwide by private equity in 2006, new funds raised in ever shorter periods of time and fund sizes reaching new records every year, one needs to ask what implications these developments have on the alignment of interests between GPs and LPs and on future returns and what makes for a successful partnership today, writes Ralph Westermann of CAM Private Equity.
Evaluating Mass Torts in a Private Equity Acquisition
02/01/2008. An important aspect of evaluating the possible
acquisition of the stock or assets of a target portfolio company is the potential litigation liability that may be acquired simultaneously. If a target company is involved or could potentially become involved in complex litigation matters, particularly mass tort litigation, it presents both risk and opportunity to a private equity acquiror, Sean P. Wajert and R. Jeffrey Legath, partners at law firm Dechert say.
The asset class private equity – market opportunities in Europe
19/12/2007. Institutional investors around the globe are continuously on the lookout for high yield and new alternative investment opportunities to boost and diversify their capital income, writes Uwe Fleischhauer of Fleischhauer, Hoyer & Partner. As the stock market turned bearish in the spring of 2000 and continued its slump well into 2003, accompanied by a prolonged phase of low interest rates up to date, asset managers in banks, pension funds, insurance companies, foundations and family offices have intensified their search for alternative asset classes.
Fair value reporting for illiquid investments: ready or not
(here it comes)
12/12/2007. For many years, private equity funds (both venture and buy-out) carried illiquid portfolio companies at cost for at
least a year or more unless a subsequent financial transaction supported a different valuation, says Roger Mulvihill, a partner at law firm Dechert.
Conflicts in private equity: respecting the rights of limited partners of private equity funds and shareholders of portfolio companies
05/12/2007. Private equity fund governing documents generally permit a manager to commence investing a new fund ('Fund B') at the time an existing fund ('Fund A') has invested or used to pay expenses an agreed upon percentage of its committed capital (on average, approximately 75 per cent). After providing for future management fees, Fund A should have capital available for follow-on investments and possibly for additional new portfolio investments as well, advises Robert M Friedman, a partner at law firm Dechert.
The hybrid capacity: The convergence between hedge funds and private equity firms
28/11/2007. James Kelly, a partner at business law firm Nixon Peabody, says hedge funds investing in illiquid assets means its differences from private equity are beginning to lessen.
The Walker Review
28/11/2007. Even the sceptics cannot deny that publication of Sir David Walker's review this week is a seminal moment for the private equity industry, notes SJ Berwin. Unique in the world, Walker's guidelines urge private equity houses that own or acquire 'large' UK companies - or aspire to do so - to reveal much more about themselves than they have in the past, and to require their portfolio companies to be more open than other private companies have ever been. Many of the affected houses have already pledged to comply, and most are expected to do so. In practice, the pressure to fall into line - at least for UK-based houses - is likely to prove irresistible.
Chaotic times in leveraged finance
21/11/2007. William D Egler, counsel for business law firm Nixon Peabody, explains why private equity leverage is in a state of flux.
Sir David Walker' Guidelines for Disclosure and Transparency in Private Equity
21/11/2007. Sir David Walker has published his Guidelines for Disclosure and Transparency in Private Equity, recommending that both private equity firms and their portfolio companies disclose more information. However, the private equity business will remain a private business and Sir David does not see the need to make it wholly transparent.
The key to the locked box
14/11/2007. Over the past 12 months there has been a marked increase in sellers requiring a 'locked box' deal in European M&A transactions, particularly on auctions by or to private equity houses. Richard Ufland, a partner in business law firm Lovells’ private equity group, explains how the mechanism works and considers the issues.
Jon Moulton's Alternative Guide to Venture Capital
14/11/2007. This article was written by Jon Moulton, the managing partner of venture capital firm Alchemy Partners to help Venturedome.com readers to gain a better understanding of the VC industry and how it operates. It is a selected dictionary of oft-used phrases to cut through the bull.
A Rock and a Hard Place
07/11/2007. Deal certainty is important to both buyers and sellers of corporate businesses. A buyer wants certainty as to both the circumstances in which it can terminate the acquisition agreement if the assumptions on which it agreed to buy the business have materially changed and the maximum amount of potential recourse that a seller has against it if it terminates. A seller wants certainty that a buyer cannot terminate the acquisition agreement in the absence of a material adverse change in the business and wants meaningful remedies against a buyer for wrongful termination, say Doug Warner and Christopher Machera of Weil, Gotshal & Manges.
Interim funding – what is the hurry?
07/11/2007. It has become commonplace for bidders to require their mandated lead arrangers to sign an interim financing package on or prior to exchange of a proposed acquisition. Susan Whitehead, a senior consultant in international business law firm Lovells’ leveraged and acquisition finance practice, explains why this can be necessary, what is involved and some issues the parties should consider.
Extraterritorial reach of US patent laws
24/10/2007. F Jason Far-hadian Esq., principal of Century IP Group, maintains that patent rights covering a system are enforceable, even if parts of the system are located abroad, as long as the control of the patented system remains within the US.
Public value: a primer on private equity
19/09/2007. You can hardly open a newspaper today without learning of a major new corporate transaction involving private equity, says the Private Equity Council. As private equity has become more prominent, as private equity funds and the size of the transactions they finance have grown larger and as the names of the companies they acquire have become more familiar, reasonable questions are being asked: What is private equity all about? How does it work? What does it mean for the American economy, for American workers and for American competitiveness?
The morning after: driving for post deal success
29/08/2007. Many CEOs and CFOs may be familiar with that 'morning after' feeling when the intensity of the deal negotiations are finally behind them, says KPMG. Rather than relief and celebration, there is a realisation of the enormity of the task ahead, and pressing questions can include: what have I bought and how do I deliver the value paid for?
Resolving disputes in China through arbitration (2007)
29/08/2007. Arbitration is usually the preferred method of dispute resolution for investors in China and this guide from Freshfields Bruckhaus Deringer aims to describe the most significant features of the arbitral process and the requirements for an arbitration clause.
Determining company value based on capital raising is a tricky business
22/08/2007. Don’t be misled by common simple calculations of company value cautions BDO Ziv Haft Consulting & Management executives Udi Savithsky and Efrat Shust. In this IVCJ article, they explain how valuations are generally far more complex.
Operating partners promise performance and higher returns, but do they always deliver?
08/08/2007. According to a 2007 Association for Corporate Growth/Thomson Financial survey, private equity professionals see lower returns as the greatest threat looming over them - more so than competition from other firms and hedge funds. For many, a way to avoid that problem is to install so-called operating partners - senior-level executives with industry expertise - at portfolio companies. Panelists at the 2007 Wharton Private Equity and Venture Capital Conference and others in the industry say that operating partners with experience running plants and facilities, and rolodexes full of industry contacts, can boost profits and feed higher returns.
What's in your portfolio?
01/08/2007. A technology company's strength and viability cannot be fully assessed without a close look at its intellectual property assets. F Jason Far-hadian of Century IP Group explains why a well-balanced IP portfolio is so important in today's competitive environment.
View from the House: private equity in the UK
25/07/2007. Change is afoot in the world of private equity, says British MP Mark Field. Few would disagree that there should now be some tightening of the generous tax regime for private equity investment. But it is crucial that we do not undermine the future prosperity generated by private equity, not least in invisible exports, in an area where the UK has become a world leader. The political and fiscal decision-makers must recognise the appeal for many players in this industry of working in a truly cosmopolitan environment.
Disclosure and transparency in private equity
17/07/2007. Sir David Walker was asked by the British Venture Capital Association and a group of private equity firms to undertake a review of the adequacy of disclosure and transparency in private equity with a view to recommending a set of guidelines for conformity by the industry on a voluntary basis. This is his consultation document on the subject.
Dealing with pension fund trustees
20/06/2007. In May, says SJ Berwin, the UK's Pensions Regulator clarified its guidance on clearance applications. Probably because that clarification came in the same week as the trustees of the Boots' pension scheme flexed their muscles in anticipation of a buy-out, it attracted significant press attention - and was seen by most as a further impediment to buy-out deals. But that may be a misleading interpretation of the announcement.
Gray hair giving way to black hair
06/06/2007. Venture capital management firms are or soon will be facing the issue of succession in their top management. In this IVCJ article, Zeev Holtzman, founder and chairman of Giza Venture Capital, provides his prescription for a successful succession process.
Lessons from the front
30/05/2007. The takeover battles between The Blackstone Group and a consortium lead by Vornado Realty Trust for Equity Office Properties, and between The Carlyle Group and Building Materials Corporation of America for ElkCorp, are two examples of the potentially tougher acquisition environment that private equity sponsors may face in 2007, says Weil, Gotshal & Manges, including increased challenges from strategic buyers.
Identifying and managing special situations at VC-backed companies
23/05/2007. In this IVCJ article, Yoav Kfir, CEO at special situations firm VAR Management, answers frequently asked questions about distressed situations – one of the most common special situation investments – and proffers ideas on how they could best be managed.
Big deal(s): what's driving the M&A frenzy?
09/05/2007. 2006 set a record for mergers and acquisitions worldwide, says Knowledge Wharton. Deals totaled $3.79tn, 38 per cent higher than in 2005, and 55 of the transactions were valued at more than $10bn each, according to data from Thomson Financial. Europe was one of the big players, registering 39 per cent more deals than in 2005 for a total of $1.43tn.
VC funding: must have three to tango
02/05/2007. In this IVCJ article, management consultant Harry Yuklea examines the substantial dependency among general partners, limited partners and entrepreneurs in the venture capital field and describes inefficiencies that result when interests of all three players are not in sync.
Venture lending – It's now or later
04/04/2007. Venture lending is relatively new to Israel. In this IVCJ article, Dr Lee-Bath Nelson, senior principal at Plenus Venture Lending answers the most frequently asked questions about this rapidly growing method of financing.
Oh, no! Not fund raising again?
14/03/2007. In this IVCJ article, Jonathan Saacks of Genesis Partners offers some alternative best practices that could increase the rate of fund raising success, while making the process more enjoyable or, at least, less painful.
Scaling up innovation: the GoForward plan to prosperity
14/03/2007. Innovation, small and medium enterprises, entrepreneurship and venture capital are ingredients in the creation of knowledge based economies; witness the success of Silicon Valley in large economies like the US and replicated in France, Germany, Japan, the UK, and elsewhere, says Thomas A Nastas. Small country economies like Israel, Ireland and Singapore, with little domestic demand for technology, developed unique approaches of exporting knowledge creation with excellent outcomes.
The growing benefits of private ownership
28/02/2007. Regulators and impatient investors are driving US public companies to go private. Major investors, along with some executives, will gain; other investors can only watch.
Technology-focused private equity investing in Israel
07/02/2007. There are sharp differences between private equity investing and venture capital investing. In this Israel Venture Capital Journal article, Yuval Cohen, Managing Partner at Fortissimo Capital Fund, explains the distinctions in several key areas. The Israeli venture capital industry has achieved international recognition and great success.
The art of communication part II
23/01/2007. In this IVCJ article, high-tech entrepreneur Isabel Maxwell continues to discuss the principles of good communications. Part I can be summed up in the acronym LLCC, which stands for Language, Listening, Consideration and Clarity. The combination of strong [English] Language speaking, writing and reading skills; the ability to listen; the capacity to be considerate - of another person and his/her country/culture whether communicating by phone, email or in person; and conducting oneself with clarity of thought and purpose, whether for a company or personal project.
Revisiting material adverse change clauses
17/01/2007. Burgers and material adverse change clauses have more in common than the fact that they sometimes share the name Mac, says Weil Gotshal and Manges. Private equity buyers should (but mostly cannot/do not) special order their MACs.
Women entrepreneurs: A growing and promising phenomenon
06/12/2006. Women entrepreneurs have become increasingly common in the business world. This IVCJ article examines women's relative advantages as well as some of the obstacles that persist in today’s business environment.
Using leverage to stimulate investment in small businesses
22/11/2006. The use of leverage by investors and technology companies can provide substantial benefits. In this IVCJ article, Sarit Soccary Ben-Yochanan of L Capital Partners explains ways in which leverage works to boost investor incentives and enhance company growth and innovation
Willful Infringement = Punitive Damages!
25/10/2006. The threat of punitive damages in a patent infringement suit can be removed by evidence of good faith, notes the Israel Venture Capital Journal. F. Jason Far-hadian, Esq., Principal of Century IP Group, discusses how to counter allegations of willful infringement.
European venture capital: the path to maturity
11/10/2006. This article outlines the dynamics within the European venture capital market in terms of sourcing deal flow, investing and exits, highlighting key emerging trends and challenges since 2000. This is a sample chapter from the book Structuring European Private Equity.
Investing in private equity through a fund of funds
11/10/2006. Important considerations in portfolio allocation to private equity are examined by Fort Washington in this introductory paper on the subject.
The nature of private equity - The stages and types of private equity financing
27/09/2006. Companies that do not qualify to issue securities to raise capital on the public, organised securities markets, or that choose not to do so, often turn to the private equity market for their financing requirements. This is a sample chapter from the book Adding Value in Private Equity - Lessons from Mature and Emerging Markets.
Getting the message across
20/09/2006. In this Israel Venture Capital Journal article, Noga Fisher offers a six-step coaching curriculum for venture capital firms to teach their portfolio companies' CEOs how to improve their presentations.
Resolving disputes in China through arbitration
13/09/2006. Arbitration is usually the preferred method of dispute resolution for investors in China and this guide from Freshfields Bruckhaus Deringer aims to describe the most significant features of the arbitral process and the requirements for an arbitration clause.
Transatlantic merger control: The same destination but by different routes
06/09/2006. The convergence of EU and US merger enforcement policy in recent years has given rise to a new set of strategic considerations for parties embarking on transatlantic transactions, says Freshfields Bruckhaus Deringer. It is now clearly imperative that merging parties co-ordinate their legal strategy across jurisdictions very carefully indeed, taking into account the greater legal accord and increased communication between competition agencies in the US and EU.
Managing risk in venture capital investing
30/08/2006. Risk is part of the landscape when investing in start-up firms, and venture capitalists need to approach this peril across a range of dimensions, including geography, industry and the timing of investments in the product development cycle, says Knowledge Wharton.
Case study in operations
09/08/2006. Suppose you receive an investment memorandum proposing the rollup of a franchisor and two of its franchises in the building products industry, says Knowledge Wharton in this private equity case study. The combined company will not have a management team, infrastructure or information systems, and you have no previous experience in the niche. Upon further research, you learn that analysts are forecasting a near-term peak in the housing cycle and interest rates are expected to rise further. Sound like a good deal? While it's not for the faint of heart, this is just the kind of situation in which operationally-oriented private equity firms thrive.
Country Q&A: UK (England and Wales)
02/08/2006. This Practical Law Company article describes the private equity market in the UK jurisdiction and looks at issues such as the opportunities for investment available to institutional investors such as pension funds, insurance companies and banks.
Using recapitalisation to unlock value in privately owned companies
12/07/2006. Franz von Bradsky of Green Tree Capital examines transitions in ownership through the use of leveraged recapitalisations, typically referred to in industry parlance as a recap.
Private equity glossary
28/06/2006. For those new to the discipline, the Center for Private Equity and Entrepreneurship at the Tuck School of Business at Dartmouth have provided their private equity glossary for download.
The arts of communication
14/06/2006. In this part two of a two-part series in the Israel Venture Capital Journal, high-tech entrepreneur Isabel Maxwell continues to discuss the principles of good communications.
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