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I’ll provide some commentary when I get a chance to read it thoroughly. At first glance it looks very nicely laid out and is quite inviting for the reader, even if the corporate black and red is a little reminiscent of a casino table.
Leafing through it brings to mind the hilarious knockabout farce that was BCG and IESE’s 2008 offering The Advantage of Persistence: How the Best Private Equity Firms “Beat the Fade”, which you can read here.
It’s full of chioce tidbits that will leave you with aching sides and coffee on your monitor screen. AND it was co-authored by Heiko Meerkat.
But for those of you with a shorter attention span, how abut a quick look back to what McKinsey had to say about the buyout boom in 2007:
The recent tightening of credit markets has complicated the financing of some buyout deals and may dampen the flow of investor money into private equity firms. Skeptics on both sides of the Atlantic have been quick to proclaim that the private equity boom is over. But don’t expect private equity to suddenly fade to the background, as did the leveraged buyout boom of the 1980s. Even if growth slows in the short term, pension funds and other institutional investors will remain interested in private equity. McKinsey projects the industry’s assets under management may double by 2012, to $1.4 trillion.
Wow. AND “wow” again.
[tweetmeme source=”mattcg” service=”bit.ly” only_single=”false”]Private equity fund managers have been under pressure in recent years to improve both the reporting they undertake to their institutional investors and the transparency with which they operate, in general. Government, regulators, the press, Limited Partners: they all want to know more about the activites of GPs. My colleagues and I at IE Consulting have spent some time looking at the press releases of the most active General Partners in Europe.
We looked at:
- The access provided to dealmakers and communications staff through their websites
- The thematic content of all press releases issued since January 2006
- The quantitative and qualitative content of all press releases pertaining to buyout investments issued in the last 12 months
Some of the results were surprising, some disappointing, some encouraging, and some downright astonishing.
The results will be published in Private Equity Europe and the first installment is out at the end of this week.
Of course, I’ll be uploading the information here, too!
In the meantime, I’m interested in your thoughts:
Should private equity firms be more transparent?
If so, are they trying hard enough?
And how successful are they being?
Perhaps you work at a GP in a marketing or communications or PR role or you are a journalist, regulator or LP. Either way, I am sure you have some interesting thoughts on this. Let me know in the comments!
You can Bank on it:
Delist at that price? You’ll get
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?
A firm should not make or offer to make any payment or other consideration with a view to enducing [sic] a third party to enter into contractual negotiations with a client
– that’s according to the Draft EVCA Placement Agents Supplementary Code of Conduct that was released recently.
Yikes. The thought that this goes on, as it clearly has, ought to be shocking. Well, it is shocking even if I feel naive writing that.
But is banning placement agents the answer? Surely it cannot be. Just because a few fraudsters want to line their pockets dishonestly, doesn’t mean that the role of an intermediary in the private equity fundraising process is unnecessary. Ask any GP running a small fund if he/she would prefer to spend more or less time raising money and the answer is pretty clear. If LPs want their fundmanagers to spend their time investing LP cash rather than trying to raise more of it, they had better accept that the placement agent is their friend or, at least, not their enemy.
Traditionally, the Venture Capital industry has taken its lead from the West. Sure there are fine firms up and down the US and beyond, but think of venture capital and it’s hard not to imagine Google’s garage or a sarcastic VC cutting through some poor entrepreneur’s far-fetched American dream (or, if it’s 1999, funding it).
Now that probes into the services that 3rd party marketing firms and placement agents offer are causing some concern, VCs need to wise-up on the marketing of their own funds. And it’s not going to be easy.
I’ve written before on certain similarities between the actions of some in the fundraising industry and of those in the Wild West. I wasn’t too complimentary, but I wonder what we can learn from the Ol’ West? Here are some quick pointers:
Firstly, if you can, it’s important to show some kind of track history. After all…
It’s better to be a has-been than a never-was.
But track history isn’t everything, of course; it might have been easy raising your last fund in ’06: You delivered 30%+ IRR and most of the LPs were reckoning on funding their commitments with distribution in any case. But, in 2009, if you can’t show how your teams delivered those returns, you’re sure gonna hear this an awful lot:
Timing has a lot to do with the outcome of a rain dance
And honesty really is the best policy; let’s hear it for bad news, told well. The amount of DD LPs are putting in these days means that it is going to be increasingly difficult to exercise that special sort of creativity that some VCs are rumoured to be indulging in with the valuations of some slightly wonky Chinese portfolio companies. Much better to open the books and tell the story of what happened and what was learned.
Good judgment comes from experience, and a lotta that comes from bad judgment.
Of course, one of the most important skills is getting an upfront read on who might be ready to commit and who is still waiting before making new commitments. It’s like they used to say:
Never slap a man who’s chewin’ tobacco.
- Show what you have done
- Show how you did it
- Don’t just tell the good news
- Wait for the right time to tell it
If you get all that licked, you might stand half a chance!
I’ll tail off now..:
Never miss a good chance to shut up.
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