Learning Curve Archive > 2003 Accessing top quartile funds 17/12/2003. The importance of accessing top quartile venture capital managers is well understood among institutional investors. But identifying and assessing these funds is now more difficult than ever, and demand is fast outstripping supply, according to Judith Elsea of Knightsbridge Advisers. Advisory committees in US and European private equity funds 03/12/2003. Advisory committees, consisting of a select group of limited partners, have become commonplace for private equity funds in both the US and Europe. Michael Harrell and Geoffrey Kittredge of Debevoise & Plimpton discuss the benefits of these committees for both investors and fund managers. The evolution of partnership terms – Aligning GP and LP interests 25/11/2003. A number of recent developments in private equity terms and conditions have shifted the balance of power towards limited partners, says Robert Hellman of MDC Partners in an article for the Institute of Fiduciary Education. Restricted stock: The solution for underwater options 12/11/2003. An increasing number of venture-backed technology-based companies are beginning to issue restricted stock to employees, instead of stock options. Arnold May of Testa, Hurwitz & Thibeault discusses the tax and regulatory issues involved. Dangerous Crossroads: the intersection between private equity and litigation 20/10/2003. The rapid growth of the private equity industry and the increasingly litigious nature of the business world, have meant that private equity firms are more likely than ever to find a legal battle on their hands, according to Carl Metzger of Testa, Hurwitz & Thibeault. Improving investment returns through working capital optimisation 15/10/2003. It is well known that working capital can be a source of cash release, but not often appreciated just how large a benefit can be obtained and what that can be worth in terms of return on equity, according to Michael Turner-Samuels of N&G Financial Management. Drag-along rights 08/10/2003. It is becoming increasingly important for private equity firms to incorporate drag-along rights in their standard term sheets and investment documents, explains Testa, Hurwitz & Thibeault. If structured and implemented properly, they can provide important protection for the private equity firm when it is time to exit portfolio company investments. Collateralised Debt Obligations - an explanation 24/09/2003. Collateralised debt obligations, or CDOs, have recently become a more common feature of the private equity market. Yet many investors are still unsure of what they actually entail. Anna Jones of Duke Street Capital Debt Management answers many of the frequently asked questions. Grace under pressure: Revisiting fraudulent conveyance risk 17/09/2003. In the 1980s and early 1990s it was not unusual for leveraged buy-outs to be found to constitute fraudulent conveyances. Andrew Bab of Debevoise & Plimpton suggests that the problem could be re-emerging and discusses the implications and possible solutions for private equity firms. Big buy-out or small venture 02/09/2003. Institutional investors are beginning to make their fund investments with a greater degree of care after many got their fingers burnt by the bursting of the technology bubble. David Leidl of the AVCJ discusses how investors are looking more at mid-market buy-outs, although most still maintain an interest in the venture sector. Is the American mid-market a good opportunity for European investors 27/08/2003. The American mid-market offers diversification for the European private equity investor, both in terms of geography and management style, according to this extrct from a report by CPR Private Equity. Portfolio rehabilitation 27/08/2003. Many private equity firms continue to plough money into underperforming portfolio companies. However, there is often a degree to which the target company can preserve and even generate cash from the balance sheet. Tony Mitchell of PricewaterhouseCoopers discusses this balanced approach to salvaging portfolio companies. Private equity - a new hope: why venture capital has come of age 19/08/2003. ‘There has rarely been as good a time for private equity or venture capital transactions.' Robert Donaldson of Baker Tilly provides a brief outline of the current economic climate and explains why private equity is so attractive now. Shark repellents that can bite 07/08/2003. When a private equity firm exits an investment through an initial public offering the process often includes a number of statutory provisions designed to prevent unwanted takeover attempts of the public company, says William Regner of Debevoise & Plimpton. Here he explains the implications of these ‘shark repellents' for the private equity industry and provides comprehensive legal advice designed to protect the interest of the private equity firm in event of a portfolio company going public. More safety for private equity transactions 30/07/2003. The acquisition of corporate risk is a fundamental characteristic of the private equity industry. But risk negotiating can be complex and can cause deals to fall through, according to Halder Invest. Halder provides a comprehensive overview of ways to avoid the transfer of risk becoming a deal breaker. Current circumstances, trends and issues 23/07/2003. In order to achieve favourable returns at any point in the private equity and venture capital cycle, limited partners must diversify their investments by region, vintage year, stage and manager, says Wim Borgdorff of NIB Capital. From managers to owners: making MBOs work 16/07/2003. Management buy-out activity is on the increase in Australia but the long-term outcome of many of these transactions remains to be seen. Andrew Harris of executive search firm Egon Zehnder International asks Andrew Rothery of GS Private Equity what makes for a successful MBO. In international private equity deals, finding the right managers is key 09/07/2003. Structuring international private equity deals requires an in-depth knowledge of the market in which you are to invest. A private equity firm must establish a network of strong local knowledge if it is to reap the rewards of economic growth abroad, it emerged at the annual Wharton private equity conference. 2002 Annual review of private equity and outlook 2003 02/07/2003. A sense of economic uncertainty pervaded all aspects of the global private equity market in 2002, according to the Strategic Capital Management (SCM) annual review of private equity and outlook for 2003. ‘Bringing home the bacon' Exits for managers and investors 24/06/2003. A thorough exploration of exit potential is crucial to every investment made by a private equity fund. But investors often pay insufficient attention to the credential of fund managers in this area, according to Andrew Rothery of GS Private Equity. This report provides a step-by-step guide to private equity exits and their implications at both fund and portfolio company level. Breaking up is hard to do: Dealing with a departing general partner 10/06/2003. The private equity industry is coming under increasing pressure to adapt and restructure. As a result, it is becoming increasingly common for general partners to part company with private equity firms. John Welsh and Robert Kilroy of Testa, Hurwitz & Thibeault explore the practical and legal implications of a GP's departure, including release claims, confidentiality and transition obligations. How to get venture capital 28/05/2003. Very few start-up aspirants survive the rigorous scrutiny venture capital investors apply to their business plans. In this report the Polish Private Equity Association gives a comprehensive overview of the process from an entrepreneurial perspective, providing private equity fund investors with a useful insight into the challenges faced by a formative business from the entrepreneur's point of view. Going Private: More public companies begin life anew as private companies 07/05/2003. Under-valued listed companies are increasingly shunning depressed public markets and going private. This is providing private equity investors with favourably priced mature investment opportunities. Kathy Fields of Testa, Hurwitz & Thibeault gives a comprehensive overview of the public to private trend. Providing investors with the portfolio returns they deserve 30/04/2003. Private equity potentially offers institutional investors excellent returns. David Thorp of ISIS Equity Partners discusses why private equity will continue to outperform the public markets and how general partners must manage risk to ensure these returns are maintained. Venture and secondary market trends 23/04/2003. The market for direct secondaries is constantly evolving and is becoming increasingly attractive to private equity firms. Corporate venturing is also on the rise. Yet they are not without their pitfalls. Columbia Strategy discusses the rise of direct secondaries and corporate venturing and the potential obstacles that must be overcome. Gaining exposure to European middle-market buy-out funds: a practical guide for investors 16/04/2003. European middle-market buy-out funds have experienced something of a resurgence in recent months. John Barber of Helix Associates discusses the factors that have contributed to this rise in popularity among institutional investors and the steps they should take to gain exposure to such funds. Venture capital: America in a new cycle, Europe in the learning curve 09/04/2003. Venture capital is fundamentally cyclical despite the fact that technological innovation is the most constant contributor to economic growth. CPR Private Equity explores this paradox in the relative historical contexts of the US and European venture capital industries. Rehabilitating underperforming investments: tips for the financial investor 31/03/2003. The past year has seen venture capital and private equity firms focus their attention on keeping struggling portfolio companies afloat rather than making new investments. Tony Mitchell of PricewaterhouseCoopers discusses this trend and warns firms to take a pragmatic approach when considering whether a distressed company can be turned around. Protecting the private equity investment without killing the golden goose 12/03/2003. The tough financing market has become tougher still for companies raising capital as private equity houses are increasingly keen to protect their potential returns, often to the detriment of the company itself. Stephen M Davis and Kenneth Drake of Heller Ehrman White & McAuliffe LLP discuss how the needs of both parties in the transaction must be balanced out. Private equity and venture capital 05/03/2003. The private equity industry can often seem like a maze to those new to the asset class. Levent Bosut of PDF Corporate Finance demystifies the workings of the industry. Private equity in emerging markets: rethinking the approach 26/02/2003. The mid to late-1990s witnessed a growing consensus in emerging markets that the private sector was to be the primary catalyst for growth and development. For this sector to succeed, however, the demand for investment capital had to be met – private equity was a logical choice. Roger Leeds and Julie Sunderland of SAIS explore the growth of private equity in emerging markets and its failure to meet expectations. Turn, turn, turn: a new season of private equity performance 19/02/2003. Many of the factors that historically drove superior private equity performance in the past – proprietary deal flow, scarcity of financial engineering skills and scarcity of committed capital – are being eroded away. Neal Pomroy and Antonis Polemitis of Mercer Management Consulting discuss what needs to be done to successfully generate such returns in the future. Investment - a transparent case? 12/02/2003. The European private equity industry is much less mature than that of the US. But as returns from the more traditional asset classes become less stable, it looks as though increasing numbers of investors will seek to diversify their investment portfolios with an allocation to private equity. However, recent news shows that private equity has its own set of risks and is a notoriously untransparent sector. In an overview of the industry, with comparisons to the US market, George Anson of HarbourVest Partners looks at the issues involved and gives advice to investors looking to move into the sector. VCs are turning to PIPEs 12/02/2003. Venture capitalists across the globe are slowly turning their attention towards investing in public equities, an investment known as a ‘PIPE'. Michael Chin and Melissa Schubert of Jones Day discuss this deal type and its attractions for venture capitalists. Exits? You haven't even entered yet. 05/02/2003. Exits have become something of a rarity in the private equity arena of late as the financial markets continue to struggle. Toby Mansel-Pleydell of Concorde Aquila Corporate Finance looks at the exits issue from an entrepreneur's viewpoint. Fund size & fee level 05/02/2003. With the declining private equity market has come another problem – venture capital funds are handing money back to investors and funds of funds are sitting on huge piles of money and still raising more. Stefan Herzog of VCM Venture Capital Management discusses the issue of too much money in the system and what needs to be done to rectify the situation. The fifth class 29/01/2003. The US has historically been the undisputed leader in terms of investing in private equity. However, as Nick Lodge of I-Cap Partners discusses, the rest of the world is rapidly catching up. Due diligence - getting at the telling details 22/01/2003. In the world of finance, the phrase ‘due diligence' pops up everywhere…but what does it mean when you're talking about investments in Asian companies? Brian McLeod of the AVCJ discusses the issues that must be addressed by investors. Coming of age 15/01/2003. The private equity industry is seeing a sustained interest among pension funds, both in the US and in Europe. Nadine Wojakovski, writing for Global Pensions, examines the attractions of this asset class. The truth about venture capitalists 15/01/2003. Venture capitalists are either exalted as the engine of economic growth or demonised as greedy and exploitative. Jim Gunton of NJTC Venture Fund attempts to dispel some of the misconceptions surrounding venture capital. Private equity fund of funds 08/01/2003. For those interested in investing in private equity but unsure where to start, the fund of funds may be the best option. In an extract from The Handbook of Alternative Investments (ed. Darrell Jobman, John Wiley & Sons 2002) Geoffrey Hirt, Thomas Galuhn and Paul Rice provide an introduction to funds of funds. They also outline important points to look for when making the investment decision.