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LPs: More GPs than ever will struggle to raise a fund over the next TWO years

June 14, 2010 1 comment

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LPs predict fundraising will be very tough for 24 months

LPs don't expect fundraising to get easier anytime soon

Two years of winter:/
That’s what awaits those who did/
Not bury their nuts

We all know that times are tough for GPs out fundraising at the moment. But ask anyone on the sell-side and they’ll tell you the same thing:

2009 was horrible, but we expect things to pick up by the end of the year

A quick poll conducted by IE Consulting last month, however, suggests that times will remain tough for those PE houses out scavenging for LP commitments. Of course, the very best funds will come out and raise money. By the way, “very best funds” does not mean “top quartile” (anyone ever marketed a fund that wasn’t top quartile?). “Very best funds” means just that: those private equity and venture capital funds that have consistently delivered performance that outpaces its peers and other funds in other asset classes.

It’s simply no longer enough to be delivering better returns than other European buyout funds or other US venture funds. Limited Partners are taking a hard look at the dollars they are investing in private equity and VC funds and how the returns stack up against their other investment strategies: Commentators should not be surprised to see even committed investors into the asset class “taking stock” for a good while longer than even the most pessimistic might have expected.

So what does this mean for those in the market now, trying to raise a fund?

  • Get out early. You could be in the market for 18 months or more
  • Be flexible. Respect the fact that the balance of power now rests with your LPs: They have alternatives.
  • Show how you are different. A longer fundraising timetable means more “competing” funds on the road at the same time. Why should LPs invest in your fund?
  • Don’t forget to make the case for private equity: Is your strategy preferable to investing in the public market? How?

I remember a conversation I had in 2008 with the head of investor relations at one of the preeminent large buyout houses. After exchanging niceties and discussing the industry landscape, talk turned to their current fundraising activity. Apparently, the firm was engaged in “philosophical” discussions as to whether it should even include a market commentary section in its PPM. After all:

“everyone knows what we do and why they should be investing in our funds”

Oh, how things have changed…

You can read the full research summary from our LP poll here:

LPs in a new era: The Good, the Bad and the Ugly

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Waste not, want not

March 8, 2010 Leave a comment
Biifa waste bins Electricinca, Flickr

How solid is it /
Selling gas to get liquid? /
Don’t get in a state!

Biffa is supposedly trying to transform into a company that turns waste into energy, so why sell a division that does just that? Maybe LPs need distributions…not that distributing money to LPs is necessarily a bad thing, of course!

The story at AltAssets

Of course, landfill gas collection is only a viable business as long as there are landfills producing gas. Given that landfills are increasingly unpopular with government and the general public and that collection of gas is only really viable for 20 years or so from each site, this is a pretty smart way to return some cash to invetors with out too adversely affecting the resale price of the business.

Do buyouts need more bad PR? At least the PE house is not at fault here!

August 6, 2009 Leave a comment

You can Bank on it:
Delist at that price? You’ll get
Shareholders iRate

Apax Partners (full disclosure – my team is owned by one of their portfolio companies…I like to think it’s Apax’s favourite one :)) is trying to buy Bankrate. And some share holders are not too happy at the purchase price. Apax is paying a premium, of course, but some shareholders are not convinced the premium is fair.

Rather than the concerns of the conflict of interests that may develop between a private equity owner and an incumbent management team (particularly if that management team intends to stick around after the PE house exits), it is the management team itself that may be questioned in this instance. Has the share price been artificially deflated (don’t say sabotaged!) in order to present a more attractive purchase price for the buyout house and the management team/the team’s equity in the new deal?

The solution to all your woes – that’s if you are a GP and not a US taxpayer…

May 18, 2009 2 comments

Private equity: /
Are you looking for lev’rage? /
Well, just buy a bank! /

1 buy bank
2 use leverage to fund new deals
3 refinance underperforming portfolio companies
4 clean up if all goes swimmingly
5 sell toxic bank assets to taxpayers if not, clean up
6 high fives all round

Private equity giant loses yet more millions, all perspective (or is that just the financial press?)

It’s all very well trying to see the positive in a bleak environment, but identifying a loss of close to $100m as good news seems a little “unusual”, to say the least.

When you think you see the light at the end of the tunnel, it’s as well to quickly make sure that you haven’t just been imprisoned for all eternity inside a giant torch…

Oh well done, fellas! /
We thought you’d lose more money. /
Let the good times roll /

Tumbleweeds, ghost towns, prospectors? Welcome to the fundraising Wild West (on the East coast)…

May 1, 2009 1 comment

South Western GPs /
Can’t all be cowboys, can they? /
Where’s the darn sherrif?

Just on the off chance that you haven’t heard….here are the details…

Advisory Services to the City a Speciality – for example:

April 1, 2009 Leave a comment

If you do want to /
Blend right in in casual clothes: /
Don’t iron your jeans.

Categories: Frivolity, Haiku