Private Equity Firms Working in Japan

Buyout Firms in Japan

Private Equity Firms Encounter Trouble Buying in Japan

There was an interesting article in the Financial Times on Thursday that showed some of the difficulties of private equity investing in Japan. For instance, TPG has been encountering obstacles in the firm's pursuit of Takefuji and Goldman Sachs' (GS) investments in Japanese real estate have struggled. As one professional associated with Goldman Sachs explained the reason private equity firms are pulling out of Japan, "Life is too short ... The opportunities elsewhere are much better."

While Goldman has previously profited from its Japanese interests, some more recent investments, particularly in real estate, have not done so well. Other firms have found themselves in similar situations.

Regardless of the outcome of the Takefuji auction, buying Japanese companies has never been easy. Japan has historically been uncomfortable with foreign buyers, especially private equity firms whose business model involves holding companies for only a few years before cashing out and moving on.

Many of the foreign investors looking at Takefuji, including Fortress Investment and Cerberus, think regulators and the trustee for the company, which filed for bankruptcy this year, would prefer a Japanese owner. One Financial Services Agency official says foreigners are generally perceived to be more interested in dismantling Takefuji than in keeping it as a going concern. Source

Tags: TPG, Private Equity Investments, Takefuji, Japan private equity, investments, private equity firm, private equity, management, contact, website, LP, group, news

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Private Equity Secondary

Private Equity Secondary Market Valuation Analysis

The private equity secondary market is an oft-overlooked area of private equity. Fortunately, Arnaud van Tichelen, Caracalla Capital and Scalar Partners have released a new study on the Private Equity Secondary Market.

ABSTRACT

During the current liquidity crisis, the Private Equity industry has been reshaped and experienced a significant increase in the level of interest and activity in the secondary market. However, despite its growth, the market is still inherently inefficient and pricing tends to vary widely among bidders. Investors need to be aware of the challenges and dynamics of this fast evolving market and to carefully analyze each potential sourced opportunity.

This research paper attempts to analyze the characteristics of the Private Equity secondary market. Furthermore it analyses the valuation in the market and provides an actual valuation of a real secondary investment opportunity supported by the development of a secondary valuation model. This analysis is based on more than 25 interviews conducted with expert participants in secondaries.

Currently, transaction volume for secondaries is near an all-time high which generates further liquidity and benefits the asset class as a whole. Near-term and long-term factors are driving a fast growing market which many expect will grow about 16% annually (CAGR) in the next five years. However opportunities on the market are mirrored by significant challenges. Although the top-down method is helpful in determining the value of a potential secondary, empirical data clearly shows that a bottom-up valuation is crucially important in determining the value of an asset in the secondary market.

PRIVATE EQUITY SECONDARY MARKET VALUATION ANALYSIS

Arnaud van Tichelen, Caracalla Capital and Scalar Partners are pleased to announce the publication of this study on the Private Equity Secondary Market [English updated version]. We hope the market intelligence and data provided in this report will allow investors to better understand the secondary market and seize its growing opportunities.

Contributors to the study:

Altamar Capital, Arcano Capital, Breslin AG, Campbell Lutyens, Caracalla Capital, Fidequity, HarbourVest Partners, Headway Capital, Lexington Partners, Pantheon Ventures, Preqin, Scalar Partners, SJberwin, Secondmarket and UBS Private Funds Group all contributed to the information in the study and we are thankful for their participation.

About the study:

This 200 page study is a complete guide to the Private Equity Secondary Market including a valuation model. The study reviews the market, its characteristics and issues (volume, participants, deal structures, sale process, legal and fiscal issues, historical analysis, outlook of the market) but also covers market valuation (pricing, theoretical analysis of top-down and bottom-up valuation approach, case study of a real world LP interest valuation).
The study was first released in Spanish last June and is updated and translated to English in this new version.

Valuation model:

A valuation model was developed in partnership with several contributors. This fully flexible model can be used to value an LP interest using a bottom up approach on the Private Equity secondary market. This model is availble upon request.

About the Author

*Arnaud van Tichelen recently graduated with distinction from ICADE’s international business administration program (E‐4). During ICADE, Arnaud worked 6 months at UBS within the M&A team and 6 months at Comgest (asset management) as an equity analyst. He currently works in the Investment Banking Division of UBS in London (Consumer Products and Retail Group). He can be contacted at a.vantichelen@gmail.com

Download here.

Tags: Private Equity, secondary market, secondaries, liquidity, valuation, selling limited partnership capital commitments, secondary fund, LP, GP, fundraising, unfunded, carried interest, waterfall, private equity secondary market,

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Jo-Ann Stores Private Equity

Jo-Ann Stores Agrees to Buyout Offer for $1.6 Billion

Jo-Ann Stores has agreed to a buyout by a private equity firm for about $1.6 billion. As the deal was approved by the board and announced to the public, shares shot up by more than 30%. An affiliate of Leonard Green & Partners will take the company private after buying out shares at $61 each.

The offer price is a 34 percent premium to the closing price of Jo-Ann's shares on Wednesday.

Leonard Green amp& Partners' other retail investments include Whole Foods, PETCO, Sports Authority, The Container Store, David's Bridal and Neiman Marcus Group.

The deal must be approved by Jo-Ann's shareholders. If approved, the transaction is expected to close in the first half of 2011.

Darrell Webb, chairman and chief executive officer of Jo-Ann Stores, said in a statement, "We are excited about the prospect of working with Leonard Green amp& Partners as we further capitalize on opportunities to accelerate the expansion and upgrade of our stores and pursue market share gains." Source

Tags: Jo-Ann Stores Private Equity, Jo-Ann Stores Private Equity Offer, Jo Ann Stores Buyout, Jo-Ann Stores Private Equity, Leonard Green & Partners Jo-Ann Stores, Jo-Ann Fabrics Leonard Green and Partners

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Private Equity Offerings

Private Company Offerings

Private Equity Firms to Increase Public Offerings in 2011

We've been hearing this since 2009, but private equity firms appear to be gearing up for more public offering in 2011. According to the Journal, buyout firms are looking to deliver a wave of billion dollar-plus offerings. Although a number of firms have already filed a prospectus with the SEC, there are also expected to be several other large companies looking to a public exit.

"In 2011, we will see some very large multibillion-dollar IPOs. Obviously, some are already on file, but there will be more to come from private-equity firms that have large holdings they are more likely to exit through the public markets," says Mark Hantho, global co-head of equity capital markets at Deutsche Bank.

Indeed, private-equity firms, one of the main sources of plus-size IPOs in America, have been sitting on many of their larger holdings since the middle of 2008, when the global economic crisis iced over demand for new stocks.

With the grand exception of General Motors Co., which raised $23.1 billion in common and preferred shares in November, there hasn't been another IPO to raise more than a billion dollars in 2010, though there were several in 2009. The majority of other deals that priced in the U.S. during 2010 were for the most part small, coming in below the $200 million mark. Source

Tags: private equity investments, Private equity IPO, Private Equity public offering, private company public offering, public offering, initial public offering

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Happy Holidays!

Happy Holidays from Private Equity Blogger

I just wanted to put out a quick note wishing all the readers of Private Equity Blogger a great Christmas and happy holidays! I am getting ready to head out to the airport right now, hopefully all of you made earlier travel plans than Christmas Eve (the airports are going to be brutal). I'm looking forward to a few days off from work, which means I will probably be too busy drinking eggnog and enjoying my hometown of Portland to update the blog. With that said, safe travels and thanks for making this a great year for the blog!

--Theo O'Brien

Tags: Merry Christmas, Christmas, Holidays,

Link to This Resource: Happy Holidays!

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Carlyle Group AlpInvest

Carlyle Group Working on Deal to Buy AlpInvest Partners

Carlyle Group is gearing up to buy AlpInvest, a move that would likely increase Carlyle Group's assets under management by 50%. This deal comes as Carlyle Group is moving toward going public sometime in 2012. The Amsterdam-based AlpInvest Partners decided to put itself up for sale this summer and now appears to be looking at an offer from Carlyle Group. The European private equity firm is estimated to have about half of the $100 billion AUM that Carlyle Group currently manages.

Amsterdam-based AlpInvest Partners put itself up for sale this summer and is now in talks with Washington, D.C.-based Carlyle. According to published reports, a deal is not imminent but could be reached in the first quarter.

AlpInvest has some €40 billion in assets under management; Carlyle has almost US$100 billion. The latter is preparing to go public sometime in 2012.

AlpInvest is owned by APG, the asset manager for the giant Dutch pension ABP, and PGGM Investments. PGGM’s questioning of its future relationship with AlpInvest pushed the manager to put itself up for sale.

In July, it was reported that the Blackstone Group was very interested in buying AlpInvest and was considered a strong potential bidder. Source

AlpInvest Partners and Carlyle Group are included in our Private Equity Database. If you would like to find contact details for these private equity firms, visit this page.

Tags: AlpInvest Partners, Carlyle Group, AlpInvest Carlyle Group Merger, AlpInvest Carlyle Group Buyout, Carlyle Group Buys AlpInvest, Carlyle Group AlpInvest Acquisition, AlpInvest Carlyle Group Deal, Assets Under Management, Buyouts, Private Equity Consolidation, AlpInvest Carlyle Group Partners

Link to This Resource: Carlyle Group AlpInvest

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Blackstone $15 Billion Fund

Blackstone Raises $15 Billion Private Equity Fund

Blackstone Group has quieted any rumors that buyout firms are struggling to reach investors with its latest fund. Blackstone Group raised a $15 billion buyout fund from investors around the globe. Although it seems to have been more difficult than usual for the private equity giant to raise the funds, the fact that the fund was able to raise such a large fund suggests investor confidence is rising.

Blackstone Group is finalizing a new $15 billion fund, the largest fund for buyout deals since the financial crisis erupted and one of the largest on record.

The big sum is the latest sign of improving interest in private equity and of the power of some well-known firms to attract investors, despite some high-profile losses in the industry over the last few years. The fund will be the sixth largest on record, based on information from data tracker Preqin.

Still, it wasn't easy to get there. The firm had to hunt world-wide to find enough investors for the much-anticipated fund, which Blackstone has been pursuing since late 2008, according to people familiar with the matter.

Though most of Blackstone's longtime investors in the U.S. and Europe are participating, they've committed smaller sums compared with previous funds, these people say. Source

Tags: Blackstone $15 Billion Fund investments, Blackstone $15 Billion Fund private equity firm, Blackstone Fund private equity, Blackstone Fund management, contact, website, LP, group, news

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Mezzanine Debt

Mezzanine Debt Remains a Popular Option for Buyouts

It occurred to me recently that I had been largely ignoring an important aspect of the buyout industry: mezzanine debt. Fortunately, Partners Group sent me a report detailing the latest trends in mezzanine financing and how Partners Group and other private equity firms have used mezzanine debt to achieve better equity returns.

As I noted in 2008, mezzanine financing became an attractive alternative solution in the banking crisis as credit froze and obtaining loans became increasingly difficult. That largely explains why mezzanine debt was so popular over the last few years. Partners Group has more on Mezzanine Debt:

What is Mezzanine Debt?

Mezzanine debt is often used in leveraged buyouts to enhance equity returns. In a company’s capital structure, mezzanine debt is subordinated to senior debt obligations, but ranks ahead of preferred and common equity. Partners Group has observed through its investment experience that the asset class has exhibited remarkable resilience through the recent financial crisis.

Partners Group is convinced that mezzanine currently represents an exceptional investment opportunity. As an introduction we observe:

Mezzanine debt in Europe outperformed nearly all asset classes during the financial market crisis from 2007 to 2009
The peak to trough drawdown of the asset class during the crisis was 11% compared to many other asset classes in the 50-60% range highlighting the relative stability of mezzanine loans in the crisis
With 50% recovery rates given default, a mezzanine lender can realize default rates on over half its portfolio and still not experience a loss of principal. This is due to high historical recovery rates and high contractual coupon payments that generate significant interim cash flows
With historical default rates peaking in the 12-13% range in 2008, and projected default rates in the 2-4% range going forward, mezzanine currently represents a very attractive risk/return profile for investors regardless of market direction
Relatively low leverage and historically high equity cushions in the capital structures of leveraged buyouts today enhance the risk characteristics of an already stable asset class
High contractual coupons offer investors steady cash flow margins over variable base rates (in Europe), as well as enhanced return potential through payment in kind interest
The performance of mezzanine throughout the market crisis, as well as the prevailing attractive characteristics the market exhibits, suggest that mezzanine is currently one of the most attractive asset classes

Click here to download the report, Mezzanine Investments: Stability Through the Storm, produced by Partners Group

Tags: private equity Mezzanine investments, Mezzanine private equity firm, Mezzanine private equity, Private Equity Mezzanine financing, Mezzanine debt, mezzanine debt financing, what is mezzanine financing?, partners group mezzanine debt, mezzanine investments,

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Private Equity Indonesia

Private Equity Firms Testing Waters in Indonesia

Indonesia is an incredible place--or, so I hear-- and the country has a lot of growth potential. The first part is only hearsay courtesy of those who have traveled there--I debated going to Jakarta last July, but settled on Bogota. As for the high potential for growth, private equity firms are banking on this being true. TPG now joins CVC Capital Partners in exploring investments in Indonesia.

CVC Matahari Deal

CVC made an investment in a the Indonesian department store chain Matahari. CVC bought a 98% stake in the company last spring hoping to expand Indonesia’s largest department store beyond the 25%+ market share nationwide and gross revenues of over US$750 million that it recorded in 2009. According to Benjamin Mailool, President Director of [CVC's partner in the deal] MPPA, "This marks a major milestone...for Indonesia, particularly in terms of attracting quality direct foreign investments into the country." The deal was valued at $880 million. (Click here to learn more about the Matahari deal.)

TPG Delta Dunia Deal

I hope I can explain this deal clearly. TPG Capital has apparently decided to follow suit by partnering with the Government of Singapore Investment Corp. to buy non-voting shares in Northstar Tambang Persada Ltd. Northstar owns 40% of PT Delta Dunia Makmur (DOID: Indonesia). Delta Dunia is a coal mining service provider in Indonesia. The investment in the Indonesia coal contractor was reportedly $331 million.

This is the fruits of at least four years of labor--the amount of time TPG is reported to have spent studying the country. It seems like a smart move, according to FT, "Indonesia is the most competitive source of coal on a delivered basis for both India and Indonesia at a time when power is one of the key potential constraints for both the continent’s giants." This deal could also represent a move by other large private equity firms to test the waters in Indonesia.

U.S private equity firm Texas Pacific Capital and Singapore sovereign wealth fund GIC invested 2.99 trillion rupiah ($331 million) for a stake in an Indonesia coal contractor, two sources with knowledge of the deal said on Sunday.

TPG and GIC have bought non-voting shares in Northstar Tambang Persada Ltd, a special purpose vehicle which owns 40 percent in PT Delta Dunia Makmur , according to a statement to Indonesia's stock exchange, following a report in the Financial Times on December 18 about the deal.

Delta Dunia is owned PT Bukit Makmur Mandiri Utama, Indonesia's second largest coal contractor. The transaction was conducted early this month when they bought 2.72 million shares of Delta Dunia for 1,100 rupiah a share, one source told Reuters. Source

Tags: Indonesia Private Equity, Private Equity in Indonesia, Indonesia investments, private equity firms in Indonesia, Indonesia private equity, Indonesia management, contact, website, LP, group, news, Jakarta

Link to This Resource: Private Equity Indonesia

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Private Equity Commitments

62% of Institutional Investors Plan New Private Equity Commitments in 2011

Today I saw some news that private equity managers will be interested to know. According to a Preqin survey, 62% of institutional investors plan to make new commitments to private equity funds in 2011. But also 30% said that they have yet to finalize investment plans for the coming year, which could leaves the door open for potentially more than 62% in 2011. A distressing finding is that 42% of the 100 surveyed institutional investors did not make a private equity commitment in 2010, an increase of 40% on last year's total.

Sixty-two percent of institutional investors interviewed by Preqin expect to make new private equity commitments in 2011, while 30% of all interviewees have yet to finalize their plans for the year.

Forty-two percent had not made a private equity commitment this year, up from 40% last year. Eighteen percent of those that did not make commitments this year expect to do so in 2011; 54% of all interviewees expecting to commit more capital to private equity funds in 2011 than they did this year.

Also, 63% of those interviewed expect to maintain their private equity allocations and 33% anticipate raising their private equity allocations.
Preqin interviewed more than 100 institutional investors this month. Source

Tags: private equity investments, private equity firms, institutional investors in private equity, private equity managers, private equity institutional investors capital, website, LP, group, news

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AIFM Directive

Alternative Investment Managers React to AIFM in Survey

Preqin did an interesting survey on the industry response to the Alternative Investment Fund Manager Directive that was recently passed in the European Union. Although most managers oppose the regulation, a somewhat surprising 31% welcome the regulation and actually support its passing.

In a separate article I am writing today for Seeking Alpha, I explore some of the implications of this survey and what it means for the future of alternative investments in the European Union. I'll be sure to give a link to that article when it's available online. For now, here are the key findings by Preqin:

• 89% believe the Directive should be amended to further take into account the differences between the various asset classes.
• 59% foresee the AIFM Directive creating a European lock-in/lock-out.
• 45% think that it is likely or very likely that fund managers will relocate to outside of Europe as a result of the AIFM Directive; 26% felt that it was likely their firm specifically would relocate.
• 28% believe that the introduction of the EU Passport will have the biggest impact on the industry, while 22% feel the requirement that non-EU fund managers comply with the Directive will be the most significant measure.
• Just 3% believe that increased regulations relating to retail investors will have the greatest impact.
• The impact of the Directive on innovation, the additional costs firms will incur, and the effect of these costs on profitability are all major causes for concern.
• A significant number feel that venture capital firms should be excluded from the jurisdiction. Get the full report here.

Tags: private equity alternative investment fund managers, private equity alternative investment fund managers directive European Union, AIFM directive

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Private Equity Beckman Coulter

Private Equity Firms Looking to Buy Beckman Coulter

Five of the biggest private equity firms are reportedly interested in a buyout of Beckman Coulter Inc. (BEC.N), a diagnostics and medical instruments manufacturer. The firms interested include: Blackstone Group LP (BX.N), Apollo Global Management [APOLO.UL], Kohlberg Kravis Roberts & Co (KKR.N), TPG Capital LP [TPG.UL] and Bain Capital. It is expected that some of these firms with team up to form a club deal. Firms will probably enter bids for Beckman Coulter by the end of this month.

Private equity firms interested are likely to team up to form consortiums to bid, said one of the sources, who was familiar with the process. A second source said that bids are due late in December.

Beckman Coulter, which has a market capitalization of roughly $4 billion, recently hired Goldman Sachs Group Inc (GS.N) to help it weigh strategic options, including a possible sale of the company, sources familiar with the situation said on Thursday.

A deal would mark the latest transaction in the medical devices sector, and would be the latest in a spate of private equity deals. Buyout firms are sitting on vast amounts of cash to invest and financing conditions have improved, allowing larger deals to be struck. Source

Tags: private equity Beckman Coulter, Beckman Coulter Blackstone Group, Beckman Coulter Apollo Global Management, Beckman Coulter KKR Kohlberg Kravis Roberts & Co., Beckman Coulter TPG Capital, Beckman Coulter Bain Capital, investments, private equity firm, private equity, management, contact, website, LP, group, news

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Carlyle Group Claren Road

Carlyle Group Buys 55% Stake in Claren Road Hedge Fund

One of the largest private equity firms in the world has bought a 55% stake in a hedge fund firm. This is not the first time that a private equity firm has waded into the hedge fund industry like this, for example Blackstone Group bought part of a Brazilian hedge fund in 2008. Carlyle Group has bought a stake worth more than half of Claren Road Asset Management, which manages $4.5 billion in AUM.

The Claren Road acquisition illustrates the trend for private equity firms to diversify beyond their traditional field of leveraged buyouts. Diversifying into shorter-term investment strategies than leveraged buyouts can smooth out demands for liquidity by investors in private equity funds.

Blackstone Group LP (BX) bought a stake in Brazilian hedge fund manager Patria for a reported $200 million in October and GSO Capital Partners LP in March 2008. KKR & Co. LP (KKR), meanwhile, has hired a group of former Goldman Sachs Group Inc. proprietary traders to launch a credit hedge fund early next year.

Terms of the Claren Road transaction, which is expected to close by year's end, weren't disclosed.

The purchase is the second acquisition Carlyle managing director Mitch Petrick has made since being charged with building the firm's credit platform in March. Source

Tags: private equity, Carlyle Group, Private Equity Carlyle Group, Private Equity firms, hedge funds private equity, private equity hedge funds purchase, buyout

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