private equity industry

Private equity vs. NYC rent control laws

Fri, 09 May 2008 06:59:54 -0400

The New York Times notes that in the last four years, developers owned by private equity firms have bought almost 75,000 rent-regulated apartments in New York City. That's 6 percent of the city's 1.2 million such units. The big players are Vantage Properties, in partnership with Apollo Real Estate Advisors; the Pinnacle Group, a unit of Praedium Capital; and Normandy Real Estate Partners. Their growth strategy depends on higher rents. Now, some tenants have told the New York Times that they sense a strategy of harassment to get them to leave. The main tactic seems to be suits filed in housing court for various offenses. This is an interesting case of raw capitalism vs. municipal policies. Going to the media may prove to be a good move. We'll see.

For more:
- here's the article

Wall Street should fear academics

Wed, 07 May 2008 06:59:54 -0400

Wall Street firms would be wise to beware of academics out to make a name for themselves. There have been quite a few cases where professors have caught the eye of regulators: the order handling rules, way back when; the still on-going options backdating scandal. These are two examples of academia-driven regulatory actions. Which brings us to a new study by three University of Southern California professors. According to the New York Times, they have found evidence that "club deals may indeed be detrimental to target shareholders because they result in a lower price, on average, than in deals with a single private equity buyer." Shareholders basically get 10 percent less in club deals than single sponsor deals. It's unclear where the Justice Department's probe stands. This much is clear: There aren't many more club deals these days.

For more:
- here's the New York Times item

Related Article:
Meet the man who uncovered the options scandal

Trend: More roll-ups of advisory firms?

Thu, 13 Mar 2008 07:59:57 -0400

Registered investment advisers have a pretty compelling pitch when it comes to graying clients. They aren't commission-based guys. They're thinking less about trades and more about your portfolio in its entirety. Of course, some of them take something like 200 basis points, which some would find even worse than cadging a few commissions here and there. In any case, there is demand for RIA service and several in the private equity industry are bent on creating nationwide firms by rolling up boutique advisory firms, notes Investment Dealers' Digest. While this is nothing new--recall the success of National Financial Partners--the trend seems to be gathering steam.

For more:
- here's the Investment Dealers' Digest article

How much private equity blood will spill?

Tue, 11 Mar 2008 07:59:58 -0400

Blackstone Group's 90 percent plunge in first quarter profits sent another shudder down the spine of the private equity industry. The Carlyle Group's credit fund woes certainly aren't helping things, either. The New York Times suggests that all the top funds are reeling. This brings up the Freescale Semiconductor deal. Recall that in 2006, Blackstone won a bidding war for $17.6 billion, a sum that stunned Wall Street at the time. Now the company is said to be hurting. Its junk bonds have tanked. Demand has fallen. And the future is unclear. The poor economy may start the real bell-tolling for the top firms. If their portfolio companies start failing, it could get very ugly for the entire private equity industry.

For more:
- here's the New York Times article

Related Articles:
Is Blackstone now a buy? Article
Consolidation in the PE industry? Article
PE funds look to SWFs for deal financing. Article
Leon Black suffers most among PE kings. Article
Lehman takes distressed debt plunge. Article
Not surprising, private equity returns slow. Article
Blackstone Group's earnings disappoint. Article

Buffett raps Wall Street in latest letter

Tue, 04 Mar 2008 06:59:54 -0500

Warren Buffet's latest letter to shareholders is heavy with criticism of Wall Street. The Sage of Omaha once derided derivatives as financial weapons of mass destruction. The Financial Times notes he now seems to feel vindicated. He borrowed a quote from Wells Fargo CEO John Stumpf about Wall Street inventing "new ways to lose money when the old ways seemed to work just fine." He also had some choice words for the private equity industry. In some ways, these guys have made life tougher for would-be acquirers such as Berkshire Hathaway. Buffett wrote that with Berkshire, "a deal is a deal." Ouch!

For more:
- here's the Financial Times article
- here's the opening of the letter from Warren Buffett to his shareholders

Read more on: Warren Buffet | Wells Fargo | private equity

Consolidation in the PE industry

Mon, 03 Mar 2008 06:59:55 -0500

We all know that the private equity industry has entered a down cycle. But is it so bad that we'll see a lot of consolidation? It doesn't seem like any major firm is anywhere close to that level of trouble. Institutional Investor's website notes that David Rubenstein, co-founder of The Carlyle Group, has said recently that he thinks the current pause will give rise to some historic consolidation, akin to what happened in investment banking in the 1950s. That seems a bit dramatic. But it maybe that the top firms continue to grab the lion's share of the really big deals. He expects six to eight "brands," not all of which will be American.

For more:
- here's the item

Read more on: consolidation | investment banking

Shifts in PE fund raising

Mon, 03 Mar 2008 06:59:54 -0500

We've noted that announced and completed deal volumes have declined precipitously. It's also important to point out, though, that fund raising has not taken a hit. According to the Financial Times, Apollo is closing in on a $15 billion fund, KKR is finishing up a $9 billion effort, and the Blackstone group has plans for a $20 billion fund. The composition of investors funds may be shifting. It seems as though pension funds, with a few exceptions, are scaling back. But the rise of sovereign wealth funds has been a real godsend for the private equity industry. They represent a powerful source of liquidity, though they come with some baggage.

For more:
- here's the Financial Times article

Read more on: KKR | Blackstone Group | Apollo Management

Carlyle to pay more attention to social issues

Thu, 28 Feb 2008 06:59:55 -0500

When the private equity industry is taking its lumps, it's a good time to work on image. Financial News Online reports that the Carlyle Group outlined plans at Super Return 2008 that would upgrade its efforts to consider, among other things, social issues, when it makes investment decisions. The idea that a fund should take extreme job losses and pollution into account isn't really all that new. In some cases, like the TXU deal, they cannot be avoided. But it may also be a bit more than PR. You do not want to lodge yourself on the agenda of environmentalists in today's era of climate change.

For more:
- here's the article

Related Articles:
Gerstner puts a happy face on private equity. Article
More on the Carlyle Group's healthcare gambit. Article

All you want to know about Schwarzman

Thu, 07 Feb 2008 06:59:57 -0500

Steven Schwarzman has become an icon of the private equity industry with perhaps a single peer. (That would be Henry Kravis.) So when the New Yorker decides to publish a nearly 11,000 word profile, it signals something significant about the man of the moment. It's hardly a glowing profile, but you get the feeling he might be relieved. Sure, the author talks about some of his PR problems, noting that Schwarzman is pondering a massive philanthropic gift to "silence his critics." That sort of stuff. But you have to wonder if this also signals the high water point for the Blackstone Group. We'll see.

For more:
- here's the New Yorker article

Bain Capital wraps up massive fund raising effort

Fri, 01 Feb 2008 06:59:56 -0500

Financial News Online notes that Bain Capital is wrapping up a new $20 billion buyout fund. The slowdown in the industry apparently has done little to dampen the enthusiasm of institutions; many are upping their allocation to alternative investments. Bain expects a raft of deal opportunities to emerge from the credit crisis. You would have to think that this money will be deployed rather slowly. You also have to wonder if Bain will start targeting smaller companies. The private equity industry is nothing if not optimistic. Still, you'd be naive to expect anything other than fewer deals and smaller returns. Maybe this is a good thing, going forward.

For more:
- here's the article