Elevator Pitch Essentials

How to Create an Effective Elevator Pitch

I recently read a valuable book on developing a great elevator pitch. An elevator pitch is defined in Elevator Pitch Essentials as "an overview of an idea, product, service, project, person or other Solution to a problem and is designed to just get a conversation started." Although an elevator pitch is essential for many careers, venture capitalists and entrepreneurs would especially benefit from reading this. I am often contacted by entrepreneurs wondering how to attract investors to their idea and having a well-crafted elevator pitch is crucial. Elevator Pitch Essentials is a concise guide to creating an effective elevator pitch by Chris O'Leary. Mr. O'Leary is a successful entrepreneur, with an impressive career in leading and advising start-ups.

One of the best aspects of Elevator Pitch Essentials is the author's sharing of his professional experiences. His experience working with start-ups like SalesLogix allows venture capitalists and hopeful entrepreneurs to learn from an active member of the start-up industry. The book is brief, straight-to-the-point while entertaining (like an elevator pitch) and inexpensive. I recommend this book to anyone hoping to perfect their current pitch or learn how to get some interested in a potential business or investment opportunity.

If you'd like to purchase Elevator Pitch Essentials by Chris O'Leary visit this link: http://www.elevatorpitchessentials.com/buy.html

Tags: Elevator Pitch Essentials, Elevator Pitch, Elevator Pitch Tools, Elevator Pitch Tips, How to Create an Elevator Pitch, Elevator Pitches, Creating an elevator pitch, what is an elevator pitch

Link to This Resource: Elevator Pitch Essentials

http://privateequityblogger.com/2008/12/elevator-pitch-essentials.html

Family Office Services | Components of a Family Office

Components of a Family Office

I just came across an educational PowerPoint presentation by a US-based family office firm. Within this powerpoint I found a list of services which are provided by family offices. For those of you who are selling to family offices, about to work for a family office or are looking to soon engage a family office this list could be useful.

• Tax Compliance, Planning and Preperation
• Investment Policy and Asset Allocation
• Portfolio Strategy and Manager Selection
• Portfolio Accounting
• Investment Performance Monitoring
• Alternative Investment Tracking (Hedge Funds, Real Estate & Private Equity)
• Trading
• Bookkeeping and Bill Payment
• Financial Reporting
• Cash Flow Management
• Estate and Wealth Transfer Management
• Insurance and Risk Management
• Foundation and Philanthropy Management
• Personal Finance Management
• Concierge Services
• Data and Document Management

If you are interested in viewing the full PowerPoint presentation you may find it by clicking here. I hope this was helpful, here are links to additional resources on family offices:

• Hedge Fund of Funds by Family Offices
• Family Office Marketing
• Family Office Wealth Management

Tags: Components of Family Offices, Services by Family Offices, Family Offices, Family Office, Single Family Office, Multi Family Office, Commercial Family Office, wealth family office

Link to This Resource: Family Office Services | Components of a Family Office

http://privateequityblogger.com/2008/12/family-office-services-components-of.html

Private Equity Deals Report

Private Equity Deals Decline

Private Equity Deals Decline to Five Year Low

Private equity deals have reached a new indicator of the troubled private equity industry. Along with the shaky market, private equity firms have had to persuade wary investors to join funds and maintain struggling portfolio companies. According to Thomson Reuters, global private equity activity fell to a five year low of $188.7 billion in 2008. This is a 72% decline from 2007, revealing just how troubled the private equity market may be.

Deals Decline

Buyout deals have especially declined, accounting for only 7% of all Mergers and Acquisitions volume. This a distinct change from the private equity giants that executed mega-deals only a few years ago (peaking at 20.6% of M&A in 2006) and it is the lowest percentage since 2001. Additionally, many deals that were put into motion before the financial crisis are now being put aside or canceled and some private investors are fighting to back out of the deal.

All this has translated into sagging public investment in private equity firms, like the Blackstone Group which is trading about 1/5 of the price of its IPO of $31. It seems that other private equity firms considering a initial public offering have taken notice of the poor market response, as KKR and Apollo Management have stalled their move to the public.

With significantly less leverage available (which firms have used to finance large deals in the past) it seems that it will be a while before private equity firms are executing multi-billion dollar deals like earlier in the decade. Although America maintained its superior deal volume to Europe but only by a slight margin. The U.S. accounted for 42.4% of buyout deals while Europe trailed by only 0.4%. The finance industry led the United States in private equity activity possibly hoping to profit from struggling companies. Energy and power were the most popular investment area with 17% of private equity investments.

Keeping Clients

Perhaps the biggest challenge to private equity firms is keeping their clients and making sure that they are confident in investing with the firm. This is especially important for the biggest clients like pension funds and endowments which may be more skittish about investing in the alternative areas like private equity or hedge funds. Especially after some endowments appear to have been burned this year (see endowments and private equity). As University of Chicago finance professor Steven Kaplan comments "The question is, how many limited partners will continue providing money? Historically, in markets like this they cut back, and it's precisely the time they shouldn't." Private equity firms are struggling to maintain their investors, as Reuters shows:

Four out of five U.S. investors and nearly two-thirds of investors in the UK would refuse to re-invest if they felt funds had underperformed, diverged from their core focus, or lost some key members of staff, according to a recent report from secondary private equity asset specialist Coller Capital.

Sale of exposure to private equity funds has risen in the so-called secondary market as the years of high returns end. Universities such as Harvard are among those trying to sell private equity assets, sources have told Reuters.

David de Weese, partner at secondary market specialist Paul Capital, estimates that $130 billion to $140 billion of private equity will available for sale by institutional investors globally during the next two years, and that supply will continue to significantly outstrip demand in 2009.

But improvement may lie down the road, with funds invested during the coming year expected to do better.

As for the future for private equity, Douglas Warner, a senior member of Weil, Gotshal & Manges LLP's private equity practice predicts, "I think we will see reduced private equity activity in 2009, other than transactions such as PIPEs that don't require so much leverage. I don't think the debt markets will come back immediately."

Source

Tags: Private equity market, private equity industry, private equity deals, private equity, private equity industry, private equity deals data, private equity report, private equity 2008, private data

Link to This Resource: Private Equity Deals Report

http://privateequityblogger.com/2008/12/private-equity-deals-report.html

Venture Capital Interview

Interview on Regulation of Venture Capital

The Wall Street Journal has conducted an interview with Josh Lerner, a professor at Harvard Business School, on the the venture capital industry. Professor Lerner is well-known within the venture capital world and serves as a senior advisor to the Wellesley, Massachusetts-based fund of funds manager Grove Street Advisors. He offers his views on the government regulation and its effect on venture capital. Here the interview via WSJ:

Your next book (Boulevard of Broken Dreams to be published this fall by Princeton University Press) addresses public efforts to boost entrepreneurship and venture capital. How did you choose this topic?

The financial crisis opened the door to massive public interventions in the Western economies. In many nations, governments responded to the threats of illiquidity and insolvency by making huge investments in troubled firms, frequently taking large ownership stakes. Many concerns can be raised about these investments, from the hurried way in which they were designed by a few people behind closed doors to the design flaws that many experts anticipate will limit their effectiveness.

But one question has been lost in the discussion. If these extraordinary times call for massive public funds to be used for economic interventions, should they be entirely devoted to propping up troubled entities, or at least partially designed to promote new enterprises? In some sense, 2008 saw the initiation of a massive Western experiment in the government as venture capitalist, but as a very peculiar type of venture capitalist: one that focuses on the most troubled and poorly managed firms in the economy, some of which may be beyond salvation. Meanwhile, as we well know, the venture industry in many nations is on “life support,” struggling for survival.

Moreover, the global hubs of entrepreneurial activity—for instance, Silicon Valley, Singapore, and Tel Aviv—all bear the marks of government investment. Yet, for every successful public intervention spurring entrepreneurial activity, there are many failed efforts, wasting untold billions in taxpayer dollars.

In your opinion, what one or two changes would provide the biggest boost to venture capitalists?

There are two sets of changes that could make a big differences. The first is an evolutionary one, which is already underway. Not only have too many groups had mediocre returns for long periods of time, but they have undertaken a lot of “me too” investments that have made it hard for everyone to succeed. We are now seeing that many second- and third-tier groups are having much greater difficulty raising new capital. While this is of course a frustrating turn of events from an individual perspective, from the point of view of the industry as a while, it cannot help but be seen as a healthy development.

The second relates to public policy. In too many areas, our system has made it hard to be an entrepreneur developing advanced technologies. From a patent system which has been overrun by sham litigation to the many barriers that public companies face, there are a whole variety of policies that create barriers to entrepreneurship. We need to revisit many of the “reforms” of recent decades—from the strengthening of patent rights to Sarbanes-Oxley—and ask how they could be changed to minimize the harmful effects on entrepreneurs.

The proposed financial reforms recently released by the Obama Administration suggest that more private equity and venture capital firms will have to register as investment advisors with the Securities and Exchange Commission. What impact do you see this having on private equity or venture capital firms?

It appears to impose quite modest costs on the industry, while advancing transparency into an opaque industry that has prompted regulatory concern. In fact, the greater transparency may even be helpful to the industry itself in terms of getting a better sense of market conditions in “real time.”

Far more worrisome are some of the proposals emendating from Brussels and Strasbourg, in which some members of the European Commission and Parliament are proposing to “micro-manage” investment decisions of private equity groups.

What systemic risks, if any, does private equity and venture capital pose to the financial system?

There have been repeated discussions regarding the desirability of increased regulation of financial intermediaries of all types, prompted by fears that the financial sector poses systematic risks, which may affect the economy in broad and unanticipated ways. It is a natural question whether private equity firms (both buyout and venture capital funds) pose such systemic risks. The relevant trade associations have staked out strong positions arguing against the presence of such risks, yet to date, this issue has received little study.

As part of our ongoing research initiative under the umbrella of the World Economic Forum, we are exploring how economic cycles between 1985 and 2007 affected sectors where private equity was and was not present. In particular, we are looking at whether the presence of private equity investments in given countries and industries led to more or less dramatic shifts in the face of economic cycles. This new work will provide some insights into the impact of private equity in exacerbating or dampening economic crises.

Tags: Josh Lerner, Venture Capital Interview, Wall Street Journal, Private Equity Interview, Venture Capital Josh Lerner, Grove Street Advisers, Grove Street Venture Capital

Link to This Resource: Venture Capital Interview

http://privateequityblogger.com/2008/12/venture-capital-interview.html

History of Hedge Funds

A Video Describing the History of Hedge Funds

Below is a short video covering the history and evolution of hedge fund managers.  It talks about how their strategies and structures have evolved into the giant industry it is today.

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Tags: History of hedge funds, hedge funds, hedge funds history, hedge funds, hedge fund industry, hedge funds 2009

Link to This Resource: History of Hedge Funds

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Carlyle Interview | Managing Director

Carlyle Interview

Interview with Carlyle's Growth Capital Fund Manager

Nick Sturiale, a Managing Director at the Carlyle Group offers some insight into the present and future of private equity deals in this interview with BusinessWeek. Mr. Sturiale heads up the U.S. Growth Capital Fund of the Carlyle Group focusing on mid-market private equity investments.

What struck me most about this interview is how optimistic Mr. Sturiale is in regards to the "current economic realities." He is looking more into the near future of how his companies will be able to restructure and prepare for 2009-2010. "While there is a lot of fear that things could get worse, I think there is a lot of optimism: how do you create customer value, how do you take advantage of the 09-10 markets that are going to open up?" Sturiale also predicts an uptick in private-to-private mergers, and lots of companies that will go public as soon as 2009-10.

He also cites a problem with valuation in private equity: "I think there is still a lag between private company valuations and public market valuations. And so many private companies still think the company is still valued at what it should have been valued at last year or a few months ago. The hard part is, that's just not the reality." So, he concludes that private equity firms and boards have to align themselves with the market value because it doesn't make sense for to pay a higher price to take a firm private than what the firm will go for when it's taken public.

Because of the aforementioned valuation dilemma, he suggests that the focus is less on trying to executing new major deals but working on restructuring existing portfolio companies. The focus is on providing financial support to portfolio firms to expand globally, adjust their balance sheets and cut excess costs.



For more information on the Carlyle Group including recent news stories visit the Carlyle Group's private equity tracker profile.

E-mail subscribers can view the video at this link: http://feedroom.businessweek.com/?fr_story=5b69b68d3708f75da9dc1d5bb8e18acea71934b8&rf=rss

Tags: Carlyle Group, Carlyle interview, Carlyle Group Managing Director, Nick Sturiale, Private Equity Interview, Private Equity Future, Private Equity Valuation, Private Equity Carlyle, Carlyle

Link to This Resource: Carlyle Interview | Managing Director

http://privateequityblogger.com/2008/12/carlyle-interview-managing-director.html

Private Equity United States

Private Equity Firms and Portfolio Companies by State

It has been a while since I have been able to post here, but I am now returning updating this blog daily as my schedule has returned to normal. That said, I received some interesting data from Private Equity Info that shows the largest geographical concentration of private equity firms and private equity portfolio companies as well. Private Equity Info sampled over 1,000 private equity firms and more than 10,000 companies held by private equity firms to give an interesting view of where firms are located and where they invest.

Geographical distribution of private equity firms and portfolio companies

Private Equity Firms ............ Portfolio Companies



















This data shows the high concentration of private equity firms in the industry, with 80% of U.S. private equity firms located in 10 states. The largest concentration of firms are in New York, California and Illinois. The companies held by private equity firms are more widely dispersed by states.































Source

Tags: Private equity states, private equity firms, private equity portfolio companies, private equity investment, private equity location, private equity firms by state, private equity companies

Link to This Resource: Private Equity United States

http://privateequityblogger.com/2008/12/private-equity-united-states.html

Hedge Fund Best Practices

The Best Practices of Large Hedge Funds

The following piece is from Richard Wilson of HedgeFundBlogger.com.  Hedge funds share some similarities with private equity and his article on hedge fund best practices may benefit private equity fund managers as well.

Below is a bullet point list of some best practices that I have seen $1B+ hedge funds employing that are more often than not missing within small teams of hedge fund professionals.


Giant well run hedge funds often have:

1. Better research processes in place and these are constantly being improved in many ways every quarter. They focus on Kazien - constant improvement
2. Documentation, their compliance processes, operational procedures,compliance checks, internal controls, hiring processes, and risk management techniques are all documented in great detail to help ensure consistent quality and improve what is being carried out
3. International marketing and sales teams which cover institutional investors and consultants in at least Europe and the United States if not also in Australia, South Africa, South America and Asia
4. Deep Pedigree, with larger pocketbooks the largest of hedge funds are able to retain the most experienced experts not only as adjunct advisors to the fund but full time employees or consultants which provide daily or weekly insights on upcoming investment opportunities
5. Human Resources strategies, many small hedge funds do not have any long-term talent development, or  Star Employee hiring practices in place.  Larger hedge funds do and must to keep their organization moving forward and growing over the long-term
6. Master DDQs, every large hedge fund I know of has a very thorough master due diligence questionnaire that is constantly updated.  The larger the hedge fund the more likely it is that their investors will be asking for a very thorough DDQ during the due diligence phase.
7. Superior Marketing, larger hedge funds have moved to the top of the learning curve when it comes to figuring out how to raise capital.  They use multi-modality marketing channels and materials and they have relationship development processes and goals in place which match up with the long-term growth growth goals of the fund.  They are also more than willing to invest in the best graphic designers and sales copy writers who can provide another edge over those who skimp on their image and marketing presence. 
8. More In-House Functions, while large hedge funds still use service providers and rely upon business partners many of them have large enough staffs and unique enough processes that some work such as some investment research, operations, accounting, or marketing may be done in-house instead of being outsourced to service providers such as administrators or third party marketers.
9. More Verification Points, the largest of hedge funds have been asked 500 times for their holdings, and 3,000 times for their PowerPoint presentation. They have completed hundreds of due diligence processes and are use to working with consultants who need to check every fact, assertion and claim.  They are use to operating within the world of providing evidence for everything said, and because of this may quickly meet the requests of investors who ask for such evidence.
10. Long-Term Strategies & Goals, most large hedge funds I know of plan for the next 3-5 or 5-7 years strategically in who they hire, market their fund to, and where they open offices.  In contrast most smaller hedge funds are very focused on day-to-day or month-to-month operations and most think in terms of 1-3 year plans.  When investors see the fund planning for, investing in the long haul it shows and that is part of why some larger hedge funds receive more allocations than small ones - they have the infrastructure and mindset more in common with an institutional investor.

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1. Private Equity Tracker Tool
2. Alternative Investment Jobs
   
3. Career Guide
   
4. Service Provider Directory
5. Private Equity Associate
   

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Link to This Resource: Hedge Fund Best Practices

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Partners Group

Partners Group | Private Equity Profile

The following piece on Partners Group is being published as part of our Private Equity Tracker Tool, our daily effort to track private equity firms in the industry.

Partners Group is a global alternative asset management firm with over CHF 24 billion in investment programs under management in private equity, private debt, private real estate, private infrastructure, absolute return strategies and listed alternatives. The firm manages a broad range of funds, structured products and customized portfolios for an international clientele of institutional investors, private banks and other financial institutions.

Partners Group is headquartered in Zug, Switzerland and has offices in San Francisco, New York, London, Guernsey, Luxembourg, Singapore, Beijing, Tokyo and Sydney. The firm employs over 350 people, is listed on the SIX Swiss Exchange (symbol: PGHN) with a market capitalization of over CHF 3 billion and majority owned by its 37 Partners and all employees.

Resource #1: Partners Group Closes Secondary Fund

Partners Group, the Switzerland based alternative assets manager, has successfully closed Partners Group Secondary 2008 at its hard cap of EUR 2.5 billion. The program saw strong demand from existing and new investors and closed significantly above its target size of EUR 2.0 billion.

Capitalizing on the attractive investment opportunities available over the past quarters, the fund has selectively invested throughout the market crisis, purchasing a number of assets at prices that can with hindsight now be seen as among the historic lows. For instance, Partners Group acquired a portfolio of assets from a bank at a discount of over 70% to net asset value at the beginning of 2009. In a market with limited visibility, Partners Group's proprietary knowledge of the portfolio combined with its valuation expertise and in-depth understanding of the private market assets enabled the rapid completion of the acquisition. The transaction is expected to achieve an IRR of above 20%. A further transaction recently completed was the purchase of a group of high quality assets from a distressed vendor seeking immediate liquidity. Thanks to its broad network, Partners Group was able to negotiate this transaction on an exclusive basis and to select attractive assets out of the seller's portfolio. The assets are all in stable sectors while offering a high degree of both sector and regional diversification, and were acquired at a discount of approximately 50%. This secondary transaction is expected to achieve a multiple of 2.0x and an IRR of over 20%.

Stefan Näf, Partner and Co-Head Investment Solutions, comments "We are delighted with the successful close of Partners Group Secondary 2008 and have seen substantial demand from investors around the globe despite a generally challenging fundraising environment. We are very comfortable with the portfolio we have built for our clients and have a substantial amount of dry powder remaining to invest in the upcoming attractive secondary vintage years. Thanks to our global presence, investment expertise and integrated approach, which form a solid base for originating and valuing transactions, we are confident of being able to access highly interesting opportunities currently in the market for the benefit of the investors in the fund."

Among the limited partners participating in the program are corporate and public pension plans, insurance companies, family offices and endowments from around the world.

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Tags: Partners Group, Partners private equity firm, partners capital group, partners group llc, partner group investments, assets, management

Link to This Resource: Partners Group

http://privateequityblogger.com/2008/12/partners-group.html

Private Equity Entry

New Information on How People Enter Private Equity

Degrees in higher education are held by many private equity professionals, the most common of which is a Masters in Business Administration (MBA). However, new information from the Private Equity Database reveals that less than half of people in all positions at a private equity firm hold an MBA. This is surprising because many people consider an MBA a prerequisite to entering the private equity industry. Although MBAs are definitely useful for working in private equity, this data suggests that it is not necessarily a requirement:













I have spoken with many young professionals hoping to break into private equity but feel that not having an MBA prevents them from working in private equity. There are many various paths people take to entering private equity even in the highest positions at private equity firms.

Source

Tags: Entering Private Equity, Private Equity Entry, Private Equity Position, Private Equity Positions, Private Equity Data, Private Equity MBA, Private Equity MBAs, Private Equity News

Link to This Resource: Private Equity Entry

http://privateequityblogger.com/2008/12/private-equity-entry.html

Private Equity Investment 2008

Private Equity Funds 2008

Largest Private Equity Funds of 2008

It's a little early for this, but PitchBook Data has put together a list of the largest private equity funds of 2008. The full report reveals that private equity fundraising has increased by 29% in the first three quarters of 2008 compared to the same period last year. Although the value and number of deals executed so far during this year have declined, but capital raising for private equity funds remains strong. As the following image shows:


Here is the latest list of the largest private equity funds 2008:

Tags: Private Equity Funds, Private Equity 2008, Private Equity Data, Private Equity Funds 2008, Largest private equity funds, largest private equity funds in 2008, list of private equity funds

Link to This Resource: Private Equity Investment 2008

http://privateequityblogger.com/2008/12/private-equity-investment-2008.html

Private Equity Master

Private Equity: Return of the Masters of the Universe

I watched this video a few months back and thought I would post it here as a tutorial in the world of private equity buyouts and corporate mergers and acquisitions.  The speaker is Lawrence Schloss of private equity firm, Diamond Castle Holdings, Inc.  It is rare to witness a private equity manager talking so openly about how the industry works and the general financial system.  His data has become outdated and some of his premises rely on pre-crisis thinking but he presents a good overall depiction of private equity deals.





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Tags: Private Equity Master, Private equity masters of the universe, private equity buyouts, video, Lawrence M. Schloss, Larry Schloss, Masters of the Universe, return, private equity, Private Equity: The Return of the Masters of the universe

Link to This Resource: Private Equity Master

http://privateequityblogger.com/2008/12/private-equity-master.html

Private Equity Firm Jobs | How to Get a Job in Private Equity

Private Equity Firm Jobs

Private Equity Firm Jobs | How to Get a Job

One of the frequent questions we get is - "How can I get a job with a private equity firm? There are many answers and we are slowly developing a complete section of our site to help you answer this question for yourself. Our most recent additional resource to this part of our website is the result of some recent negotiations with a private equity job listings website which you may use for a discount if you believe it would help you find a position in the industry.

PrivateEquityBlogger.com has negotiated a special $10 first-quarter discount on subscriptions to Job Search Digest, a unique career resource for finding venture capital, private equity, hedge fund and investment banking jobs. Since 2002, Job Search Digest has helped finance professionals be much more effective with their job search. Every day their team researches all the online job boards (including the specialty niche sites) and captures only the most relevant jobs—giving you a competitive advantage in your job search. They also provide profiles of specialist executive recruiters, compensation data, and other resources aimed at making your job search more efficient.

To get started and claim your discount on any one of their services, simply go to private equity Private Equity Job Center, Hedge Fund Job Center, or Investment Banking Job Center

Tags: Private Equity Firm Jobs, Private Equity Jobs, Private Equity Job, How to Get a Private Equity Job, Private Equity Job Search, Getting a Job in Private Equity, Private Equity

Link to This Resource: Private Equity Firm Jobs | How to Get a Job in Private Equity

http://privateequityblogger.com/2008/12/private-equity-firm-jobs-how-to-get-job.html

Apollo Private Equity

Private Equity Firm Apollo Management's Tough Year

Apollo Capital was ranked sixth this year in Financial Week's list of top private equity firms and seventh by Fortune, but this year has been a trial for Apollo Management. With the poor performance of many companies backed by Apollo private equity funds, the firm is struggling to maintain its impressive investment record.   To see the contact details for Apollo Private Equity, visit the Private Equity Directory.

In 1990, Leon Black formed Apollo Management and grew it into one of the largest private equity firms managing more than $20 billion. Early this year though, The Apollo Group, lost its $365 million investment in the home furnishings retailer, Linens-N-Things, when the company filed for bankruptcy and set about liquidating its assets. The company was purchased by Apollo and other investors for $1.3 billion but the new owners struggled to turn Linens-N-Things around. Mr. Black took some responsibility for the failed venture saying to the New York Times that Apollo "underestimated the severity of the downturn of the housing market.” And he points out that the loss to his investors was only half a percentage point on return.

This was a major blow to the private equity firm but Linens-N-Things is not the only Apollo investment that has floundered recently. Many challenging investments lie in the portfolio of Apollo's sixth fund. Mr. Black admits that five of the fund's investments are "cyclically challenged," the five he refers to are: the retail chain Clair's, Hot-Tub maker Jacuzzi, Realogy (owner of Coldwell Banker and Century 21), the Countrywide real estate company in Britain and casino-chain Harrah's. One insider who claims to have knowledge of the fund's performance says that the fund has had a negative 12.6% internal rate of return to investors from creation of the fund to September this year.

To add to Apollo Management's difficulties, one of its subsidiaries owns Hexion Specialty Chemicals which recently offered $28 a share to purchase the Huntsman Corporation. The deal was estimated at $10.6 billion and financed largely by two banks, Deutsche Bank and Credit Suisse. Apollo Management then attempted to kill the deal but was told by a court that it could not. Then, on October 28th 2008, the two banks said they would not finance the deal because they think that the two companies merged will be insolvent. According to the WSJ:

“Reputational risk no longer exists,” one dispirited investor told Deal Journal. Mitch Walker, a partner with Bass, Berry & Sims, sees its differently: “So far I haven’t had much sympathy for the banks, but they are marginally more justified in saying ‘we need more proof of solvency to lend this much money,’” Walker told Deal Journal. “If they made loans to a company that became insolvent, they would be in considerable trouble with shareholders and the Treasury.”

So, now Apollo is left with "trying to figure out how to make an unwanted marriage work out and how to persuade the banks to be a part of the nuptials." The situation at Apollo Management is concerning, but the firm's head, Mr.Black, remains optimistic saying that he has faced economic adversity before and produced good returns still.

Source: NYT and WSJ

To see the contact details for Apollo Private Equity and 1000 other firms, see the Private Equity Directory.

Tags: Apollo, Apollo Private Equity, Private Equity, Private Equity Apollo Management, Apollo Management LP, Apollo Group, Apollo Private Equity Funds, Apollo Management Holdings, Apollo News

Link to This Resource: Apollo Private Equity

http://privateequityblogger.com/2008/12/apollo-private-equity.html

Private Equity Trends

Report of Private Equity Trends 2008

A new report offers an overview of the last three quarters of private equity trends and where the industry is today.

The private equity industry has begun to significantly feel the effects of the financial crisis, as evident by the Carlyle group's recent cuts and the latest data revealing reductions in the number and value of private equity deals. This does not necessarily represent a collapse in the private equity industry, but more likely illustrates that many private equity firms are exercising caution toward working in such an adverse climate as well as the lack of credit available for big deals in the current market. PitchBook Data has put together a brief report showing current trends in private equity and which industries is private equity investing.


The above chart shows that private equity deals have significantly dropped, and predictions for the fourth quarter of 2008 are similarly low. To find out where this decline is occurring, PitchBook has broken down the last three quarters of private equity activity by investment sector:

• Business Products/Services: 'Commercial Services, such as Media & Information and Consulting Services, led this sector with 230 deals in the first three quarters of 2008. The number of deals fell 33.7% and total capital invested fell 76% for the first three quarters of 2008 compared to the same period in 2007. Business Products & Services accounted for 35% of the deals in 3Q 2008.'
  

• Consumer Products/Services: 'Consumer Durables led this sector with 54 deals in the first three quarters of 2008, followed closely by Consumer Media with 49 deals. The number of deals and capital invested both fell 39% for the first three quarters of 2008 compared to the same period in 2007. Consumer Products & Services accounted for 25% of the deals in 3Q 2008.'

• Financial Services: 'Capital Markets/Institutions led this sector with 23 deals in the first three quarters of 2008, followed by Insurance with 22 deals. The number of deals fell 20.8% and total capital invested fell 21.3% for the first three quarters of 2008 compared to the same period in 2007. Financial Services accounted for 5% of the deals in 3Q 2008.'
  

• Energy: 'Exploration, Production & Refining led this sector with 46 deals in the
  first three quarters of 2008, followed by Energy Services with 30 deals. Number of deals fell 14% and total capital invested fell 58.4% for the first three quarters of 2008 compared to the same period in 2007. Energy accounted for 7% of the deals in 3Q 2008.'

• Healthcare: 'Healthcare Services led the this sector with 72 deals in the first three quarters of 2008, followed by Devices & Supplies with 29 deals. Number of deals fell 26.6% and total capital invested fell 54.4% for the first three quarters of 2008 compared to the same period in 2007. Healthcare accounted for 11% of the deals in 3Q 2008.'
  

• Information Technologies: 'Software led this sector with 42 deals in the first three quarters of 2008, followed by Communications & Networking with 29 deals. Number of deals fell by 44.7% and total capital invested fell 91.4% for the first three quarters of 2008 compared to the same period in 2007. Information Technology accounted for 10% of the deals in 3Q 2008.'
  

Source: PitchBook Data

Tags: Trends in private equity, private equity trends, private equity trend, private equity trends 2008, trends in private equity 2008, private equity data, private equity report, private equity trends report

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Carlyle Group

Carlyle Group Cuts 10% of Staff

The Carlyle Group announced today that it will be reducing 10% of its staff, marking the first of the major private equity firms to announce firmwide layoffs, the WSJ reports. An even more remarkable note is that this is the first time in the Carlyle Group's twenty-year history that it has made a firmwide staff cut.

After a recent surge in hiring, the Carlyle Group will be reducing its staff to 2007 levels. Also the Carlyle Group is shutting down its less than one-year-old office in Silicon Valley. Showing that even the mega-buyout firms are vulnerable to the financial crisis. A Carlyle Group spokesman explained the move, “In response to extraordinary market conditions, Carlyle has taken measured steps to balance its cost structure with the current investment climate. The firm is well positioned to take good care of our investment portfolio and has the resources to create and respond to compelling investment opportunities.”

The Carlyle Group has already had its share of public setbacks this year after the failures of Hawaiian Telecom, SemGroup LP which filed for Chp. 11 bankruptcy in July (SemGroup was only last year ranked 18th largest private company), and the fall of its mortgage securities hedge fund Carlyle Capital. Yet this is far from a collapse of the Carlyle Group, in fact, in its 64 funds there is around $40 billion in uninvested capital and it is raising an estimated $14 billion for its next buyout fund.


Tags: The Carlyle Group, Carlyle Group, group and Carlyle, Caryle Group, Carlyle Group DC, David Rubenstein, Carlyle Group Loss, Carlyle Group Investment, Carlyle Group Companies

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Buyout Market

Debt Bankers Predict Trouble in Buyout Market

Leveraged finance bankers predict that half of all private equity buyouts that have been completed within the last three years will struggle. The head of restructuring at JP Morgan, Peter Jaffe, said that because companies have been overleveraged, around half of private equity buyouts made in the last three years will run into trouble. He believes that buyouts need to be deleveraged because there is a lack of credit available in the market for buyout deals.

Speakers at the Debt Brief Europe conference agreed that there will likely be an unparalleled amount of trouble for private equity-owned companies.

“If anybody who runs an investment portfolio tells you they have no problems in it they’re a bare-faced liar,” said Ryan McGovern, investment director at Nomura Mezzanine, a Japanese debt provider. “One of the problems is everyone is looking into a black hole of economic morass.”

A discouraging estimate came from rating provider, Moody's Investment Services, which expects the 5 year global high-yield default rate to rise from 10.2% in September to 35.1% in 2013, more than tripling in just five years. This coincides with an increase in the number of private equity-backed companies breaking contract, asking for a waiver or rearranging their debt structure.

S&P found that in the 12 months ended Oct. 30, there was a 100% increase in covenant breaches, waiver requests or related restructurings among speculative-grade industrial companies in Europe, compared with the prior 12-months. These companies are also running into difficulties more quickly, with the time from financing to experiencing problems with covenant tests decreasing considerably in the past two years when compared with 2006, according to S&P.

The estimates given by participants in the Debt Brief Europe conference added to recent pessimism over the future of private equity, especially in regards to buyouts.

Source

Tags: Private Equity News, Private Equity Europe, Private Equity U.K., Private Equity Future, Private Equity Market, Private Equity Wall Street Journal, Private Equity Outlook, Private Equity Conference

Link to This Resource: Buyout Market

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