French Private Equity

French Private Equity Deals Test M&A Waters 

Two deals involving French companies are testing the waters of the private equity M&A market.  As I wrote earlier, buyout firms are sitting on a huge stash of dry powder and the two companies are seen as a measure of private equity firms' willingness to complete a purchase rather than letting the firms go to auction.  The two companies are frozen food company, Picard Surgeles, owned by BC Partners (BCPRT.UL), and health clinic operator, Medi-Partenaires, owned in part by LBO France.  

Competition for these companies, worth more than of 1 billion euros each, is likely to be keen because many funds, are sitting on cash while they fall behind on investment and performance targets.

Appetite is so strong that despite their size, the two companies up for sale could be bought by funds before they have debt financing in place.

The risk is that some funds may rush to buy before performing adequate due diligence. Some private equity players warn a mini-bubble in attractive sectors could be forming.

"There is relative imbalance in the market. There is a lot of cash but few opportunities." said Xavier Marin, President of Paris-based private equity fund Fondations Capital.

"With this pressure to put cash to work some of the larger funds are being very aggressive."

Picard has a network of stores selling frozen food and competes with general retailers such as France's Carrefour (CARR.PA). Medi-Partenaires competes with Blackstone (BX.N)-owned Groupe Vitalia and Generale de Sante (GDSF.PA).   (Source)

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Tags: private equity investments, private equity firms, private equity deals, french management, French companies, France private equity deals

Link to This Resource: French Private Equity

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Private Equity City

Regulation Changes Private Equity Cities, London and NYC

I am working in New York City this week before I leave the States for three weeks.  New York is the private equity hub in the United States, but with increasing taxes, a new financial reform bill, and tightening regulation of placement agents, it's uncertain whether New York will continue its dominant position in the industry.  For a list of the top 15 private equity firms see this article.

I've heard talk of New York losing its top spot, but I do not think this is realistic because the only city really capable of competing as a private equity hub is London and regulation and taxes look even worse across the pond.  The UK's recent budget proposal has not hurt UK buyout firms enough to drive them away it seems but it continues to be more and more expensive for private equity firms to operate in London.  The new British government has decided to raise carried interest taxes from 10% to 28%, payable on profit above GBP10,000 a year.  For the U.S. this would be seen as a severe tax hike, but UK firms were expecting an increase to as much as 40%-50%.

But the rise wasn't as large as feared by many private equity executives who have to pay CGT on the carried interest, or the share of profits that fund managers receive as part of their compensation.

"It is a big increase but it could have been a lot worse--many were expecting a hike to 40% or even 50%," said Caspar Noble, a partner in the tax group at Ernst & Young.
Noble said that he didn't think it was sufficiently high to make people relocate as they had threatened.

The sector will also benefit from a reduction in corporation tax from 28% to 27% next year and a further 1% cut in the three successive years. For small firms, Chancellor of the Exchequer George Osborne said corporation tax would be reduced from 21% to 20%.
The cuts are good for private equity-owned companies in the U.K. and will also help the smattering of private equity firms which are managed and employed by a U.K.-based company as opposed to being structured as a partnership, said Noble.  Source

Click here for contact details to over 1,000 private equity firms including firms in New York and the UK.

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Tags: private equity city, private equity cities, private equity city location, top private equity cities, list of private equity firms, private equity firms in New York, Private Equity firms in the UK, London

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UK Buyouts

UK Buyouts Up 67% On Total UK Buyouts Last Year

UK buyout activity has recovered pretty well in the first six months of 2010 but analysts are unsure whether the momentum will continue through the end of the year.  The total value of UK buyouts this year has already surpassed the total for all of 2009.  The value this year is GBP7.9 billion (approximately $11.9 billion) a 67% increase on last year. 

The activity has been led primarily by secondary deals between private equity firms.  These private equity secondary buyouts accounted for 60% of total UK buyout activity in the first half of the year.  With looming regulation and continued market volatility, it's hard to tell if this amount of buyouts can continue.

 Meanwhile the average size of buyouts has more than doubled to GBP91.2 million, from GBP39.5 million last year which is the highest average buyout size ever recorded with the exception of 2007 which saw the height of the buyout boom typified by the GBP11.1 billion buyout of U.K. pharmacy chain Alliance Boots by Kohlberg Kravis Roberts.

But experts say that sales remain challenging in particular to the public markets and trade buyers.

"The exit market has remained quiet in 2010 in line with 2009 activity levels," said Christiian Marriott, Director at Barclays Private Equity which sponsors the research.

"A number of large flotations were anticipated this year but renewed stock market turbulence has held back the IPO market, with only two private equity-backed IPOs taking place in the U.K. so far," he added. These are Jupiter Fund Management and Cambria Automobiles with market capitalizations at commencement of trading of GBP755 million and GBP50 million respectively.  Source

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Tags: private equity buyouts, buyouts, secondary buyouts, secondary private equity buyouts, buyout firms, UK buyouts, UK private equity firms, UK buyouts, buyouts in the UK

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Private Equity Career Path

Video: Different Private Equity Career Paths & Backgrounds

Private equity professionals come from many different backgrounds--academically and professionally.  I've spoken with many people who work in private equity and have degrees or work experience that contradicts the mainstream consensus of what private equity professionals do before joining the industry.

There are a  number of individuals who come from non-finance backgrounds and have no training in private equity but still these professionals usually have a graduate degree if not an MBA and specialize in an area that is particularly attractive to the private equity firm.  The following video is a profile of five top-tier private equity firms and shows how executives at each firm climbed to the top from different backgrounds.  If you would like to watch the video and you are reading this through RSS feed or e-mail newsletter, click this link.

To learn more about private equity and better position yourself for a career in private equity consider our Private Equity Training Program

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Tags: private equity career path, private equity jobs, private equity career paths, private equity careers, private equity career, private equity jobs, private equity employment, private equity job search

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Buyout Dry Powder

How Will Buyout Firms Invest $280 Billion in Dry Powder?

Private equity managers are under a lot of pressure from investors to invest the capital they have amassed over the last few years. Over the last 18 months I've seen estimates of buyout firms' dry powder ranging from $280 billion to as much as $500 billion (probably closer to the former estimate now). But it is clear that buyout firms have huge cash reserves on hand that have not been invested and investors are growing tired of watching their cash on the sidelines.

This really wouldn't be a problem for managers if it weren't for the agreements many made with their investors that they would put that capital to use within 5-6 years or turn it back over to the limited partners.  If investors didn't mind the stall, managers would be able to sit on that capital and invest it when the time is right.  My feeling is that investors were willing to let managers hold onto their cash through the recession (maybe even encouraging managers to stop investing in new companies for fear it would be wiped out).  But now that rival funds (namely hedge funds) have succeeded in producing impressive gains since the beginning of 2009, private equity investors are likely growing restless.  This is natural, you give your money to a buyout firm and it doesn't invest in anything, while other funds are making great returns for their investors.  If it were possible, you'd probably want to take your uninvested capital back and put it with a fund that is not going to wait on the sidelines.

Now, buyout funds are facing this anxiety and are expected to put $51 billion to work before 2011 and $213 billion has to be invested by 2015.  The concern here is that buyout firms are always looking to raise more capital and if they're buried in investors' cash already without investing it  they're going to have a tough sell trying to convince investors that they should give more money to a new fund.  One possible reaction from buyout firms is that they will invest in companies that they would not otherwise invest in if they weren't under pressure to get rid of the capital.  If buyout firms are scrambling to offload this capital into companies they could minimize due diligence efforts and get stuck with some failing companies (especially considering many firms are still struggling with an unstable economy). This could just lead to low returns or even losses on these investments which, I think, will be an even bigger barrier to raising new funds than having not invested in the first place.  (This is all assuming that there is the credit available to finance a high volume of leveraged buyouts this year.) 

It will be interesting to see how this plays out, whether buyout firms will stay strong resisting pressure to invest that dry powder or whether we will see a flurry of new investments from buyout funds.

Use it or lose it. That is the choice faced by some buyout firms sitting on piles of capital they have raised but not invested. The firms are unlikely to give it up without a fight.

A fund-raising arms race last decade was followed by a sharp slowdown in investments, leading levels of dry powder to surge. Such undeployed capital stood at a record $280 billion among U.S.-focused buyout firms at the end of 2009, according to research firm Preqin.

The catch is that firms generally agree to invest capital within five years or return it to investors. For some, the deadline is fast approaching. U.S.-focused buyout funds have $51 billion that must be used before the end of 2011, Preqin says. Another $213 billion needs to be invested by 2015.

Raising new money isn't that easy anymore. So, the worry is that firms will lower the bar on the quality of investments to ensure existing funds are put to work. One risk is that firms begin to chase after deals and overpay. Source

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Tags: dry powder, investments, cash reserves, cash on hand, buyout firms cash reserves, buyouts cash, buyout firms investments, capital, capital reserves, capital committments, funds, limited partners

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Private Equity Salaries

Free CPEP Video: Private Equity Salaries & Compensation

Today I am completing a video on how to create a private equity resume for the participants in the Certified Private Equity Professional program.  That video will be one of many multimedia tools offered to those who enroll in the CPEP as resources for advancing their careers and understanding the industry better.

I wanted to give those of you who are considering the program a sample of the type of complimentary resources in the Certified Private Equity Professional program, so I am offering the following video to all of my readers. As with all of our resources, we will be constantly updating and improving these videos to better serve those who enroll in the Certified Private Equity Professional program.

I receive hundreds of e-mails asking about compensation trends and salaries at private equity firms.  I have completed this video for the Certified Private Equity Professional program to give participants an idea of the most recent private equity compensation trends.  This video gives my analysis on private equity salaries and compensation and offers insight from the most recent private equity compensation data available.



To learn more about the Certified Private Equity Professional program follow this link.

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General Partners Fees

PE Investors See Power Shift Away from General Partners 

Private equity investors overwhelmingly responded positively when asked whether negotiating power had shifted in their favor.  According to Preqin, 81% of investors see a change in power allowing limited partners to more strongly enforce their demands on general partners in fund terms and conditions this past year.  The following notes are the key findings of the Preqin PE Fund Terms 2010 report:

• 81% of respondents reported seeing a shift in the balance of power towards the investor during negotiations of fund terms and conditions in the past year.
• Fund managers are already responding to investor demands for concessions: 41% of investors polled reported seeing an improvement in the share of deal-related fees they are set to receive from funds in the past year.
• Despite concessions, the proportion of investors agreeing that GP-LP interests are properly aligned has decreased from 69% in 2009 to 58% in 2010, showing increasing investor dissatisfaction with fund terms.
• The majority of respondents (71%) told us they may not invest in a fund as a result of it failing to adhere to ILPA’s Private
• Equity Principles. This included a significant 13% which stated that they definitely would not invest in a fund that did not follow the principles.
• Management fees remain a major source of discontent for investors with 64% of respondents expressing dissatisfaction at the level and structure of management fees charged.
• 54% of investors feel that the more LP-friendly terms and conditions they are now seeing will continue to be offered over the longer term. Just 9% felt any concessions were only temporary.

This is a very important trend that I have been following since the middle of the recession.  As fundraising has grown increasingly difficult even after the peak of the financial crisis because buyout funds have still failed to make the type of visible recovery that hedge funds and other industries have made, general partners have felt pressure to cater more to limited partners.  This includes reducing fees, not requiring lock-up periods, and a stronger adherence to the ILPA Private Equity Principles.  To read the Private Equity Principles issued by private equity investors see this article.

For the last few months it seems that general partners have been hesitant to lower fees and meet investors' on fund terms.  But now, a growing number of private equity funds are responding to limited partners' dissatisfaction:

• The mean management fee for new buyout funds (those of a 2010 vintage or yet to hold an initial close) seeking $1 billion or more in commitments is 1.59%, down 32 basis points from its peak for vintage 2008 funds of 1.91%.
• The mean management fee for new real estate funds seeking $1 billion or more in total commitments is 50 basis points down from its peak for 2007 vintage funds, now standing at 1.25%.
• The mean management fee for the latest distressed private equity funds seeking less than $500 million in commitments is 1.82%, down 24 basis points from the average for 2008 vintage funds of 2.06%.  Source

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Tags: private equity fees, private equity management fees, limited partnerships, general partnerships, general partners, management private equity, LP, GP, private equity funds, buyout funds

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Citigroup Private Equity

Citigroup Raising $3.5 Bil for Private Equity, Hedge Funds

Citigroup and other investment banks are facing pressure from Congress and regulators.  It is possible that these banks will not be able to have ownership positions in hedge funds or private equity--see this article for more information.  While that possibility looms over the banks, Citigroup is rumored to be raising $3.5 billion for its hedge funds and private equity over the next two years.

Citi Capital Advisors, Citigroup's alternative asset management platform, will try to raise around $1.5 billion for private equity and around $1.75 billion for hedge funds, the person said, without elaborating on the time frame or how much Citigroup will invest in the funds.

The planned fund raising comes during consideration of a legislative proposal on Capitol Hill that would bar big commercial banks from making speculative proprietary derivatives and stock investments for their own accounts.

The so-called "Volcker rule" proposal--named after ex-Federal Reserve chief Paul Volcker, who chairs U.S. President Barack Obama's economic-advisory panel--would also cap the size of big banks and force financial institutions to divest hedge funds and private-equity units.

 The amount Citigroup is looking to raise is a huge sum under the current environment when investors are still cautious about whom to entrust their money with, and funds generally would refrain from having a specific fundraising target, for fear that they won't be able to meet it.  Source

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Tags: Citigroup private equity, Citigroup Investments, private equity banks, Private Equity, Citigroup private equity Capital, Fundraising, Citgroup Management

Link to This Resource: Citigroup Private Equity

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Private Equity CFA

The Benefits of a Certification for a Career in Private Equity

I recently received an e-mail asking about private equity training and how different qualifications are viewed in the industry.  I get this type of question pretty frequently so I thought I'd post part of my response for others wanting more information on this topic.

Question:

Hi Theo

I found your latest newsletter explaining ways to break into private equity very helpful. I am still in the dark about the following: Is the Certified Financial Analyst (CFA) qualification worth it in relation to the private equity field?  And what else can I do qualification wise to prepare myself for a career in PE?


Kind regards

(Name withheld)

Answer:

Hi,

The Chartered Financial Analyst designation really just provides a broad base of financial preparation not very specific to private equity.  The CFA includes helpful knowledge in valuation, portfolio theory and modeling that PE firms use.  In my opinion, the program is basically just a stamp of approval for fund management and it helps to give employers and clients confidence in your knowledge and abilities.

Similarly, the Chartered Alternative Investment Analyst program gives candidates a background in alternative assets and teaches modeling and valuation as well as portfolio management.  Private equity firms employ professionals from diverse backgrounds and both these designations will help your resume but they are no guarantee that you will get the job.  An MBA is also a very valuable qualification for private equity applicants--especially because it gives graduates the ability to manage and improve businesses--and will help you accelerate toward beyond the analyst position.

Another program that may be of interest to you is the recently launched Certified Private Equity Professional program.  This program is designed to provide a rigorous education in private equity.  Unlike the aforementioned designations, the CPEP designation is exclusively for those working in private equity or seeking employment in private equity.  It is also considerably less expensive than competing certification programs like the CAIA or CFA which is great for students and young professionals looking to save money while advancing their careers.  It is the only private equity certification that can be completed 100% online and we are working with private equity employers to demonstrate the advantages of hiring someone who has completed our training program.

If you would like to learn more about the Certified Private Equity Professional Program follow this link. 

I hope this has given you a clear picture of your options and some steps to get into the private equity industry.  Feel free to contact me again if you have any additional questions, good luck.

Regards,

Theo O'Brien


Read more about the Private Equity Training Program

Full disclosure: the Certified Private Equity Professional program is owned by H Media Group, LLC which also owns this website.
 

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3. Private Equity Training

Tags: private equity investments, Private Equity Certification, Certified Private Equity Professional designation, Chartered Financial Analyst, CFA, Private Equity Training

Link to This Resource: Private Equity CFA

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Fortress Investment Fund

Fortress Investment Takes $5 Billion Loss in Last 5 Years

A new report reveals that Fortress Investment Group has had a pretty rough last half decade.  The private equity and hedge fund firm apparently took a $5 billion loss on its private equity funds since 2005.  That's more than KKR or Blackstone Group's losses combined...almost $3.5 billion more than both those firms' losses.  Fortress's head of private equity, Wes Edens, decided not to open up a fund last year and will launch a new one in the coming months.  But at least one institutional investors has said he won't be investing in Fortress funds unless they can prove better than the most recent private equity funds. 

The shortfall over the past five years more than offset gains in earlier funds, leaving Fortress’s private-equity investors with a paper loss of $1.3 billion on $20.9 billion in initial assets since the firm was founded in 1998, a decline of 6 percent. Clients received $9.1 billion in distributions.

Performance suffered in part because the firm made 66 percent of its private-equity investments in 2005 or later, more than peers over similar periods. Blackstone, KKR and Apollo all posted profits in their buyout funds over similar periods and over the life of their firms.

Officials at the four New York-based firms declined to comment for this story.

The Fortress filing broke down amounts on how much capital each fund invested, how much it returned to clients, and what the remaining holdings are worth. Fortress included information on how much its investments need to gain for the firm to earn incentive income. Those figures show 12 buyout funds are currently below that mark and together need to rise $9 billion to claim a share of profits. The funds haven’t lost any companies to bankruptcy and the holdings may recover.

 Source

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Tags: investments, Fortress Investment Fund private equity firm, Fortress Investment private equity, Fortress Investment management, fortress investment group contact, website, LP, group, news

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FSA Break Up

Breaking News: UK Splits FSA Regulator into 3 Agencies 

A big story that just came out over the wire is that the United Kingdom has decided to break its chief financial regulator, the Financial Services Authority, into three separate agencies.  The move will consolidate power within the Bank of England as the Financial Services Authority breaks into three new agencies with a bank regulator in the Bank of England.  This is a big move by the UK government to address the coming challenges for financial regulation as the head of the U.K. Treasury said it will be "a new system of regulation that learns the lessons of the greatest banking crisis in our lifetime."

The U.K. government on Wednesday unveiled a shake-up of the country's bank-regulatory system that will consolidate power within the Bank of England.

The Financial Services Authority, which for the past decade has been the primary supervisor of the U.K.'s giant banking and finance industry, will be splintered into three new agencies, including a bank-regulating subsidiary inside the Bank of England.

In a speech Wednesday night in London, the U.K.'s Treasury chief, George Osborne, trumpeted the long-awaited changes as "a new system of regulation that learns the lessons of the greatest banking crisis in our lifetime."  Source

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Tags: private equity regulation, private equity United Kingdom, UK regulation, Financial Services Authority, FSA break up, FSA regulation, FSA

Link to This Resource: FSA Break Up

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Capital Raising Resources

Four Resources for Finding Investors and Raising Capital 

The current fund-raising market is difficult, especially for young private equity firms without a proven track record.  Finding private equity investors is a demanding process even in boom years and after a couple years of poor returns and with the competition from the much more quickly recovering hedge fund industry, fund marketers must use all available resources to raise assets.  The following article gives four resources for reaching investors and raising capital and will be part of my complimentary 20+ page guide to private equity fund marketing that will be available for download this week:

1. Placement Agents:  Private equity firms sometimes hire placement agents to help connect management with potential investors.  These third party agents have attracted some negative press over pay-to-play agreements with state pension funds which have resulted in government investigations, however, new SEC rules are aimed to prevent such problems.  Despite the ethical violations of a few, placement agents are still a legitimate and necessary way to raise capital for many firms.  These agents sometimes raise private equity for companies but many perform the same capital raising role for private equity firms. 
2. Look For Different Types of Investors: Reaching investors is difficult if you are always contacting the same institutional investors or wealth management firms.  Consider expanding your list of investors to include a wide range of potential limited partners including: wealth management firms, family offices, pension funds,  sovereign wealth funds, endowment funds, foundations and institutional investment consultants.  Many private equity firms overlook these various capital sources and stick to familiar investors.  In a tough fundraising climate marketers should be reaching out to ALL potential investors across the board.  We currently offer a database of all these different types of potential private equity investors, see Private Equity Investor Directory.
3. Issue a Press Release:  This method is tried and true as firms have used it for years to gain name recognition and grow their brand.  But many private equity firms still overlook this opportunity.  I think this is a mistake considering the potential number of investors a press release could reach in media publications.  Think about the confidence boost when you contact a potential investor and introduce your firm and he replies "I saw an article about you the other day." This name recognition goes a long way in building the initial trust with an investor.
4. Expand Your List of Private Equity Investors:  While you have now opened up your fund to new types of investors you also need to simply expand the number of investors you can reach.  Attending networking and working with placement agents can yield some results but to vastly increase the size of your potential investor list you should consider a directory of investors.  For a directory of more than 3,800 private equity investors follow this link.
   

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Tags: private equity marketing, private equity fundraising, private equity capital sources, private equity capital raising, raising private equity, private equity investors, finding private equity investors

Link to This Resource: Capital Raising Resources

http://privateequityblogger.com/2010/06/capital-raising-resources.html

Private Equity London Conference

Exclusive Discount to Sept. Private Equity Event in London

I was recently approached about a private equity conference in September and I thought it might be interesting to readers.  I managed to get a discount readers of this blog so be sure to give the code (at the end of this post) to get a 10% discount.

It is a two day seminar in London on private equity with a great list of speakers.  The first day covers "Company Turnaround and Restructuring" and the topic for the second day is "Restructuring International Funds."  The panelists and speakers have diverse private equity backgrounds which should facilitate an interesting and informative discussion.  For more information on this London private equity event please follow this link. 

Here is an explanation of the September 28th topic:

"How do you re-structure a failed investment in practice? This practical seminar is aimed at equipping private equity houses and their advisers to answer this question with confidence. Key benefits will include developing a clearer understanding both of the technical issues and the practical realities of the interface between private equity and distressed companies. Experts in the legal, private equity, and banking professions will reveal their experiences and give case study presentations to bring this exciting subject to life."

The second day, September 29th, speakers will discuss:

"The credit situation has altered the relationship between the investor and the private equity company: Not all draw-down commitments are likely to be honoured so agreeing a new structure for your fund may be the only option left.  In one day, this seminar will pinpoint the options available for fund restructuring, the tax implications, and most importantly, discovering what the LPs actually want."

To register for this conference or to learn more please follow this link.  Don't forget to enter the following code to get 10% off the cost of admission, available exclusively for PrivateEquityBlogger.com readers.  VIP Code: KM2257PBLOG



Popular private equity articles:

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Link to This Resource: Private Equity London Conference

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Private Equity Wind

Private Equity Firms May Revive Wind Energy Efforts 

Private equity firms are looking to consolidate the onshore wind turbine industry as manufacturers and suppliers are both trading at extraordinarily low multiples.  Deal making is expected to increase in offshore wind turbines but only small deals involving distressed assets.

It has taken some time for valuations to fall to a more realistic level but now that the industry has proven an average annual growth of 25%, buyout firms will be more likely to buy these companies.  Private equity firms are expected to revive this sinking sector, breathing new life into the wind energy industry providing financing to struggling and expanding companies. 

The European onshore wind-turbine industry looks set for further consolidation by private equity, now that manufacturers and their suppliers are trading at multiples in line with historical lows and order books have likely bottomed out.

Expect opportunistic deal-making in the nascent offshore turbine side too, albeit limited by deal size and focused on distressed assets that have already sunk at least part of their capital expenditures.

Trade buyers shouldn't be written off, but private-equity involvement seems more likely. The industry has shown healthy and sustained growth in the last decade and average annual growth of 25% over the past five years, with global installed capacity projected at 203,500 megawatts in 2010, according to the World Wind Energy Association.

With debt financing scarce, it is time to deploy the estimated $500 billion of cash held by private-equity firms. The industry's growth potential shows why buyout groups shouldn't hold fire. Source

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Tags: private equity wind, private equity wind power, wind turbines, onshore wind turbines, offshore wind turbines, buyout wind, private equity wind energy, investment in wind

Link to This Resource: Private Equity Wind

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Private Equity Firm Directory

Gain Access to a Directory of 1,000+ Private Equity Firms

After receiving hundreds thousands of e-mails over the years asking for a list of private equity firms we are proud to announce that we have constructed a Private Equity Directory.

Our team has invested our time in developing and updating a deep, constantly-improved directory of private equity firms and their contact details in Excel format.  This is a valuable resource for firms, capital raisers, individuals trying to meet with private equity firms, students, internship or job-seekers and private equity service providers. 

This Private Equity Firm Directory contains the private equity fund firm name, primary contact name, physical location, assets under management, phone number, fax, and email address as well.  Collectively the 1,000+ private equity firms in our database control well over $200B in assets.  This directory is a great way to gain access to hard-to-find contact details for private equity firms.  

Click here to learn more about this directory of private equity firms.


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Link to This Resource: Private Equity Firm Directory

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Private Equity Investors Poll

Limited Partners Investing Directly Rather than PE Funds 

Coller Capital's latest survey found that more than half of the polled limited partners said that they had achieved returns of less than 11% over the lifetime of their private equity investments.  According to the survey, at least 40% of investors are responding by increasing their direct investment programs.  While institutional investors such as endowment and pension funds have experience with down markets, new private equity investors may not be used to the cycle and are more aggressively looking for alternatives to PE investments. 

I think of this more as a warning shot by private equity investors that firms are expected to outperform the markets and bring in returns competitive with other alternative investment managers.  If buyout firms cannot satisfy investors they will have an even harder time raising capital for their next funds.

 "Limited Partners, or LPs, are driving big changes to their private equity portfolios in response to new economic realities and dramatic falls in their overall returns from the asset class," said Coller Capital, in its latest survey on the industry.

Many sophisticated investors such as the large North American pension plans and endowments have been making direct investments for several years but newer players are now joining them.

"Relatively recent private equity investors haven't been through a major cycle and have had a useful, if painful learning experience from the credit crunch and recession," said Jeremy Coller, chief executive of Coller Capital.

In addition to boosting their own direct investment programs, a substantial proportion of limited partners will also reduce the number of GP relationships over the next two years--this applies to 38% of North American LPs and 20% of European and Asia Pacific investors.  Source

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Tags: limited partners, private equity survey, private equity limited partners, private equity investors, buyout investors, investors in private equity, private equity funds, poll

Link to This Resource: Private Equity Investors Poll

http://privateequityblogger.com/2010/06/private-equity-investors-poll.html

Track Post Backup

FIRM NAME

Firm Name | Private Equity Profile

• Montagu Private Equity 
• Morgan Stanley Private Equity 
• NB Private Equity Partners 
• Permira Private Equity 
• PAI Partners 
• Platinum Equity 
• Providence Equity Partners Inc. 
• Silver Lake Partners 
• TA Associates 
• Talos Partners 
• Terra Firma Capital Partners 
• The Exxel Group
• The Halifax Group
• The Invus Group
• The Jordan Company LP
• The Sunday Group
• Thoma Bravo
• Thomas H. Lee 
• Thompson Street Capital Partners LLC
• Tianguis Limited
• TMG Capital
• TorQuest Partners Inc.
• TowerBrook Capital Partners LP
• TPG Capital 
• Treacle Private Equity
• Tregaron Capital Company
• Triginta Capital
• Truffle Capital
• Tuninvest Finance Group
• Turenne Capital
• Two Rivers Associates
• Unison Capital
• Valedo Partners
• Vendis Capital
• Ventizz Capital Partners
• Veronis Suhler Stevenson
• Vestar Capital Partners
• ViewPoint Capital Partners
• Vintage Venture Partners
• Vista Equity Partners
• Vitruvian Partners
• Vulcan Capital
• Warburg Pincus 
• Wasserstein and Co.
• Waterland Private Equity Investments
• Wellspring Capital Management LLC
• Welsh Carson Anderson & Stowe
• Weston Presidio
• Wincove Capital
• Whitecastle Private Equity Partners
• Willis Stein and Partners
• Wise SGR SpA
• WL Ross and Co. LLC
• Wolseley Private Equity
• Zeus Private Equity
• Zurmont Finanz AG

Tags: investments, private equity firm, private equity, management, contact, website, LP, group, news

Link to This Resource: Track Post Backup

http://privateequityblogger.com/2010/06/track-post-backup.html

Private Equity Training Program

Private Equity Training and Certification Program

I am very pleased to be associated with a new program exclusively training private equity professionals, the Certified Private Equity Professional program.  The Certified Private Equity Professional (CPEP) program is a private equity training and certification program that may be completed by anyone 100% online in 3-6 months.

This professional certification program was developed by the Private Equity Investment Group.  This program is specifically designed for those professionals who work in the private equity industry, would like to start working in the private equity industry, or would like to better understand and serve private equity firms as clients.  

Our program is limited to just 25 professionals per quarter, and after joining you can choose from one of four examination dates per year including: January 15th, April 15th, July 15th or October 15th. The entire program including the exam is completed online with no testing centers or travel required.

Who Should Enroll in This Program?

Potential participants in the Certified Private Equity Professional include analysts, due diligence professionals, private equity fund managers, lawyers, accountants, recruiters and marketing/sales professionals.

Click here to learn more about the program

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Tags: private equity training, private equity certification, private equity training program, private equity training programs, buyout training, buyout firms, venture capital training, private equity education, Certified Private Equity Professional

Link to This Resource: Private Equity Training Program

http://privateequityblogger.com/2010/06/private-equity-training-program.html

Carried Interest Taxation

Carried Interest Tax Could Cut Investment by $7 Billion

The proposed tax hike on private equity firms could have a very significant impact on private equity investment in the United States.  Currently, carried interest is taxed at a rate of 15% but proponents of reforming the tax laws have argued for taxing carried interest as ordinary income which could be as high as 35%.  The latest draft of the Senate bill has been diluted somewhat to tax only 65% of the carried interest as ordinary tax and the rest at the normal 15%.

A trade group  for the private equity industry, the Private Equity Council, has analyzed tax trends and private equity investment from 1980-2009 and concluded that the the tax change could slash investment by as much as $7 billion.  It should be noted that the PEC is a trade association and its findings are not necessarily independent or academic but increasing tax on buyout fund managers will no doubt have a negative effect on PE investment.  This is an especially critical argument to make as lawmakers focus on job-making and helping businesses recover. 

PEC president Douglas Lowenstein said, “This data is consistent over two decades and confirms that tax increases reduce private equity investment activity and that the proposed 157 per cent tax increase on investment partnerships would have a harmful  effect on the economy, the recovery and job creation.

Representatives from five of the 12 PEC member firms reportedly met behind closed doors with key legislators this week in a bid to overturn the proposed measures. Apollo Management’s Leon Black, Steve Schwarzman of Blackstone, TPG’s David Bonderman, Carlyle’s David Rubenstein, Glenn Hutchins of Silver Lake Partners, along with Wes Edens of non-member Fortress Investments, all met with Capitol Hill officials.

The PEC study analysed equity invested in US businesses between 1980 and 2009 by venture capital, buy-out and growth equity firms. Annual invested equity rose from $723m in 1980 to $49bn in 2009, with 2000 scoring as the banner year for investment, when $137bn was invested in more than 7,000 businesses.  Source

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Tags: Carried Interest Taxation, Carried Interest, Tax on carried interest, carried interest reform, private equity carried interest, private equity taxes, US tax law

Link to This Resource: Carried Interest Taxation

http://privateequityblogger.com/2010/06/carried-interest-taxation.html

E-Mails

Catching Up On a Mass of E-mails

I finally have a chance to catch up on my e-mails, unfortunately there are about 1,300 unread e-mails that I have been too busy over the last few months to respond to (see the image to the left to see just how many e-mails I have to get through).  I am going to do my best to power through them over the next few weeks, I hope those of you who have been waiting on a response are not too irritated.  I will try especially to answer those questions from students and professionals working in the industry or trying to get into it. 




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Tags: E-Mails, e-mail, newsletter

Link to This Resource: E-Mails

http://privateequityblogger.com/2010/06/e-mails.html

Private Equity Job Advice

Top 10 Steps Toward a Private Equity Job 

Landing a job in private equity is difficult but it is not impossible if you work hard and develop a plan for getting into the industry.  The following is my top 10 steps for getting your foot in the door with a private equity firm.  I cannot guarantee that these steps will get you a private equity job but by following this plan you will at least improve your chances and make yourself a more attractive candidate for private equity firms.   For more career articles and videos, see our Private Equity Training Program.

Step 1: Be Sure You Want To Work in Private Equity

• Private equity is a competitive field, do you have the passion and interest in private equity to compete in this industry?
• If you are dedicated to working in private equity it will show in your ability to network, knowledge of the industry and all your actions toward working in the industry.
• On the other hand, if are not passionate you will not be able to compete in the field of private equity with those individuals who are willing to go the extra mile to get a job in the industry.

Step 2: Become a Student of the Private Equity Industry

Take meaningful steps to enhance your understanding of private equity by:

• Subscribing to private equity newsletters
• PrivateEquityBlogger.com newsletter or other PE site
• Reading at least a chapter of a private equity-related book daily
• Joining a local or collegiate private equity association or club 
• Talking with professionals in the industry as much as possible

Make sure you know:   

• Who the major players are in the private equity industry or within your niche, if you focus on a certain investment area?
• What terms are important to know?
• Which the responsibilities are for different positions in a private equity firm?
  

Step 3:Decide What Job You Want 


Narrow down your search to 1 or 2 positions:

• Consider what area of private equity and investment industry you are most passionate about.
• Find what position fits your abilities and qualifications best.
• Consider other variables such as salary, location, competitiveness of industry.
• Try to find a job that fits these criteria.

Step 4: Find a Private Equity Mentor

Choose the right mentor:

• Find someone with experience in the industry.
• Reach out to finance professors, family, friends for connections to mentors
• Do not over-communicate with your mentor by sending long emails or calling too often.

Step 5: Develop Your Unique Selling Proposition

• What makes you different from other candidates?
• Do you have valuable experience in a related industry?
• Do you have any special skills? 
• Do you have any designations or awards that show your ability to perform?
• If not, develop these areas to give you an advantage over other candidates.

Step 6: Complete At Least One Internship

• An internship is a great way to get your foot in the door.
• Be open to unpaid internship, experience is valuable.
• Look for one in a niche or field related to where you would like to work.
• Consider working at a service provider or help a private equity start-up.

Step 7: Private Equity Resume

Typical characteristics of a private equity resume:

• Reputable or ivy-league business school
• Professional designation (CPEP, for example)
• Past experience or specialization (PR, Marketing, etc.)
• High quality names for last employer, especially investment banks or related firms.
• See our article on crafting a quality resume here. 

Step 8: Land the Unadvertised Private Equity Job
Find the unadvertised private equity job by:

• Cold calling firms
• Exchanging e-mails with private equity professionals
• Attending networking events
• Offering to work for a free trial period

Step 9: Consider Working For a Private Equity Service Provider

Consider all avenues for working with a private equity service provider:

• Information technology
• Fund Administration
• Third Party Marketers and Sales
• Compliance Services

Step 10: Now You're Ready to Apply to a Private Equity Firm

• Update your resume with new qualifications and experiences you've added from the previous nine steps as well as feedback from your mentor and interviews.
• Reach out to professionals you have met during your research for potential job opportunities.
• Check back with firms you have spoken with previously.
• Be persistent. 

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Tags: Private Equity Job Advice, private equity jobs, how to get a private equity, private equity career, private equity careers, finding a private equity job, career in private equity, job in private equity

Link to This Resource: Private Equity Job Advice

http://privateequityblogger.com/2010/06/private-equity-job-advice.html

What is Private Equity

Definition Answering: What is Private Equity? 

Private equity is a well-known industry in the financial world and it is becoming a more familiar term for the general public as high-profile companies are purchased and taken private by buyout firms like Chrysler, Toys R Us, and Hilton Hotels.  But there are still people who frequently ask me, "What is private equity?"  So the following is a brief answer to this question.  To learn more about the private equity industry consider joining the Certified Private Equity Professional program.  This 100% online program provides participants with a strong education in private equity that prepares professionals to work in private equity or alongside private equity firms.  Click here to learn more.

A lot of the confusion in defining private equity is that it encompasses several niche industries.  There is important distinctions between buyouts, venture capital, angel investing, mezzanine financing and distressed investments.  But all these industries often get lumped together as private equity.  So, to simplify things, when I am talking about private equity I am mostly talking about buyout firms.  So, what is a buyout firm?  What does it do?

A private equity firm launches private equity funds which are large pools of private capital used to invest in companies.  These funds are managed by private equity general partners, principals, associates, analysts, in-house or third party marketers--positions depend on the size of the firm.  Fund marketers work to reach a capital goal for a fund from capital sources, such as institutional investors (pension funds, endowment funds, etc.) or high-net-worth individuals.

In a typical buyout: The private equity fund seeks out opportunities to invest its capital.  When the management team discovers a possible opportunity it will conduct due diligence and valuation on the firm to decide how much it should offer and what the potential return on the investment would be.  Then the firm will buyout shares of the company--often using leverage as well as the private capital from the fund--to takeover a controlling interest in the company. 

Buyout firms invest long term, as opposed to hedge funds or other investment funds, and will work to improve the company and generate profit through cost-cutting, selling assets and motivating management (who now have more control of the company, answering to the PE management, not ordinary shareholders).  It will usually install an advisory board to guide the company; this board is drawn from the buyout firm's associates, general and limited partners and others.  Management will receive the kind of support and control necessary to make concrete changes to the company but, if the management is the problem, the buyout firm may install new leadership in the company.

After the private equity firm has expanded or improved the company it will look toward an exit--maybe through an IPO where shares are offered again to the public, or a strategic buyer-- or decide to invest more money in the company.  The exit is how the private equity firm makes its money back on its initial investment to give returns to investors.  The hope is that the company can be sold for a significant profit.

I hope this answered the question "What is private equity?"



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Tags: What is Private Equity, private equity, buyout firms, what is a buyout firm, what is private equity, what is a private equity firm, what is private equity management, private equity investments

Link to This Resource: What is Private Equity

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Harrah's Entertainment Debt

Paulson Fund Takes Stake in PE-Owned Harrah's

In 2006, TPG Capital and Apollo agreed to buy Harrah's Entertainment for $90 a share and assumed more than $10 billion in debt--so the transaction total was $27.8 billion.  Now, John Paulson's hedge fund has agreed to buy a 9.9% stake in the deeply indebted Harrah's Entertainment.

Paulson & Co. will provide a cash infusion of $351 million for $532 million debt owned by a Harrah's subsidiary.  The action is part of a restructuring deal that also gives a 5.7% equity interest to private equity groups Apollo Global Management and TPG Capital for $303 million in debt from the subsidiary which the PE firms will exchange for a 15.6% stake in the company.  Blackstone Group also holds a minority interest in the company.

As part of the deal, the hedge fund run by John Paulson will provide a cash infusion of $351 million for $532 million debt owned by a Harrah's subsidiary. Harrah's owners Apollo Management LP and TPG Capital LP will put in about $200 million into the company to buy $303 million debt from the Harrah's subsidiary. The companies together will exchange that debt for 15.6% equity in the company.

The debt-laden Harrah's says the total cash infusion of around $550 million should free the company up to attack its balance sheet and to make investments internationally as well as in the U.S., as many states across the country are considering proposals to expand gambling. The transaction should also reduce the company's $21 billion debt load by around $900 million, chief financial officer Jonathan Halkyard said in an interview. Much of the debt was originally taken on to fund TPG and Apollo's acquisition of Harrah's in 2008.
Source

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Tags: Hedge Fund Harrah's, hedge funds, Harrah's Entertainment, Hedge funds debt, Paulson, John Paulson Harrah's

Link to This Resource: Harrah's Entertainment Debt

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Richard Wilson's New Book Released

Richard Wilson--a close associate, frequent commenter on this blog and authority on hedge funds and capital raising--has published a great book on hedge funds.  This industry is related to private equity in many ways and the capital raising advice in this book will benefit any private equity firm trying to expand.  It is chalk-full of great interviews with financial professionals that have advice that is wholly transferable to private equity.  With that said, I'll leave it to Richard to explain his book:

Today I'm announcing some exciting news, a book I wrote for was released earlier today. This book is called "The Hedge Fund Book: A Training Manual for Professionals and Capital Raising Executives."

Within this book you gain access to these three things:

• Transcripts of over 20 interviews conducted with hedge fund veterans, resulting in over $80,000 worth of advice is offered within this book
• Over 30 Video Modules integrated into the context of the book, view these videos for free online using the URLs provided within the book
• Over 100 pages of additional pages of my own hedge fund industry insights, capital raising advice, career tips, and more.

To further review or purchase the book shown above please visit Amazon, Barnes & Noble, or Borders.

This book was written by sitting down with and contacting over 30 hedge fund veterans and then using the transcripts of the 20 most valuable interviews and my own research and insights to create a hedge fund training manual.  This book will soon become required reading for the Certified Hedge Fund Professional (CHP) Designation Program, and it includes many additional resources that can be found on HedgeFundTraining.com at no additional cost.

What You Get Inside of This Book:

• Direct stories, insights, advice, and practical strategies from over 20 hedge fund veterans
• How hedge funds are adapting their internal governance, operational, and institutional investment processes to adapt to investor demands for ever increasing institutionalized hedge fund managers
• How to raise more capital without spending any more money on marketing and sales
• How to quickly speed up your hedge fund career, gain more responsibility, and grow your specialized hedge fund knowledge faster than anyone else around you
• The top 4 trends affecting the hedge fund industry today, and why those trends will continue on for some time to come

This book was written after HedgeFundBlogger.com became a top 2 website on hedge funds and because my Hedge Fund E-Book has been downloaded close to 100,000 times to date. Without your support neither of these things could have happened, so thank you for visiting my blog.

Thanks to everyone in advance who purchases this books and can leave a review for me on Amazon.com.  If you are a blogger or journalist and would like to review a copy of the book please let me know.

Thanks for grabbing your copy.

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Tags: Hedge Fund Training Manual, The Hedge Fund Book by Richard Wilson, Hedge Fund Training Book, Richard Wilsons Hedge Fund Training Book, CHP Designation Books Required

Link to This Resource: Richard Wilson's New Book Released

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