Sustainable Private Equity

Sustainable Private Equity

Private Equity Investing in Sustainable Living

Sustainable living is a rapidly expanding industry and it has attracted a lot of investment. Private equity firms are moving in to capitalize on opportunities in "green" products and sustainability solutions. Because the industry is so fresh there is a need for private equity firms to provide capital to those sustainable companies that are looking to expand or restructure to a more competitive business model. The following video is an interview with Brent Knudsen of Partnership Capital explaining how his firm is executing deals in the sustainability market despite the tough economy.



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Tags: Brent Knudsen, Partnership Capital, Private Equity Sustainability, Sustainability green private equity, Partnership Capital Private Equity, Private Equity environment, private equity solutions

Link to This Resource: Sustainable Private Equity

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Private Equity Reputation

Private Equity Reputation

Considering a Private Equity Firm's Reputation

This week I have been covering factors to consider when selecting a private equity firm to partner with. There are many choices and limited information on many buyout firms, so you should be careful in deciding what firm is best suited to their risk appetite and specific needs. This is the final part in a series of four articles on how to choose a private equity fund. To read the first article, see Sector Specialization and for the second, see Historical Performance and the third, see Private Equity Fund Management. The following explains the importance of selecting private equity firms with a good reputation.

I often highlight the importance of having a great reputation in the private equity industry and I think it is important at any level of the business. If you act unethically or even unlawfully you put a near-permanent smear on your professional reputation. This will cause even long-standing clients to reevaluate doing business with you. This article applies that idea to private equity firms.

I would think long and hard before working in any way with a private equity firm that has a poor reputation in the industry. This is not to say that any minor legal issue or controversy should automatically prevent you or your company from considering the private equity firm. But by working with a discredited private equity firm you open yourself up to a lot of liability. Their decisions have a direct or at least indirect impact on your own standing in the industry. For example, if you provide an auditing service to a private equity firm that participates in some form of an illegal or unethical act, then that reflects poorly on you and could potentially open you up to a lawsuit or inquiry. Even if you were unaware of the violation, you could be associated with that firm and scare off future clients.

To avoid this scenario, a certain level of due diligence should be conducted on the private equity firm. This can be done by examining the firm's record, past funds and transactions as well as speaking with professionals who have done business with the private equity firm. Similarly, look into the lenders who work with the firm and how consistent their relationship has been. If the firm frequently changes lenders this may indicate that the firm has not satisfied its lending partner. Similarly, gain insight from limited partners and service providers who have consistently worked with the group. If you are new to private equity, it would be helpful to reach out to someone who is experienced in the industry such as a professional advisor. A well-rounded perspective will help you decide whether the firm has a solid reputation.

This is the final part in a series of four articles on how to choose a private equity fund:
To read the first article, see Sector Specialization.
For the second, see Historical Performance.
To view the third in the series, see Private Equity Fund Management.

As always, the writing on this blog is not financial or legal advice so please seek a qualified advisor.

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Tags: Private Equity Reputation, Private Equity Rep, Private Equity Industry, Private Equity Firm Reputation, Choosing a Private Equity Firm, Selecting a Private Equity Firm

Link to This Resource: Private Equity Reputation

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Management Buyouts

Management Buyouts

Gresham Private Equity in Management Buyout

Gresham Private Equity is a U.K.-based mid-market buyout firm and it has recently launched a management buyout of more than half of Formation Group. It was recently announced that Gresham exchanged contracts on a £20.75m management buyout for five of Foundation Group's nine businesses. The purchased businesses will form the James Grant Group.

Gresham will provide 100 per cent of the funding to complete the transaction using its recently launched debt underwriting product.

The five businesses included in the transaction are James Grant Media, O J Kilkenny & Co, Proactive Sports Management USA Inc, Formation Sports Capital and Proactive Sports Management. These businesses collectively have over 750 clients.

Neil Rodford, CEO of the newly formed James Grant Group, said, “We are delighted to have found a partner of Gresham’s magnitude to enable us to complete this MBO. We have an excellent management team in place and with Gresham’s support we can substantially grow the business and the services we can offer our extensive and complementary client base. We look forward to working closely with Gresham to identify the right acquisitions and to accelerating our growth through organic initiatives.” Source
Read the definition of a Management Buyout.

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Tags: Management Buyout, MBO, Management Buyouts, Manage buyout, MBOs, a MBO, What is a Management Buyout, Manager Buyout, Gresham Private Equity, Gresham Buyout, group management buyout

Link to This Resource: Management Buyouts

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Private Equity Fund Management

Private Equity Fund Management

Selecting the Right Private Equity Fund Management

Selecting a private equity fund to partner with or invest in can be difficult. With so many choices and limited information on many buyout firms, you should be careful in deciding what firm is best suited to their risk appetite and specific needs. This is the third part in a series of four articles on how to choose a private equity fund. To read the first article, see Sector Specialization and for the second, see Historical Performance. The following explains the importance of selecting the right private equity fund management team.

Private Equity Fund Management

Management is one of the most important aspects of a private equity firm, having the wrong management team in any part of the business could hurt the firm's performance significantly. I think it's best to break down management into three tiers: selecting transactions and investments for the firm; day-to-day operational duties in raising capital, structuring and finally executing the deals; and the management in place at the fund's portfolio companies. It's useful to consider the management through each of these aspects in order to get a sense of the private equity firm's general management. For example, management issues at a fund's portfolio company, such as an unusually high turnover rate, signals problems in the private equity firm's management as well.

Private equity firms that have a impressive and consistent performance record usually have a consistency in their management approach. These firms have the structure in place to fluidly find and execute deals before the opportunity is lost. Poor management can cause private equity firms to act too slowly and fail to make decisions. A strong management team will have ultimate decision-making authority on what deals to open and which ones should close. A firm with a solid management team has consistent, disciplined growth--not volatile returns that subject LPs to a quarter of big losses for one with high returns.

Once the firm's management has sourced, structured and executed a deal another management team has the responsibility for transforming the acquired company. If the company is purchased for reasons other than inadequate management, then the portfolio company's existing managers might remain on staff. Other times, the business is underperforming primarily because the existing management is either inefficient or lack the knowledge and resources to expand the company. In this case, the private equity firm may recommend an addition or actively replace the management with executives that will be able to lead the company more effectively.

A portfolio company's executives are often representative of how the private equity firm manages. For instance, if the company's executives are frequently replaced it shows that the buyout firm either cannot choose a qualified executive or it lacks the ability to lead the executives. There are plenty of opportunities to lead the portfolio company's management and the most secure companies often have a wealth of resources available to them. Private equity firms can give their portfolio company every opportunity to succeed by offering: experienced board members, advice from experts in the industry, and capital support to ideas that could grow the company.

A final level of analysis should examine what executives the firm typically places on a board or turns to for advice and analysis. If these executive consultants have a inconsistent track record of poor performing companies and irrational decisions then they are not the type of people you would like advising your investments. I hope this gave a helpful outline on analyzing a private equity fund's management. Tomorrow's final installment in this series will cover a private equity firm's reputation in the industry and with past partners.

Please read Part One of Selecting a Private Equity Fund: Private Equity Investment Funds
Also see Part Two: Private Equity Fund Performance

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Tags: Private Equity Fund Management, Private Equity Fund Management Tips, Private Equity Asset Management, Private Equity Management Group, Private Equity Manager, Buyout Fund Management

Link to This Resource: Private Equity Fund Management

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Private Equity Fund Performance

Private Equity Fund Performance

Considering a Private Equity Fund's Past Performance

Selecting a private equity fund to partner with or invest in can be difficult. With so many choices and limited information on many buyout firms, investors should be careful in deciding what firm is best suited to their risk appetite and specific needs. This is the second article in a series of four on how to choose a private equity fund. To read the first article, see Sector Specialization. The following is explains how a private equity fund's past performance and individual deals help in deciding what private equity firm to partner with.

Past Performance

Along with sector specialization, another important factor in selecting a private equity fund is the firm's past performance. It is worth laboring over all aspects of the private equity firm's track record, looking at not only each investment and fund, but the overall profits and losses for the firm. The firm's history will reveal what deal structure they prefer, their use of leverage, minority vs. controlling interest and how their returns match up to their predictions.

When looking at the performance, if the firm has launched multiple generations of funds examine how consistent each fund performs. Is the firm a consistent performer, or do some of its funds produce high returns while others collapse? Investors are often satisfied with a solid private equity firm that has proven less volatile even if it means that you do not receive as high of a ROI as the riskier fund. As the numerous investment frauds this decade show, if a fund is promising unheard of returns there is probably a reason for it--and it's often illegal or at least unethical practices. (After all, Bernard Madoff promised some investors annual returns as high as 46%).

If a business is looking for a buyout or significant private equity investment, here are some factors to consider:
  • What percentage of transactions placed under letter of intent are actually closed?
  • How do past sellers feel about their dealings with the private equity firm? Are they satisfied or do they feel ignored or taken advantage of? It's important to get a sense of the buyout firm from people who have worked with the firm but are not on the payroll.
  • Did the firm keep with the original guidelines in the letter of intent? Although the document is usually non-binding, adherence to the core agreements builds a foundation of trust for both parties.
  • How professional was the transaction process? Especially if you want to be the primary decider in the direction of business, you should examine how past partnerships have succeeded (and failed). Although buyout firms do sometimes takeover a controlling interest of a company--in spite of the owner's objections--it is not always as dramatic as the owner may suggest. In some cases, the private equity firm and the company have already agreed on terms but the business owner attempts to back out later. Similarly, if a disagreement resulted in litigation, the owner or buyout firm may be bitter and give a less-than-truthful take on the deal. In other words, be sure to get both sides of every deal.

To read one of the other factors to consider when choosing a private equity fund see Private Equity Investment Fund.


Some of the above factors were partly based on Module IV of Private Equity: History, Governance, and Operations.
As always, the preceding article is no way a means of private equity, financial advice or solicitation to sell private equity or investment products. Please seek a qualified financial or legal adviser.

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Tags: Private equity fund, private equity funds, private equity investment funds, private equity governance, private equity history, private equity fund performance, private equity firms, past performance

Link to This Resource: Private Equity Fund Performance

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Family Office Wealth Management Resources

Family Office Wealth Management

Looking to learn more about Family Office Wealth Management? The Family Offices Group is part of our H Media Group investment blog network, and this website is dedicated to providing hundreds of free-to-access educational videos, articles, interviews, and industry statistics on the topics of Ultra High Net Worth Wealth Management and Family Offices. They are well known for providing these educational resource and the Family Offices Database and as of last month they are now the #1 most highly visited website on the topic of family offices. Here are links to 50 of their top resources:
  1. Family Office Services
  2. Hedge Fund of Funds by Family Offices
  3. Family Office Marketing
  4. Family Office Profiles
  5. Family Office Wealth Management
  6. Family Office Industry
  7. Private Banking and Wealth Management
  8. Insti-Individual Investment Consulting
  9. Virtual Family Offices
  10. Sovereign Wealth Funds Video
  11. Iveagh Family Office Fund Launch
  12. Family Office Jobs
  13. Philanthropic Giving
  14. Family Office Services
  15. Family Office Wealth Management
  16. Single Family Office
  17. Family Office
  18. Multi-Family Offices Blog
  19. Investing Book
  20. Single Family Office
  21. Family Offices Message Board
  22. Family Offices
  23. Financial Advisor Marketing
  24. Family Office Resources
  25. Family Office Directory
  26. Fund of fund
  27. Private Equity for Family Offices
  28. Family Office Example
  29. Family Offices Group.com Archives
  30. Family Office Jobs
  31. Chartered Hedge Fund Associate (CHA) Designation
  32. Jobs at Hedge Funds
  33. Family Offices Message Board
  34. Investment Internships
  35. Family Office List
  36. Family Office Professionals
  37. Family Giving | Philanthropic Management
  38. The Cost of Being Wealthy
  39. Philanthropic Giving

The Family Offices Group also is building a series of profiles on family office and UHNW wealth management firms, here are links to these resources:
Tags: family office, family offices, family office wealth management, family office services, multi-family office firms, single family offices, how to work with a family office

Link to This Resource: Family Office Wealth Management Resources

http://privateequityblogger.com/2009/07/family-office-wealth-management.html

Private Equity Investment Funds

Private Equity Investment Funds

Selecting the Right Private Equity Investment Fund

Selecting a private equity fund to partner with or invest in can be difficult. With so many choices and limited information on many buyout firms, investors should be careful in deciding what firm is best suited to their risk appetite and specific needs. The following is partly based on a section in Private Equity: History, Governance, and Operations. This is the first in a series of articles on how to choose a private equity fund:

Sector Specialization

The first factor to consider is sector specialization. Many funds primarily invest in a small number of sectors and seldom deviate from these areas. This should not be seen as a deficiency or an alarming lack of diversification, rather this approach ensures that the private equity firm is knowledgeable about the industry and will be more likely to predict changes.

A frequent downfall for private equity firms or venture capitalists is that they invest too far from what they understand. A buyout fund that has always invested in technology companies may run into trouble buying out a manufacturing firm. The complexities of the industry will be a major struggle for a fund that has no experience in production and distribution of supplies, competitive pricing, expanding the customer base, keeping the workers satisfied and compensated as well as any number of aspects that are unique to the manufacturing company.

Additionally, less specialized funds may be more likely to invest in volatile sectors that they do not fully understand, thus exposing its investors to significant losses. Perhaps the most dangerous and common trait among less specialized funds is that they will chase whatever industry is currently "hot." Traditional investors will know that this is a flawed strategy, as the area that is popular and generating big returns is often a bubble on the brink of bursting.

This was most evident in the late investors in the internet companies in the very end of the 1999 and beginning of 2000. These investors followed the exciting dot-com firms that had been making big returns, but in the first quarter of 2000 the bubble burst. Stock prices plummeted leaving investors with sometimes total losses on their investments and once heavily capitalized companies filed for bankruptcy. A way to prevent this type of exposure is by investing with a fund that invests in a limited number of sectors and is dedicated to improving companies within that area rather than only investing in the popular investments.

Another benefit to investing in a specialized private equity fund is that the fund will have a wealth of industry relationships. This will be useful throughout the investment; in the day-to-day operations of the company, facilitate possible mergers or acquisitions within the industry, access to industry-seasoned executives and other resources that would not be immediately available to non-specialized funds. Perhaps the biggest hazard for selecting a highly-specialized fund is that it could be more susceptible to industry declines. In the current recession, many industries are struggling, such as real estate. Real estate private equity funds were therefore hit hard by the collapse in the housing market and the changing property valuations.

Overall, when selecting a private equity fund, specialization in a limited number of industries offers a number of long-term benefits. The fund's management will be more likely to anticipate changes in the industry, have helpful contacts in the sector, have an understanding of a portfolio company's operational needs and problems and avoid chasing the "hot industry."


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Tags: Private Equity firms, Private Equity Funds, Selecting a Private Equity Fund, How to Choose a Private Equity Fund, Finding a Private Equity Fund, Industry Private Equity Funds, Private Equity investment funds

Link to This Resource: Private Equity Investment Funds

http://privateequityblogger.com/2009/07/private-equity-investment-funds.html
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