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International accounting standards: impact on private equity
18/11/2004. Preparations continue apace for the introduction of International Accounting Standards, which will apply to the consolidated accounts of European listed companies from January 2005, says Victoria Kershaw at SJ Berwin. And two aspects of the consolidation requirements in IAS 27 cause concern to the private equity industry. 
Private Equity Management Liability: Research report 2004/2005
18/11/2004. As recently as five years ago, management liability was a minor consideration for the private equity community, says Marsh. This relatively relaxed view of professional risk was complemented by the golden years of private equity, where stellar returns and strong performance were commonplace and reference to corporate governance and regulation were not yet prominent in the private equity vernacular. Now private equity - across all fund sizes and geographies - are adopting a much more active approach to the management of their professional liabilities.
Going Once, Going Twice . . . Surviving the Auction Process in M&A Transactions.
01/11/2004. Today's economic climate has created a seller's market in the sale of businesses. Low interest rates have contributed to a relatively low cost of capital for acquisitions, and capital allocations to the private equity asset class have generated a large pool of equity dollars looking for investments. There are often many potential buyers competing for the same business. As a result, more companies are being sold through the auction process, says F. George Davitt and Kathy A. Fields of Testa, Hurwitz & Thibeault.
US Venture Capital: Understanding the Asset Class and its Changing Dynamic
25/10/2004. Why institutions should consider US venture capital, how to approach the market, and the value of fund of funds for US venture is explained by Tim Cruttenden, Director, Fund Investments at VenCap International.
Important considerations in portfolio allocation to private equity
06/10/2004. There are two primary reasons for financial investors to invest in private equity. First, private equity returns have historically outperformed those of public equities. And secondly, private equity is not highly correlated to public equities, making it an excellent diversifier when added to a portfolio of stocks and bonds, according to Fort Washington Capital Partners Group.
What you should know about appraisal values in a changing world economy
06/10/2004. Accurate appraisals are the very foundation of asset-based loans. Companies count on them to ensure that their borrowing power is maximized while lenders rely on them to support the value of the credit they are extending, according to Robert Maroney of Bank of America Business Capital.
Debt market considerations for today's borrowers seeking the optimal capital structure
16/09/2004. In a surprisingly short timeframe, loan market conditions have changed dramatically. Covenants continue to loosen, maturities continue to increase and lenders are competing very aggressively on price. As a consequence, leveraged loan volume is on the rise, driven largely by re-pricings of existing debt.
Limited liability partnerships uses in venture capital structures
16/09/2004. In a typical limited partnership fund structure, a company will be the general partner of the limited partnership fund, which will contract to receive management supplies from a management company. But there are a number of reasons why private equity firms should consider whether it may be more tax efficient to use an LLP instead of a company to carry out the management function, according to SJ Berwin.
Venture capital fund cash flows: The J-curve
07/09/2004. Any attempt to analyse a venture fund must take into account the way in which such a fund works and the resulting J-curve. A traditional 'Net Asset Value' approach is inappropriate and is likely to give the mistaken impression during the early years of a fund's life that it has been extremely unsuccesful, according to venture capital fund of funds Mowbray Capital.
Lessons from Google's IPO
31/08/2004. On the surface, Google's IPO appears to have been at least a partial success. But it remains far too early to issue a verdict. Knowledge Wharton examines the details of the flotation and assesses the company's chances for the future.
Strengthening GP/LP relationships: The role of valuation reporting
31/08/2004. While most industry practitioners seem to welcome improved reporting guidelines, some resistance to formal valuation standards based on fair value assessments remains within the general partner community, according to the Centre for Private Equity and Entrepreneurship at the Tuck School of Business.
Alternative investing
26/08/2004. After experiencing over three straight years of negative performance in the public equity markets, many high net worth investors and institutions are looking for ways to further diversify their portfolios, reduce overall volatility and, of course, enhance returns. For qualified investors willing to think outside the traditional investment box, there may be a way to accomplish these elusive goals by allocating a portion of their investable dollars to alternative investments, such as hedge funds and private equity funds, according to Brian Isroff, senior managing director of Sterling Private Investments.
Why auctions are becoming more prevalent in middle-market private equity deals
05/08/2004. Once perceived as a refuge from bidding wars, the middle-market is increasingly receptive to the auction process. The dual challenge for middle-market private equity buyers is to generate deal opportunities outside of the auction framework, and when they do participate in auctions, to compete effectively, according to Paul Mahoney and Ragan Ferraro of Edwards & Angell.
Limited partnership agreement project
05/08/2004. This Tuck School of Business survey canvasses the opinions of both LPs and GPs with regards the cost of the limited partnership agreement, its role as a governance document and the value to the industry of a guideline or model LPA.
Creeping regulation of private equity fund managers
27/07/2004. A spate of recent regulatory initiatives in the US, have served to focus increasing attention on operations that were once considered to be private. Michael Collins of Testa, Hurwitz, Thibeault examines the implications of this legislation for the nation's private equity industry.
What is private equity? Trends and current issues
22/07/2004. The private equity industry is made up of three crucial components, according to Joseph Skrzynski of Castle Harlan Australian Mezzanine Partners. These essential elements are capital, management and deal flow.
Reporting and valuation guidelines
22/07/2004. This British Private Equity and Venture Capital Association publication contains reporting guidelines, addressing the content of reports to limited partners, and valuation guidelines, addressing the basis and methologies to be used for valuing private equity investments.
Taking stock of stock distributions
21/07/2004. The recent surge in acquisition activity by public companies and the re-emergence of the IPO market have provided private equity funds with increased opportunities to hold publicly traded stock. Stephen Mears of Testa, Hurwitz & Thibeault discusses the factors determining whether a fund should sell this publicly traded stock or distribute this stock to its partners.
Management buy-outs: A five-point checklist for success
13/07/2004. A management buy-out can be a highly attractive business proposition for private equity backers and for the management team itself. Here, David Baxa of VISTA Technology Services, provides a five point guide to a successful MBO.
Asset-based lending in buy-out transactions: Key issues for borrowers and lenders
13/07/2004. The pace of acquisition and buy-out activity has picked up significantly over the past year. Readily available financing, at historically low rates, from high-yield investors and leveraged loan providers has fuelled this increased activity, according to Mark Smith of Testa, Hurwitz & Thibeault.
LPX50 - A new benchmark for private equity
01/07/2004. Quoted private equity vehicles offer a wide range of investors the possibility of accessing the asset class with a limited liquidity risk, according to Ralph Guenther of bmp Venture Capital and Hans Christophers and Michel Degosciu of the University of Basel.
Background checks: Proceed with caution
14/06/2004. High profile events of the last few years, including the corporate accounting scandals and September 11, have forever changed the US business landscape. One important change is that employers are seeking to learn more about the backgrounds of applicants and employees. This is equally true of private equity investors, which are increasingly insisting on background checks for management teams as part of their due diligence, according to Adam Forman and Robert Kilroy of Testa, Hurwitz & Thibeault.
Private equity investing: An overview
04/06/2004. Basic mistakes in comparing FTSE and venture capital returns seriously undervalue the returns that can be achieved through venture captial investing. The true computations show, contrary to popular belief, that upper quartile venture capital funds have broadly outperformed quoted equities since 1990, according to Guy Fraser-Sampson of Mowbray Capital.
Outside directors in the government's spotlight
23/04/2004. Private equity investors who sit on public company boards have long viewed the risk of being sued in shareholder litigation as a cost of doing business, according to Brian Pastuszenski, Jordan Hershman and John Falvey of Testa, Hurwitz & Thibeault. But in the wake of the Enron fiasco and the Sarbanes-Oxley Act, these risks have been considerably heightened and the importance of observing best practices has become all the more clear.
Managing general partner litigation risk
13/04/2004. The rapid growth of the private equity industry, the recent economic downturn 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 Rebecca Silberstein of Debevoise & Plimpton.
Getting in position to be in position
13/04/2004. Achieving liquidity through the US public equity markets has become more time consuming and more expensive in the wake of the Sarbanes-Oxley Act of 2002 and other related regulations. Portfolio companies that understand the increased effort required to complete an initial public offering and prepare in advance to be a public company will significantly reduce the number of obstacles to liquidity confronting them and their private equity investors, according to Mark Bettencourt of Testa, Hurwitz & Thibeault.
Structuring private equity investments in LLCs
06/04/2004. When a private equity firm invests in a limited liability company, its otherwise tax-exempt investors become subject to tax on their share of any operating income of the company that is allocated to the fund. Firms are increasingly relying on creative investment structures to ensure that, 'unrelated business taxable income' is not a problem, according to Joseph Hugg of Testa, Hurwitz & Thibeault.
Demystifying private equity
06/04/2004. Around 90 per cent of general partners claim to have top quartile track records. Getting beyond the sales pitch to select the right mix of managers is the key to getting the best from private equity investment, according to Vince O'Brien of Montagu Private Equity and vice chairman of the British Venture Capital Association.
Who is investing in private equity?
30/03/2004. The European private equity industry is well positioned for an increase in activity in 2004. The merger and acquisition market is improving, there are a number of initial public offerings in the pipeline and the forecast is for increased information technology spending, according to Keith Arundale of PricewaterhouseCoopers.
Private equity: How to access
30/03/2004. There are three prerequisites to being a successful private equity fund of funds manager. These prerequisites are a broad market reach, superior selection skills and the ability to improve terms and conditions, according to Wim Borgdorff of AlpInvest Partners.
The quality of the fund manager is crucial in private equity investments
02/03/2004. There are over 1000 private equity fund managers active today in Europe alone. Permanent monitoring and the search for the best teams is a laborious process but is absolutely essential to successful private equity investing, according to Bruno Raschle and André Jaeggi of Adveq Management.
Private equity: The regulatory environment
02/03/2004. The regulation of a limited partnership is governed by a combination of common law, the Partnership Act of 1890 and the Limited Partnerships Act of 1907. These regulations are in much need of reform, according to Stephen Pierce of Bond Pearce.
Alternative assets: Private equity fund of funds
24/02/2004. Fund of funds offer investors access to elite funds and knowledge of emerging funds that have the potential to achieve top quartile performance, according to Piper Jaffray.
Successful succession planning: Thinking about tomorrow today
24/02/2004. A private equity firm must pay attention to the concerns and needs of both its senior managers and its junior managers in developing a successful succession plan, according to Stephen Mears of Testa, Hurwitz & Thibeault.
Exploring changes in the fiscal environment and their impact on private equity
18/02/2004. A number of changes have recently taken place in Europe's fiscal environment that have had significant implications for the region's private equity industry, according to Paul Megson of KPMG Private Equity Group.
How to make LPs smile in difficult times
10/02/2004. For LPs to feel happy in these difficult times it is important that they feel secure. Strategic consistency, management team stability and transparency in reporting procedures are all ways in which a GP can help create this feeling of security, according to John Singer of Advent International.
Will open source close your exit?
19/01/2004. The use of open source software, in the developmental stages of a portfolio company, is becoming increasingly problematic for private equity firms when that company comes to be sold. Karen Copenhaver and Ira Heffan outline the key issues that investors and portfolio company management need to be aware of when dealing with open source software, and how it may affect the potential exit opportunities available to an enterprise.
How independent is independent enough?
07/01/2004. It has become common practice for private equity firms investing in US public companies to negotiate special governance arrangements, including the nomination of a number of independent directors. Meredith Brown and William Regner of Debevoise & Plimpton ask just how independent these directors really are.
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